$14B Write-down Costs Tom Albanese Job, Sam Walsh is New Rio Tinto CEO
By Vittorio Hernandez | January 18, 2013 1:07 AM EST
Australia's mining industry was rocked on Thursday night, not by volatile iron ore prices or another tax on resources, but by the sudden firing of Tom Albanese as chief executive of Rio Tinto (ASX: RIO).
Responsible for the termination of Mr Albanese is Rio's write-down of assets worth $14 billion, the bulk of which were related to the aluminium division that the now ex-chief executive purchased from Alcan in 2007 at $38 billion.
It was the second successive write-down in Rio's aluminium assets in two years. The one in 2011 was worth $8.9 billion. To make matters worse, the giant miner could not a buyer for the distressed company.
To replace Mr Albanese, 55, as new chief executive is Sam Walsh, a 63-year-old graduate of the University of Melbourne. He has been with Rio for more than 20 years and until his promotion headed Rio's iron ore business in Pilbara, which accounts for about 80 per cent of the miner's revenue. a 2011
Rio described the change of leadership as Mr Albanese agreeing to step down, but industry observers believe he was fired.
Here is a video of one of Mr Albanese's who talked about the future of commodities in a 2011 TV interview, unaware his own future would soon become shaky.
Ironically, Mr Albanese's departure from Rio came just after he announced a boost to the company's iron ore production by mid-2015 and plans to cut costs, including jobs, in Rio's coal mines in New South Wales and Queensland.
Informed of his promotion, Mr Walsh said, quoted by The Sydney Morning Herald, "I am honoured to be given the opportunity to lead this wonderful business. I have great respect for Tom and the many positive attributes he brought to the role, and I am grateful for the experience of working closely with him over many years. I will be working flat-out to build an even stronger more valuable Rio Tinto business."
Here is a video clip of the incoming CEO in a speech about China and Rio's iron ore business.
Along with Mr Albanese, who has been with Rio for more than 30 years, Doug Ritchie, former chief executive of Rio's energy arm and who led Rio's acquisition of the Mozambique coal assets that were also written down, also resigned.
"The Rio Tinto board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial write-down in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally," The Telegraph quoted Rio Chairman Jan du Plessis.
The changes were announced after the stock market had closed, but it is expected to affect Rio's shareprices in the coming days.
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