Although the firing of Tom Albanese on Thursday night caught Australia's mining industry by surprise, many industry observers agree his exit is good for Rio Tinto (ASX: RIO), the country's second-largest miner.
While analysts believe that the sudden departure of Mr Albanese would have a short-term impact on shareprices, Friday's closing price of $66.35 says otherwise. Rio's shareprices actually closed 2.71 per cent higher. A major shareholder agreed with Rio's board's decision.
"From an investor's point of view, they've almost written off $US30bn on the aluminium acquisition, which is pretty close to 80 per cent of what they paid for it . . . It's about the same size as the market cap of their Australian arm and it's about the same size as Woodside. They could have used the money to buy Woodside," The Australian quoted Ross Barker, managing director of Australian Foundation Investment.
Mr Albanese, besides being blamed for the purchase of the losing Mozambique mine, also committed a second and more expensive financial mistake when he approved the $38-billion Rio buy-in of Canadian aluminium business, Alcan, which turned out to be a bad decision because China flooded the market with cheap aluminium even if the Chinese smelters run at loss for years to kill competition.
Others, such as Breakingviews, believe the decision to immediately fire Mr Albanese was rushed.
But many agree that the choice of Sam Walsh as his replacement is a good decision because of his role as head of Rio's iron ore division which accounts for 80 per cent of the miner's profit and 50 per cent of revenue.
At 63, Mr Walsh is near retirement age and much older than Mr Albanese who is 55. The new chief executive agreed to head Rio for three years. Among his credentials is his brokering the successful joint venture with Gina Rinehart on the Hope Downs iron ore project.
Ms Rinehart, Australia's richest woman, said Mr Albanese should not have been a scapegoat for the bad decisions, but the board should have also share some blame.
"It needs to be remembered (Rio) has thrived under the leadership of Tom. However, this was countered by some very poor investment decisions in risky countries offshore Australia for which the entire Rio Tinto board and relevant senior management are responsible for, not Tom alone," Ms Rinehart said in a statement.
She also urged Mr Walsh to move Rio's headquarters from London to Perth since more of the company's revenue is generated from Australia. Ms Rinehart also invited Rio to join her personal advocacy to battle the Gillard government's mining tax.
Mr Walsh may likely heed most of Ms Rinehart's advice, although the mining magnate's other advice and opinions about the Aussie economy has turned off many Australians as reflected in these 10 memes.
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