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Rio Tinto announces massive write-down and waves goodbye to CEO Tom Albanese

AP Photo/Rob Griffith
What do you mean I should have said something earlier? Rio boss Tom Albanese, who is leaving after announcing a shock $14 billion write-down
By Naomi Rovnick
Published Last updated This article is more than 2 years old.

Investors in London-listed miner Rio Tinto have had a bad morning. Rio has parted company with chief executive Tom Albanese and announced a $14 billion write-down on the value of its assets.

Shares in Rio, which has slashed the worth of its aluminum assets mainly because of its ill-fated 2007 purchase of Canada’s Alcan, have been falling all morning and at the time of writing were down over 2%.

Albanese is being replaced by Rio iron ore boss Sam Walsh. Doug Ritchie, another senior Rio executive who led the company’s acquisition of some badly performing Mozambican coal assets, has also been shown the door.

The Alcan nightmare is nothing new. Rio bought the company at the top of the aluminum market, and prices of the bendy metal have slumped since. The London miner already took an $8.9 billion hit on Alcan last February.

Part of the reason Albanese, a two-decade veteran of Rio, is being punished for the Alcan debacle now is because he did not adequately prepare fund managers for this latest penalty.

“I wasn’t expecting the $14 billion write down,” London fund manager Tim Schroeders told Reuters.

There is little worse a chief executive can do than give his investors nasty shocks. And Rio may have stopped managing their expectations properly when its long-serving chief financial officer, Doug Elliott, retired back in July.

Albanese also presided over a massive investment in Mongolian copper mine Oyu Tolgoi, where relations with the emerging Asian economy’s government have taken an extremely bad turn.

After years of negotiations, Rio and Mongolia finally struck an agreement on how they would share revenue from the landmark project in 2008. This led Rio to gradually increase its investment in its Oyu Tolgoi development partner, Canada’s Ivanhoe Mines, to 51%.

But last October, Mongolia’s new government tore up the investment agreement and asked Rio for a greater share of the profits, leaving the future of the $6 billion project in doubt.

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