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Rio Tinto chief resigns after shock $14 bn charge

Roland Jackson
Anglo-Australian mining giant Rio Tinto on Thursday announced a $14 billion write-down on its Mozambique coal assets and ailing aluminium business, prompting its chief executive, Tom Albanese (pictured on October 26, 2011), to resign.

The head of Rio Tinto, Tom Albanese, resigned on Thursday after the global mining giant announced a $14-billion (10.5-billion-euro) write-down on its Mozambique coal assets and ailing aluminium business.

Rio warned it expected non-cash impairments of $10-11 billion mostly related to the 2007 purchase of aluminium firm Alcan, and $3 billion relating to its Mozambique coal project acquired in 2011, in annual results due on February 14.

Albanese has therefore agreed to stand down with immediate effect and will be replaced by Rio Tinto's iron ore chief Sam Walsh, the Anglo-Australian added in a statement.

The price of shares in the group fell by 2.20 percent to 3,382 pence on London's FTSE 100 index of leading shares, which was 0.02 percent lower in morning deals.

"The Rio Tinto board fully recognises that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable," said chairman Jan du Plessis.

"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 group added that Albanese had stepped down with immediate effect "by mutual agreement with the Rio Tinto board".

Doug Ritchie, who led the acquisition of the Mozambique assets which were previously known as Riversdale Mining Limited, had also stood down.

Neither would get a lump sum payout or outstanding bonuses. They would formally leave the company on July 16 to ensure a smooth transition.

"While I leave the business in good shape in many respects, I fully recognise that accountability for all aspects of the business rests with the CEO," Albanese said.

The announcement comes a day after the mining giant unveiled record production in 2012 and beefed up expansion plans for its flagship Australian iron ore operations.

The chairman added that Rio's underlying business and balance sheet "remain in good health, and we are taking decisive action to improve our competitive position further with an aggressive cost reduction plan".

Rio's unpopular $38 billion acquisition of Canadian firm Alcan in 2007 has cost it dearly, with lagging profits from the metal eating into its bottom line and seeing full-year earnings slump 59 percent in 2012 to $5.8 billion.

An impairment charge of $8.9 billion from the aluminium business saw Albanese forgo his bonus last year.

Rio said conditions in the aluminium market had worsened further in 2012, with a rally in some currencies compounding high raw material and energy costs.

In Mozambique, developing infrastructure to support its new coal assets was proving more challenging than anticipated, the miner said.

"These infrastructure constraints, combined with a downward revision to estimates of recoverable coking coal volumes on the tenements, have led to a reassessment of the overall scale and ramp-up schedule of (the project), and consequently to the impairment announced today," Rio said.

Du Plessis thanked Albanese and Ritchie for their lengthy service to the company -- more than 30 years in the outgoing CEO's case -- and noted Ritchie's "invaluable work in developing our relationships in China".

A slowdown in China and debt strains in Europe and the United States have weighed on mining companies in the past 12 months, with projects delayed or shelved as commodity prices have plunged on a drop in demand.

The surprise departure of Albanese is the latest shake-up in the global mining sector.

Earlier this month, Anglo American named AngloGold Ashanti boss Mark Cutifani as its new chief executive to succeed Cynthia Carroll with effect from April.