By Sonja Ryst, Research Analyst
Rio Tinto plc (RIO) cut back on staff before the mining giant’s recently departed CEO Tom Albanese pushed ahead with a nearly $935 million investment in 2012. The company has downwardly revised by $14 billion its estimates about assets it bought in earlier years.
Rio Tinto said last week that Mr. Albanese stepped down from his role “by mutual agreement” with the board, and Iron Ore CEO Sam Walsh took his place effective Jan. 17. Doug Ritchie, who had led the acquisition of Rio Tinto’s Mozambique coal assets, also left by mutual agreement.
The company wrote down around $3 billion relating to Rio Tinto Coal Mozambique, and also reduced in the range of $10 to $11 billion its valuation of aluminum assets mostly associated with Rio Tinto Alcan but also with Pacific Aluminium. The former company was created in late 2007 after Rio Tinto acquired Alcan.
During the year ended 2008, Rio Tinto had an average 105,785 employees. This number shrank each subsequent year until the end of 2011, when Rio Tinto had only 67,930 employees, according to the company’s most recent annual filing submitted to the Securities and Exchange Commission.
Since being appointed CEO in 2007, Mr. Albanese’s team has brought about agreements to sell assets such as Rio Tinto’s 57.7% stake in Palabora Mining Company Ltd. for $373 million in December 2012 and its wire and cable business Alcan Cable for $185 million in May. (When completed in September the latter deal became valued at $151 million.)
During this year of fundraising, Mr. Albanese directed Rio Tinto to spend. In July 2012, Rio Tinto bought a stake in Ivanhoe Mines for nearly $935 million, as part of an agreement that Rio Tinto provide funding to the latter company’s Oyu Tolgoi copper-gold mine in Mongolia.
“Rio Tinto’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,” the company’s chairman Jan du Plessis said January 17. While acknowledging that the write-down of the “relatively recent” Mozambique acquisition is “unacceptable,” he also emphasized that Rio Tinto had a strong production year in 2012.
That production was not strong enough, however, for Mr. Albanese and the people who had once held the tens of thousands of jobs that disappeared from the company during his tenure.
Rio Tinto was not immediatily available for comment.