Rio Tinto PLC is writing down the value of its Montreal-based global aluminum business by at least US$10 billion and getting rid of both its chief executive officer and the head of its energy division.
The mining company announced Thursday that CEO Tom Albanese, who had been instrumental in acquiring Canadian multinational Alcan and making it the core of Rio's worldwide aluminum business, has agreed to step down.
Albanese's departure comes as Rio Tinto adjusts to slowing demand and prices for many of the commodities it produces. The company said it will record $14 billion of writedowns in the 2012 financial year, including US$10 billion to US$11 billion for its aluminum business — primarily related to Alcan.
The writedowns also include US$3 billion related to a coal business in the African country of Mozambique and smaller amounts for other parts of Rio.
Sam Walsh, head of Rio's iron ore division, becomes chief executive of the company.
"We are fortunate to have such a capable and highly experienced executive as Sam to take over and to ensure there will be a rapid and seamless transition. He is ideally placed to cast a fresh eye over how we address the challenges and opportunities in the business, and derive greater value from it," said Rio chairman Jan du Plessis.
The company said Albanese and Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets as head of Rio's energy business, had agreed to leave.
During Albanese's time, Rio diversified into new areas and commodities to build one of the world's largest diversified mining businesses.
"I would like to pay tribute to Tom for his considerable contribution to Rio Tinto over more than 30 years of service and for his integrity and dedication to the company," du Plessis said in a statement.
"I would also like to thank Doug for his 27 years of service to the Group and particularly for his invaluable work in developing our relationships in China. I wish them both well for the future."
However, the two men are clearly being held accountable for Rio's difficulties in the aluminum and coal sectors.
Albanese and Ritchie will receive no lump sum payments, no performance bonus for 2012 or 2013 and will forfeit their deferred bonus share entitlements, the company said. However, they will continue to receive their salaries during the transition period.
"The Rio Tinto board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable," du Plessis said.
"We are also deeply disappointed to have to take a further substantial write-down in our aluminum businesses, albeit in an industry that continues to experience significant adverse changes globally."
Rio Tinto was down about US$1 or less than two per cent at US$55.03 in pre-market trade of the company's U.S.-listed equity.
Rio Tinto acquired Alcan in 2007 for $38 billion — one of Canada's biggest foreign takeovers ever — and the Mozambique operation in 2011.
The company said that developing infrastructure in Mozambique was more challenging than expected, and it had also downgraded its estimates of recoverable coal volumes.
— with files from The Associated Press