Rio Tinto expects to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results. These impairments include an amount of approximately US$3 billion relating to Rio Tinto Coal Mozambique (RTCM), as well as reductions in the carrying values of Rio Tinto’s aluminium assets (mostly Rio Tinto
Alcan (RTA) but also Pacific Aluminium) in the range of US$10-11 billion. The Group also expects to report a number of smaller asset write-downs in the order of US$500
million. The final figures will be included in Rio Tinto’s full year results on 14 February 2013.
Tom Albanese has stepped down as chief executive by mutual agreement with the Rio Tinto Board, and Iron Ore chief executive Sam Walsh has been appointed as his
successor with effect from today. Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets in his previous role as Energy chief executive, has also stepped down by mutual agreement. Rio Tinto chairman Jan du Plessis said "The Rio Tinto Board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial writedown in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally.
“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. 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. “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.
“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. As announced on 15 January, we had a strong production year in 2012, particularly in our low-cost iron ore business where we produced a record 253 million tonnes. Since the price of iron ore dropped to a low of less than $US90 a tonne last September, prices rebounded strongly reaching a level of around $US150 a tonne earlier this week, albeit in an environment of continuing volatility.” The new chief executive Sam Walsh said “I am honoured to be given the opportunity to
lead this wonderful business.
I have great respect for Tom and the many positive attributes he brought to the role and I am grateful for the experience of working closely with him over many years. I will be working flat out to build an even stronger, more valuable Rio Tinto business for shareholders and for our many other stakeholders.” Tom Albanese said “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. I am pleased that someone of Sam’s calibre and values has been chosen to succeed me as chief executive. This is a great company and Sam will do an outstanding job.”
Impairments
At its investor seminar in Sydney on 29 November 2012, Rio Tinto said that the annual year-end review of asset carrying values would most likely result in further revisions to the value of assets, notably aluminium. The further deterioration in aluminium market conditions in 2012, together with strong currencies in certain regions and high energy and raw material costs, has had a negative impact on the current market values in the aluminium industry. In Mozambique, the development of infrastructure to support the coal assets is more challenging than Rio Tinto originally anticipated. Rio Tinto sought to transport coal by barge along the Zambezi River, but this option did not receive formal approvals. These infrastructure constraints, combined with a downward revision to estimates of recoverable coking coal volumes on the RTCM tenements, have led to a reassessment of the overall scale and ramp up schedule of RTCM, and consequently to the impairment announced today. Rio Tinto continues to engage with the Government of Mozambique on all transport infrastructure options.