- Mark Cutifani is Anglo’s new CEO
- Anglo announced the appointment of Mark Cutifani, CEO or AngloGold, as the new CEO, replacing Cynthia Carroll in April. The departure of Mrs. Carroll had been announced some time ago.
- Mr. Cutifani has been heading AngloGold since 2007, working as COO of Inco before that. He is an Australian nation, but has extensive experience in South Africa, which should help Anglo to both manage the important government relations in South Africa and become less dependent on the country.
- Sources: Anglo press release; Financial Times Videos; Wall Street Journal
- Walsh replaces Albanese as CEO of Rio Tinto
- Rio Tinto announced the sudden replacement of CEO Tom Albanese by Sam Walsh, who had been heading the company’s iron ore group since 2004. Albanese and Doug Ritchie, the head of the coal group, stepped down because of write-downs of $14bn on acquisitions, including $10-11bn on the acquisition of Alcan in 2008, and $3bn on recent coal acquisitions in Mozambique.
- Sources: Rio Tinto press release; Reuters Videos; Wall Street Journal
Trends & Implications:
- With the departure of Albanese as CEO of Rio Tinto, each of the top 5 diversified miners has a replacement of CEO in a timeframe of 2 years. Only BHP Billiton has not yet announced who the new CEO will be. The previous group of CEOs started their jobs during the high-growth period in which the size of their companies grew exponentially, and then had to lead the same companies through the global financial crisis and debt crisis. The new chief executives will have to manage the performance of their companies in a period of lower growth and potentially more stability in terms of asset base and outlook.
2013 | Wilfred Visser | thebusinessofmining.com
“Rio Tinto and Chinalco today signed a non binding Memorandum of Understanding (MoU) to establish a landmark exploration joint venture (JV) in China. The JV will explore mainland China for world-class mineral deposits and is expected to come into operation in the first half of next year. It is intended that between three and five large area exploration projects will be selected for initial focus by the JV, with the potential for additional regions to be added at a later date. Chinalco will hold a 51 per cent interest in the JV and Rio Tinto will hold a 49 per cent interest.”
“My second idea revolves around assisting China in the search for world class mineral resources in its own backyard within China. In saying this, let me stress that I recognise China has considerable expertise in this area and that a lot of exploration work is being undertaken in China and that new resources are being discovered here. …
There is no “magic wand” in mineral exploration. Success requires highly experienced people, rich databases, a deep understanding of conceptual orebody models, robust research and development teams, appropriate technology, and good management, to name a few. We believe we can bring that expertise and know-how to bear in helping China to find major orebodies on its home soil. I remain happy to discuss these ideas further.”
- Rio Tinto will work with Chinalco in an exploration Joint Venture in which Rio Tinto will hold 49% of the shares. The CEO of the JV will be appointed by Rio Tinto.
- In August of this year mr. Albanese informally invited the Chinese to search for options in which the company could work together.
- While in Beijing, mr. Albanase also signed an extension of the agreement with Sinosteel to expand the Channar mine in the Pilbara region in Western Australia.
- Rio Tinto has been working hard to establish strong ties with Chinese government and companies. With Chinalco as the largest shareholder it holds a good position. However, the refusal to give Chinalco an even larger share and the conviction of three employees for corruption in China did slow down the process for some time. Mr. Albanese has managed well to regain the momentum of discussion.
- BHP Billiton has not yet managed to establish a foothold in the Chinese industry. Whether the company deems the political risk in the country too high, the company is scared away by the operational risk of developing infrastructure (most interesting exploration prospects in China are located far in the inland, making transportation to the markets near the coast challenging), or the company simply did not manage to establish the right connections yet is not clear.
©2010 | Wilfred Visser | BUJEZKKNXD3Z | thebusinessofmining.com
“Tom Albanese, chief executive, Rio Tinto said: ‘We believe the first and best use of our strong cashflows and robust balance sheet is to invest in the excellent range of value-adding growth projects across Rio Tinto’s product portfolio.
The long-term industrialisation and urbanisation story in developing countries continues apace. Over the next 15 to 20 years, this will lead to a doubling in iron ore, aluminium, and copper demand which will require a significant supply response. With our large suite of low cost, large scale, expandable assets along with our core skills in operating excellence, exploration, technology and innovation, we are very well positioned, and are investing to take full advantage of these opportunities.'”
Source: Rio Tinto, November 26 2010
The plans presented to the investor community include:
- $13bln expected investments up to end of 2011, including $4bln for 2010;
- 50% capacity expansion in Pilbara over 5 years, leading to $130/tonne costs for added capacity;
- Copper output for 2010 at 661Kt, increasing from 2013 due to Oyu Tolgoi;
- Over $2bln planned investment in copper assets.
- Copper production comes down from 800Kt in 2009, a productivity drop of close to 20%, mainly attributed to grade variation. As copper accounted for 14% of revenues in 2009 this is a significant hit on the income statement.
- Though the expansion of Pilbara will give Rio Tinto crucial access to iron ore, the estimated $130/tonne give a signal to steel producers that the ore costs will not permanently return to levels below this threshold.
- Rio Tinto appears to have recovered from the bad competitive position when entering the downturn, but it still is a small buyer of assets in the industry compared to the major competitors.
©2010 | Wilfred Visser | thebusinessofmining.com
In the series of specials on the priorities of the CEOs of the world’s leading mining companies we analyze Rio Tinto this time. What is top of mind for Rio’s CEO Tom Albanese?
An analysis of Rio Tinto’s latest annual report; financial reports, investor presentations and the news about the company in the last months yields a list of 10 issues that are likely to be at the top of Albanese’s list of priorities. The list holds strategic, operational, financial and relational activities, each of which are scored in terms of importance and urgency. Priority 1 on the list is the lobby on the new Australian mining tax. Number 2 is restoring the operating margin of the company. The list closes with resetting the focus of the exploration program. Read on for the full list of priorities.
Priority 1 – Lobby against Australian mining tax
Although prime minister Kevin Rudd has been replaced by Julia Gillard, the negotiations about the reformation of the Australian mining tax system stay the top priority for mr. Albanese. If the super profits levy proposed by mr. Rudd would be implemented without changes (which is very unlikely at this point), Rio’s profits would take a hit of approx. 20%. As part of the tax discussions Rio Tinto is re-assessing its portfolio of development projects in Australia, as the feasibility of many projects is endangered by the tax.
Priority 2 – Restore operating margin
The operating margin of the company has decreased most of the large diversified miners, down at less than 20%. Especially in the diamonds and minerals unit major cost cutting needs to take place. Furthermore, the transformation of the aluminium business is to continue to take out more costs.
Priority 3 – Achieve ‘A’ credit status
The balance sheet has been strengthened significantly in 2009, but achieving the ‘A’ credit status remains top priority for the CFO in order to ensure access to capital in the near future. “Prudent balance sheet management” and a “complete review of trading security practices” are mentioned as key issues for 2010.
Priority 4 – Sell Alcan packaging food
Rio undertook a major divestment program of non-core assets to strengthen the balance sheet. It did succeed in collecting $8bln already, but still wants to bring more cash in by selling the remainder of the packaging food division of Alcan for some $2bln.
Priority 5 – Complete Pilbara Iron ore JV
The enormous Western Australian iron ore operations, for which a Joint Venture with rival BHP Billiton has been designed, are getting ready for large scale production. However, the JV is still subject to competition authority analysis. The Australian watchdog will decide end of July, but other countries will be investigating much longer. Getting the Pilbara operations on steam is crucial for Rio’s iron ore supply position to China.
Priority 6 – Develop M&A Decision scenarios
The share price of his company will be a major concern for mr. Albanese. The market capitalization has not really recovered after the first hit of the crisis. The low prices in the industry enable many strange merger and acquisition moves. Albanese survived the acquisition effort by BHP Billiton started late 2008, but will need to be prepared for potential new moves.
Priority 7 – Strengthen relationship with China
A revolutionary deal with Chinalco involving $20bln investment by the Chinese collapsed in June 2009 as shareholders did not support the board’s intentions. With China being the single most important country for development of Rio, which is very dependent on iron ore exports, Albanese will have to find other ways to build relationships with the key decision makers in the country.
Priority 8 – Manage capital projects portfolio
Rio is planning to invest only some $5bln in 2010. However, the projects on which the money will be spend are of strategic importance to the company. Extension of Diavik diamond mine, Building of the AP50 aluminium plant, and development of Oyu Tolgoi Copper mine in Mongolia are the most important capital projects in the development phase.
Priority 9 – Improve operational delivery
Where cost cutting is one of the top priorities, increase output volumes is another key issue. Especially the output of the aluminium operations has been disappointing in recent years. Albanese will be closely monitoring the delivery excellence programs in Madagascar (new industrial minerals asset), Queensland (Clermont thermal coal and Kestrel coking coal) and the aluminium business unit.
Priority 10 – Focus exploration program
Finally, Rio’s exploration program needs renewed focus, mainly in the areas of iron ore and copper. The new Mongolian asset and a potential Bingham canyon extension could secure copper output for some time. The difficult relationship with Guinean government very much increases the need to find new iron ore, as the Simandou development can not be expected to be finished quickly.
Sources: Rio Tinto annual report 2009, Rio Tinto annual review 2009, Rio Tinto investor presentation February 2010
©2010 – thebusinessofmining.com