Refocused Rio prepares to pass the baton
There was pressure for Rio Tinto's board to take the axe to senior management after the Alcan flop, but the chairman's justified restraint back then will lead to a smooth leadership transition from next year.
Today that decision in March 2009 not to act precipitously was in a back-handed sort of way vindicated with Elliott, a Rio veteran of 32 years, deciding to retire on his own terms at the end of next year.
With Albanese, Elliott has been a key figure in the resurgence of Rio and its restoration to what it was pre-crisis and before the ill-fated $US38 billion acquisition of Alcan.
While the legacy of that acquisition lingers within Rio’s numbers, its balance sheet has been restored to its former pristine state after a massive disposal program overseen by Elliott and its earnings and cash flows have soared on the back of a massive and continuing increase in the group’s iron production.
Du Plessis backed Albanese and Elliott because he didn’t believe they were culpable for the Alcan decision – Albanese announced the acquisition but it was a decision he had inherited when he became chief executive shortly before it was made. Former chairman Paul Skinner, more of an executive than non-executive chairman, has been blamed for that decision.
In any event du Plessis would be well-pleased that he supported his management and that they have subsequently delivered and that Rio will now be able to stage an orderly transition within the most senior levels of its management. With Albanese, 54, several years younger than Elliott it should also be able to put some distance between the departures of its two most senior executives.
Rio is yet to appoint a successor as CFO to Elliott, who was also responsible for the group’s strategy. It has, however, appointed one its rising stars, Rio Tinto Energy’s chief executive, Doug Ritchie, to lead the group’s strategy and business development. The newly-created role is London-based, which might be a pointer to the Rio board’s thinking on succession.
Ritchie, during Rio’s crisis years, wore two hats. He was chief executive of the energy business but was the point man on Rio’s response to the takeover overtures from BHP Billiton, the aborted dealings with China’s Chinalco and the mooted iron ore joint venture with BHP (before it was stymied by the regulators).
He also led the bid for Riversdale Mining, where Rio Tinto manoeuvred its way through a host of obstacles to acquire the group and its vast coal resources in Mozambique, defying market scepticism.
His shift to London has necessitated some other changes, with Diamond Minerals chief executive Harry Kenyon-Slaney, a former chief executive of Energy Resources of Australia, taking over the Energy business from September 1 and Alan Davies, president of Rio’s iron ore division’s international operations, taking on Kenyon-Slaney’s former role.
Davies, like Ritchie an Australian, is a former CFO of Kennecott Energy and has held a number of finance roles within Rio. He will retain responsibility for one of Rio’s new mega-projects, the giant Simandou iron ore project in Guinea and will join Rio’s executive committee.