THE DISTILLERY: Rio adieu

Jotters assess the impending departure of Rio Tinto's Guy Elliott, while one digs into the latest unemployment figures.

The departure of a successful senior executive so often heralds the beginning of the end of a bull market. Is there anything to be read into with the pending departure of Rio Tinto finance boss Guy Elliott, asks The Australian Financial Review’s Tony Boyd? But shareholders can be thankful that Elliott wasn’t booted out in the wake of the Alcan acquisition, writes Business Spectator’s Stephen Bartholomeusz.

The Australian Financial Review’s Chanticleer columnist Tony Boyd wonders whether Elliott has really picked the right time to get out of Rio.

"One experienced fund manager reeled off the names of several chief executives whose departure coincided with the top of the sectoral bull market in their shares such as Allan Moss at Macquarie Bank, Richard Uechritz at JB Hi-Fi and Ian Smith at Newcrest. Iron ore mining is as far as you could get from investment banking, electronics retailing and fickle goldmining. Also, Rio is well off its highs. But the principle still applies. Has Elliott picked the top of the iron ore market? Is the obvious stockpiling of iron ore by the Chinese a precursor to prolonged weakness in prices? Are the bearish strategists, such as David Cui at Bank of America Merrill Lynch, right in predicting a banking crisis in China in 2013 with severe consequences for the entire economy?”

Business Spectator’s Stephen Bartholomeusz argues that Rio chairman Jan du Plessis would be pleased that he didn’t get rid of Guy Elliott and chief executive Tom Albanese when he took charge of the board, something that many were calling for in the wake of the disastrous Alcan acquisition.

"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.”

Meanwhile, Fairfax’s Adele Ferguson has got her hands on some research from Goldman Sachs with some importance news, some good and some bad. The good news is Australia is expected to win 15 gold medals at the London Olympic Games, the bad news is the poms have a home-town advantage that’s measurable in medals.

"The upshot is that the report predicts Britain will win 30 gold medals and 65 medals in total, which is a whopping 18 more medals than it won at the Beijing Olympics. China, meanwhile, will have ex-host hangover, winning 33 gold medals versus 50 when it hosted the games in 2008. The team of economists at Goldman Sachs forecast that the United States will again win the lion's share of medals. It predicts that the top 10 ranks will include five G7 countries (the US, Britain, France, Germany and Italy), two BRICs (China and Russia) and one additional developed and emerging market (Australia and Ukraine, respectively). ‘Based on our analysis, these 10 countries will likely capture more than half of all medals attained during the Games,’ the report says.”

In company news, Fairfax’s Elizabeth Knight says Fortescue Metals Group is a takeover target for likes of Teck Resources, Glencore International and Xstrata. The Australian’s John Durie says Telstra’s finance chief Andy Penn must be enjoying his new gig, given all the cash that the telco is now blessed with. And The Australian’s Bryan Frith says Mariner Corporation keeps making elementary mistakes in its quest to become "the next GPG”.

In economic news, Fairfax’s Tim Colebatch says yesterday’s employment figures were a "correction we had to have”. Fairfax’s Peter Cai looks at the ambitious plans by China to reduce its emissions.

In banking, Fairfax’s banking writer Eric Johnston explains how credit card fraud is soaring as online sales rise. The Australian’s Adam Creighton argues that the unfolding Libor scandal in Britain serves as just another marker on the decline of the global banking industry’s reputation.

And finally, The Australian’s Glenda Korporaal hits Prime Minister Julia Gillard on the unemployment rate, arguing that Australia’s relative strength compared to global competitors offers little comfort to families facing uncertainty.

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