It is a bittersweet end to Jacynthe Côté’s distinguished 26-year career at Rio Tinto Alcan.
The Laval University-trained chemist who rose through the ranks at Alcan became head of Rio Tinto’s aluminium business in January, 2009, just as the financial crisis was ripping through the world economy. No other woman had accomplished such a feat in the company’s 112-year history.
On the day she was appointed, though, she announced the closing of the Beauharnois, Que., smelter she once directed, and that pretty much set the tone for her five-year term. As aluminium prices fell and Rio Tinto suffered from an acute case of buyer’s remorse over its $38.1-billion (U.S.) acquisition of Alcan – in cash no less – Ms. Côté closed smelters, laid off employees and turned every rock she set her eyes on to cut the producer’s costs.
Last year, the unit’s underlying earnings, at $557-million, were 10 times higher than in 2012.
Now that the worst of the mining downturn appears behind Rio Tinto, Ms. Côté is leaving the company’s aluminium unit to “pursue other interests.” However, her replacement by BP veteran Alfredo Barrios as chief executive comes at a time when Alcan’s future within Rio Tinto is clouded.
One cannot disregard how big a job Ms. Côté accomplished. She may look unassuming in her understated dark suits and her discreet jewels, but the 55-year-old executive put the former Montreal-based producer through the wringer. No geography was spared, notably Alcan’s home country, where another plant, in Shawinigan, Que., was shut down last year.
However, Ms. Côté was able to pursue the expansion and upgrade of the Kitimat, B.C., smelter, a $3.3-billion project that is reportedly running over budget. She also oversaw the construction of a new Jonquière, Que., production centre, although completion of the second and third phase of this new Saguenay-region smelter that uses energy-efficient technology has been deferred for three years, until 2019.
As a whole, Rio Tinto is in a much better shape, after pursuing the most aggressive spending cuts in the industry – the company already excised $2.3-billion of the $3-billion targeted in the two years leading to December, 2014. Its debt fell to $18.1-billion at the end of 2013. The company’s chief executive, Sam Walsh, is even weighing new investment projects that could be submitted to the mining company’s board in 2015.
Those investments won’t be predicated on current commodity prices. Still, the aluminium industry looks about as attractive as a faded painting in the storefront of a second-hands goods store.
While Rio Tinto Alcan was busy shutting down smelters along with its rivals Alcoa and Rusal to reduce oversupply, China has been producing aluminium full blast. So far, the additional Chinese production has more than offset the cuts made in North America and in Europe.
With this lingering oversupply, pricing pressures persist. Aluminium trades once more under $1,800 per metric tonne on the London Metals Exchange, a price lower than the 2013 average of $1,845 and the 2012 average of $2,018. The 2008 summit of over $3,000 per tonne now looks like a long-forgotten fantasyland.
To offset the impact of these low prices, Rio Tinto Alcan has resorted to increasing production in its remaining facilities. Luckily, the Canadian dollar fell, giving the aluminium producer a little breathing room.
But one has to wonder how long Rio Tinto, the second-largest iron ore producer in the world, behind Rio-de-Janeiro-based Vale SA, will stand for this. Four out of five dollars that Rio Tinto earns come from its iron ore activities, and the rest, such as its diamond business, just looks peripheral.
The chairman of Rio Tinto, Jan du Plessis, publicly acknowledged at the company’s shareholder meeting in early May that the iron ore producer regularly questions which commodities it should keep in its portfolio.
Rio Tinto already toyed with the idea of selling its cursed aluminium business. It scrapped its plans because it couldn’t fetch a good price, Mr. Walsh admitted last year. That doesn’t exactly spell close attachment.
No one would be surprised then if Mr. Barrios heralds a whole new chapter for the old Alcan.
From one Côté to another
In the past 39 years, you would be hard pressed to find a big Quebec Inc. company that didn’t resort to Secor Group, the consulting firm that Marcel Côté co-founded in 1975 with two other Sherbrooke University professors. Bombardier, SNC-Lavalin, Videotron: Uou name it. Mr. Côté never got over the sale of his firm to KPMG in 2012 and then went into politics, running to become mayor of Montreal. But the man who had weighted on every public policy debate in Quebec was as talented an economist as he was a clumsy politician. The die-hard Montrealer who lived downtown and who walked to all of his appointments was so energetic, no one could believe he was 71 when he died on Sunday of a heart attack at a bike race. His cleverness and his contagious smile are already missed.