The ouster this week of one of the world’s captains of mining underscores a breaking dawn in the industry as it sheds its old guard and discards a mantra of growth at any cost.
After six years at the helm of the world’s third-largest diversified miner, Rio Tinto PLC chief executive officer Tom Albanese said Thursday he was resigning the post by “mutual agreement” with his employer of three decades, amid a writedown of $14-billion (U.S.).
“While I leave the business in good shape in many respects, I fully recognize that accountability for all aspects of the business rests with the CEO,” said Mr. Albanese, who is also forgoing his bonus for this year and last.
Mr. Albanese joins a long line of former CEOs who have been replaced in recent months at some of the world’s largest miners, including Canadian giants Barrick Gold Corp. and Kinross Gold Corp.
The shift from an old guard, bent on rapid growth via expensive acquisitions, to one focused on preserving share value comes as miners face some of the most tumultuous times in decades, including massive cost increases and overruns, a scarcity of new discoveries and an uncertain demand outlook.
They must also contend with an increasingly vocal and active shareholder base at a time when stock valuations slump in gyrating stock markets.
“I think the new round of CEOs coming in will be much more cautious than what we’ve seen in the last five years,” said Tony Robson, an analyst with BMO Nesbitt Burns in London. “I think the new CEOs coming in for the companies across the board, whether in base metals or gold, will take a much more cautious view in terms of project build and M&A (mergers and acquisitions).”
To be sure, the world facing Mr. Albanese when he was appointed to lead Rio Tinto in 2007 was a very different one. China’s city-building was at full throttle and commodities prices were on a tear.
Rio’s acquisition that same year of Montreal-based aluminum giant Alcan Inc. was a bold bet that aluminum prices would soar to new heights. Instead, the metal steadily lost value, barely trading at cost these days.
Most of the charges announced by Rio this week were related to that eye-popping $38-billion takeover, and came on top of $8.9-billion in writedowns on the same assets last year. Rio Tinto Alcan is today is not even one-quarter the size it was when it was bought.
When he stepped down on Thursday, Mr. Albanese was also facing the music in part for some $3-billion in writedowns on Rio’s 2011 acquisition of Mozambique-focused coal miner Riversdale. The chief executive of his energy division also stepped down, also by mutual agreement with the board.
Toronto-based Barrick replaced its CEO, Aaron Regent, in June, just before announcing a 60-per-cent rise in costs at a key development project in the southern Andes. Incoming chief executive officer Jamie Sokalsky also deferred some $4-billion in planned spending on projects that did not meet rigorous investment criteria to help offset costs.
Other global CEO casualties in recent months include Cynthia Carroll, who left Anglo American in a surprise move in October. She was nearly seven years into a job that saw her steer the miner through the global financial crisis.
BHP Billiton Ltd., the world’s largest miner, is said to be looking for a new leader to replace Marius Kloppers, the energetic CEO also hired in 2007 and who waived his 2012 bonus after coming under fire in August for a $2.8-billion writedown on U.S. shale gas assets acquired for nearly twice that amount 18 months earlier.