Rio Tinto hit by $14bn impairment

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Tom Albanese has stepped down as chief executive of Rio Tinto by mutual agreement with the board‚ and iron ore chief executive Sam Walsh has been appointed as his successor with effect from Thursday.

The global mining giant also announced on Thursday that it expects to recognise a non-cash impairment charge of approximately US$14 billion (post tax) in its 2012 full year results.

The impairments include an amount of approximately US$3 billion relating to Rio Tinto Coal Mozambique‚ as well as reductions in the carrying values of Rio Tinto’s aluminium assets (mostly Rio Tinto Alcan but also Pacific Aluminium) in the range of $10bn-$11bn.

The group also expects to report a number of smaller asset write-downs in the order of $500 million. The final figures will be included in Rio Tinto’s full year results on February 14.

The group also announced that Doug Ritchie‚ who led the acquisition and integration of the Mozambique coal assets in his previous role as energy chief executive‚ has also stepped down by mutual agreement.

“The Rio Tinto board fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable. We are also deeply disappointed to have to take a further substantial write-down in our aluminium businesses‚ albeit in an industry that continues to experience significant adverse changes globally‚” said Rio Tinto chairman Jan du Plessis.

“Rio Tinto’s underlying business and balance sheet remain in good health‚ and we are taking decisive action to improve our competitive position further with an aggressive cost reduction plan. As announced on January 15‚ we had a strong production year in 2012‚ particularly in our low-cost iron ore business where we produced a record 253 million tonnes. Since the price of iron ore dropped to a low of less than $US90 a tonne last September‚ prices rebounded strongly reaching a level of around $US150 a tonne earlier this week‚ albeit in an environment of continuing volatility‚” said Du Plessis. - I-Net Bridge

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