Bold boss takes helm at Rio Tinto

The mining giant is emerging from the commodity downturn as the industry’s strongest player, says Alex Williams.

801-truck-1200

Rio Tinto's new boss is taking the company in a new direction

The mining giant is emerging from the commodity downturn asthe industry's strongest player.

Less than a week into the role and Rio Tinto's new boss is steering the mining giant in a new direction. Rio has been under the watchful eye of Australian iron-ore veteran Sam Walsh for three years, but Rio's board recently replaced him with Jean-Sbastien Jacques, a younger, French-born executive, who is immediately making his presence felt.

Jacques, who previously led Rio's copper division, has instantly adopted a more "forthright" tone, says Marcus Leroux in The Times, dropping Sam Walsh's plans to build the vast Simandou iron-ore mine in Guinea. Simandou has been a public relations drama for nearly two decades, as the constant focus of bribery and corruption allegations. "We don't see a way forward" for the project, Jacques said.

Instead, Jacques is pouring $5.3bn into expanding Rio's Oyu Tolgoi copper mine in Mongolia, growing it into the second-biggest copper mine on the planet. Its investment in Mongolia was put on hold three years ago, after tax negotiations stalled. But during talks at his house in London, Jacques smoothed over the disagreement, breaking the ice by letting his daughter ask Mongolia's prime minister to sign her geography schoolwork.

At just 44, Jacques is one of the youngest bosses in the FTSE 100. Besides shelving Simandou and pumping money into Mongolia, he has reshuffled Rio's divisions, bundling in together its uranium, salt and coal mines. It is a "basket-case division", according to analysts, suggesting Rio plans to dump the combined unit. Rival miner BHP Billiton similarly hived off a ragbag of non-core assets two years ago.

Mining bosses tend to make major moves early in their tenure, says Jesse Riseborough at Bloomberg. Rio's former head Tom Albanese launched a "calamitous" $38bn takeover of aluminium group Alcan in 2007, soon after his appointment. But the deal went so disastrously wrong that Rio has been shy of deals ever since. Mergers and aquisitions are "not on the top of the agenda", Jacques confirmed this week. What looks more likely is a fire sale of its smaller assets. This week it sold off a coal mine in Australia for the nominal sum of one dollar, "less than the price of a cup of coffee", says the Financial Times.

However they slice their assets, miners are inexorably linked to Chinese growth, says The Daily Telegraph. The country's slowdown has sent iron ore tumbling from $190 per tonne in 2011 to a low of $38 last year and copper is just as vulnerable. Rio's Mongolia mine, 80km from the Chinese border, is highly dependent on Asian buyers. But the group is emerging from the commodity downturn as the industry's strongest player. "We have a good balance sheet," Jacques boasts. "We are profitable at the bottom of the cycle."

Recommended

Make money from the metals mining boom in Latin America
Industrial metals

Make money from the metals mining boom in Latin America

Covid-19 has hit Latin America harder than any other. But the continent's highly competitive mining sector looks poised to profit handsomely over the …
23 Oct 2020
Too embarrassed to ask: what is short selling?
Too embarrassed to ask

Too embarrassed to ask: what is short selling?

Short sellers are often accused of unfairly driving share prices down to make a quick buck. But short selling is a perfectly legitimate – if risky – t…
26 Jan 2021
Buy into the “contrarian” appeal of US growth stocks
Investment trusts

Buy into the “contrarian” appeal of US growth stocks

Investors should ignore the shift towards value stocks, says Max King, and stick with fast-growing American tech stocks. Here are two of the best inve…
26 Jan 2021
Three clean energy stocks for your portfolio
Share tips

Three clean energy stocks for your portfolio

Professional investor Christian Roessing of the Pictet Clean Energy Fund highlights of his three favourite stocks at the forefront of the clean energy…
25 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021