Rio Tinto Rumours Keep Rolling
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The stories about Rio Tinto keep coming - the latest is that Mick Davis, the former Xstrata boss and current chief executive of Britain’s Conservative Party, is said to be the tip to become Rio’s new chair when the incumbent, Jan du Plessis steps down next year.
Rio shares closed at $73.75 yesterday on the ASX yesterday, the highest they have been for more than five years.
The sharp rise in recent months is due to the fact that iron ore prices have not collapsed as many had feared in the wake of Chinese steel capacity cuts and suspensions, and the continuing strength of copper prices.
The Financial Times reported this morning that Davis has held talks with Rio about the position.
Davis built Xstrata into one of the world’s biggest mining companies (at one stage it controlled coal in NSW and Queensland and Mount Isa, also in Queensland) before selling it to Glencore in 2012.
The FT says that in 2016, Davis “freed investors from financial commitments to his mining fund X2 Resources after it failed to pull off any deals during the depth of a commodity market downturn.”
Rio has been looking for a new chairman since March, when Jan du Plessis announced he would be joining BT Group.
The FT says Rio wants to name a successor by the end of the year. "Its search has been complicated by several issues, including the resignation of the John Varley, the non-executive director tasked with finding a replacement for Mr du Plessis. Mr Varley resigned in June after he was charged in the UK with fraud over his time as chief executive of Barclays. Ann Godbehere, another Rio board member, is now leading the search.”
Rio has also been hit with fraud charges from the US Securities and Exchange Commission which claims the company tried to hide a bungled $A4 billion acquisition of Riverside Coal the Mozambique coal producer. ASIC, the Australian corporate regulator is also investigating.
The company was also fined nearly £25m by UK’s Financial Conduct Authority last month in connection with the Riverside deal for breaching its listing rules.
Rio is also under investigation by regulators here and offshore for questionable payments made in connection with its foray into the Simandou iron ore project in Guinea.
Despite these cases the attractions of chairing Rio will be hard to beat - it is the second biggest iron ore miner in the world, it has significant copper investments, especially in the US and it is exiting the coal mining business. It has a very strong balance sheet, low debt and could afford a major expansion in copper, for instance which is one commodity Mr Davis knows a fair bit about.
Mr Davis is a cleanskin and not associated with the Rio board in anyway so his accession would give the company room for a new start and deal quickly with the issues.
Rio’s CEO is Jean-Sebastien Jacques who has replaced nearly all of the top executive team since he was appointed in mid 2016. He is said to have bought an apartment in Sydney and his wife is also rumoured to be interesting in moving to Australia. Most of Ro’s assets (the iron ore mines of WA) are based here.
The FT says other candidates include Sam Laidlaw, the former head of UK gas company Centrica, sits on the Rio board and Simon Thompson, a former banker and mining executive. Rio is also searching for a finance director to replace Chris Lynch, who has announced his intention to step down next year.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.