TIDMRIO
RNS Number : 7580V
Rio Tinto PLC
17 January 2013
Rio Tinto impairments and management changes
17 January 2013
Rio Tinto expects to recognise a non-cash impairment charge of
approximately US$14 billion (post tax) in its 2012 full year
results. These impairments include an amount of approximately US$3
billion relating to Rio Tinto Coal Mozambique (RTCM), as well as
reductions in the carrying values of Rio Tinto's aluminium assets
(mostly Rio Tinto Alcan (RTA) but also Pacific Aluminium) in the
range of US$10-11 billion. The Group also expects to report a
number of smaller asset write-downs in the order of US$500 million.
The final figures will be included in Rio Tinto's full year results
on 14 February 2013.
Tom Albanese has stepped down as chief executive by mutual
agreement with the Rio Tinto Board, and Iron Ore chief executive
Sam Walsh has been appointed as his successor with effect from
today. 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.
Rio Tinto chairman Jan du Plessis said "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.
"I would like to pay tribute to Tom for his considerable
contribution to Rio Tinto over more than 30 years of service and
for his integrity and dedication to the company. I would also like
to thank Doug for his 27 years of service to the Group and
particularly for his invaluable work in developing our
relationships in China. I wish them both well for the future.
"We are fortunate to have such a capable and highly experienced
executive as Sam to take over and to ensure there will be a rapid
and seamless transition. He is ideally placed to cast a fresh eye
over how we address the challenges and opportunities in the
business, and derive greater value from it.
"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 15 January, 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."
The new chief executive Sam Walsh said "I am honoured to be
given the opportunity to lead this wonderful business. I have great
respect for Tom and the many positive attributes he brought to the
role and I am grateful for the experience of working closely with
him over many years. I will be working flat out to build an even
stronger, more valuable Rio Tinto business for shareholders and for
our many other stakeholders."
Tom Albanese said "While I leave the business in good shape in
many respects, I fully recognise that accountability for all
aspects of the business rests with the CEO. I am pleased that
someone of Sam's calibre and values has been chosen to succeed me
as chief executive. This is a great company and Sam will do an
outstanding job."
Impairments
At its investor seminar in Sydney on 29 November 2012, Rio Tinto
said that the annual year-end review of asset carrying values would
most likely result in further revisions to the value of assets,
notably aluminium.
The further deterioration in aluminium market conditions in
2012, together with strong currencies in certain regions and high
energy and raw material costs, has had a negative impact on the
current market values in the aluminium industry.
In Mozambique, the development of infrastructure to support the
coal assets is more challenging than Rio Tinto originally
anticipated. Rio Tinto sought to transport coal by barge along the
Zambezi River, but this option did not receive formal
approvals.
These infrastructure constraints, combined with a downward
revision to estimates of recoverable coking coal volumes on the
RTCM tenements, have led to a reassessment of the overall scale and
ramp up schedule of RTCM, and consequently to the impairment
announced today.
Rio Tinto continues to engage with the Government of Mozambique
on all transport infrastructure options.
Remuneration
Tom Albanese and Doug Ritchie
Tom Albanese and Doug Ritchie step down with effect from today
but, in order to ensure the effective transition of multiple global
stakeholder relationships, will leave the company on 16 July 2013.
During this period they will receive base pay, benefits and pension
contributions.
In respect of both individuals there will be:
-- No lump sum payment
-- No annual short-term performance bonus for 2012 or 2013
-- No long-term share award for 2013
In addition, when they leave the company, all outstanding
entitlements under Rio Tinto's long-term incentive plans will lapse
and their outstanding deferred bonus share entitlements earned in
previous years will be forfeited.
The 2009 performance share plan award made to Tom Albanese,
which related to the four-year period 2009 to 2012, may vest in
February 2013. This award comprised 48,019 shares, the current
indicative value of which is GBP1.6 million. In addition, he
received a 2010 share option plan award, which related to the
three-year period 2010 to 2012. This may vest in March 2013. This
award comprised 119,230 options. The grant price was GBP37.05
compared with a closing share price of GBP34.61 on 16 January
2013.
Tom Albanese has 525,508 vested but unexercised share options
which were granted between 2003 and 2009 at a range of exercise
prices. Based on the closing share price on 16 January 2013 of
GBP34.61, those options are currently valued at GBP10.7
million.
The 2010 share option plan award made to Doug Ritchie, which
related to the three-year period 2010 to 2012, may vest in March
2013. This award comprised 48,270 options. The grant price was
A$76.15 compared with a closing share price of A$65.55 on 16
January 2013.
Doug Ritchie has 15,538 vested but unexercised share options
which were granted between 2006 and 2009 at a range of exercise
prices. Based on the closing share price on 16 January 2013 of
A$65.55, those options are currently valued at A$242,000.
Sam Walsh
As chief executive, Sam Walsh is on a standard Rio Tinto Ltd
contract, which includes a standard 12-month notice period. He will
receive a remuneration package comprising:
-- A base salary of A$1.9 million, which is an increase over his
previous base pay of 15 per cent
-- Target annual bonus opportunity at 120 per cent of base salary (unchanged)
-- Expected value of long-term share incentive plan opportunity
at 190 per cent of base salary (unchanged)
-- Relocation costs from Perth to London
-- London housing costs
Sam's total target remuneration (salary + target bonus +
expected value of long-term share incentives) will therefore rise
by 15 per cent to A$7.8 million. There will be no change to other
benefits.
About Rio Tinto
Rio Tinto is a leading international mining group headquartered
in the UK, combining Rio Tinto plc, a London and New York Stock
Exchange listed company, and Rio Tinto Limited, which is listed on
the Australian Securities Exchange.
Rio Tinto's business is finding, mining, and processing mineral
resources. Major products are aluminium, copper, diamonds, thermal
and metallurgical coal, uranium, gold, industrial minerals (borax,
titanium dioxide and salt) and iron ore. Activities span the world
and are strongly represented in Australia and North America with
significant businesses in Asia, Europe, Africa and South
America.
For further information, please contact:
Media Relations, EMEA / Americas Investor Relations, London
Illtud Harri Mark Shannon
Office: +44 (0) 20 7781 1152 Office: +44 (0) 20 7781
Mobile: +44 (0) 7920 503 600 1178
David Outhwaite Mobile: +44 (0) 7917
Office: +44 (0) 20 7781 1623 576597
Mobile: +44 (0) 7787 597 493 David Ovington
Christina Mills Office: +44 (0) 20 7781
Office: +44 (0) 20 7781 1154 2051
Mobile: +44 (0) 7825 275 605 Mobile: +44 (0) 7920
010 978
Media Relations, Australia / Investor Relations, Australia
Asia Christopher Maitland
David Luff Office: +61 (0) 3 9283
Office: +61 (0) 3 9283 3620 3063
Mobile: +61 (0) 419 850 205 Mobile: +61 (0) 459 800
Bruce Tobin 131
Office: +61 (0) 3 9283 3612
Mobile: +61 (0) 419 103 454
Media Relations, Canada Investor Relations, North
Bryan Tucker America
Office: +1 (0) 514 848 8151 Jason Combes
Mobile: +1 (0) 514 825 8319 Office: +1 (0) 801 204
2919
Mobile: +1 (0) 801 558
2645
Website: www.riotinto.com
Email: media.enquiries@riotinto.com
Twitter: Follow @riotinto on Twitter
High resolution photographs and media pack available at:
www.riotinto.com/media
This information is provided by RNS
The company news service from the London Stock Exchange
END
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