Tom Albanese quits Rio Tinto after £8.7bn writedowns

Rio Tinto boss Tom Albanese shocked the City today by announcing a further $14 billion (£8.7 billion) of writedowns, relinquishing more than £12.3 million worth of bonuses and resigning from the FTSE miner after two decades of service.

Shares in Rio Tinto tumbled by more than 4% after it wrote down its beleaguered Alcan aluminium business by another $10 billion to $11 billion, less than a year after cutting its value by $8.9 billion.

Rio also revealed a $3 billion charge against Riversdale, the fledgling Mozambique-focused coal business it bought in 2011, after the cost of developing supporting infrastructure spiraled and estimates of its recoverable reserves had to be written down.

“The Rio Tinto board fully acknowledges that a writedown of this scale in relation to the relatively recent Mozambique acquisition is unacceptable,” said chairman Jan du Plessis.

“We are also deeply disappointed to have to take a further substantial writedown in our aluminium business, albeit in an industry that continues to experience significant adverse changes globally,” he added.

Albanese became chief executive in 2007 and in his first year paid $44 billion for Canada’s Alcan. The deal left Rio with huge debts and forced it to a $15.2 billion rights issue. Meanwhile the aluminium industry was squeezed by a cocktail of falling prices — as China ramped up supply at the same time as the financial crisis hit demand — wage and raw materials inflation and rising power prices.

Albanese today waived his bonus for 2012, along with £12.3 million worth of all outstanding entitlements. He was replaced with immediate effect by Sam Walsh, head of Rio’s iron ore operation, which accounts for nearly three quarters of operating profit.

The shares lost 157.1p to 3457.1p.