Rio Tinto expects to recognise a non-cash impairment charge of approximately US$14bn (post tax) in its 2012 full year results.
These impairments include an amount of approximately US$3bn 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$10-11bn. The Group also expects to report a number of smaller asset write-downs in the order of US$500M. The final figures will be included in Rio Tinto's full year results on 14 February 2013.
The company is the world’s second largest producer of iron ore producing in excess of 170Mt and has 23% of the global sea-born trade. Revenue from iron ore amounted to US$29.9bn in 2011, up 19.6% on 2010 with underlying earnings at $12.85bn up 20.7% y-o-y. The Company has 13 mining sites in the Pilbara region of Western Australia and a 53% stake in three in NW Australia (Robe River) and also holds major shares in mines in Canada (59%). It is developing iron ore mines in Guinea (W Africa) (95%) and India (Orissa) (51%).
CEO Tom Albanese has stepped down by mutual agreement with the Rio Tinto Board, and is replaced by iron ore chief executive Sam Walsh effective from 17 January. 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.
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.
Rio Tinto purchased Alcan in 2007 for $38bn, just prior to the global financial crisis which has since hit the profitability of the company. This was the first major acquisition by Tom Albanese who took up the post of CEO that year. The company has since sold off all Alcan’s downstream secondary and research operations to concentrate on its primary smelters.
Rio Tinto bought Mozambique-focused coal miner Riversdale in 2011. The mine was believed to contain extensive coking coal reserves but 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. This, along with an under estimate of the infrastructure needed to export the coal has added to the impairment announced on 17 January.
Rio Tinto sought to transport coal by barge along the Zambezi River, but this option did not receive formal approvals.
In respect of the two individuals leaving the company there will be:
• No lump sum payment
• No annual short-term performance bonus for 2012 or 2013
• No long-term share award for 2013.