Rio Tinto CEO shown the door

Some shareholders might say ‘about time’.

Rio Tinto Limited’s (ASX: RIO) chief executive, Tom Albanese, has been given the boot from the giant miner, after the company announced US$14 billion of write-downs, although the company announcement says it was ‘by mutual agreement’.

Rio is writing down its aluminium assets by between US$10-$11 billion, and a further US$3 billion related to its Mozambique coal acquisition.

Energy chief, Doug Ritchie has also been shown the door, after he engineered the acquisition of Rio’s Mozambique coal assets .

The impairment of its aluminium assets comes after the company had previously written off US$17.3 billion, after purchasing Canadian aluminium producer Alcan for US$38 billion in 2007. Rio wrote off US$8.4 billion in 2008, and a further US$8.9 billion in 2012. Including the current US$10-$11 billion, Rio has now taken impairments of between US$27-US$28 billion against the US$38 billion purchase.

Now that’s an acquisition that destroys shareholder value.

The company blamed those previous write-downs on difficult economic conditions, but really, the Alcan acquisition was a giant mistake. After the company revealed the 2012 impairment, We questioned how Mr Albanese had managed to hang onto his job. It seems a third write-down was his third strike.

90% of earnings are now estimated to come from iron ore, showing how dependent Rio is on the commodity. Should iron ore prices continue to fall, as they have over the previous week, Rio could see its profits hit materially. The miner’s plan to ramp up production even further to compensate for the falling price, is likely to exacerbate the issue.

Brazilian iron ore giant, Vale, BHP Billiton (ASX: BHP) and Fortescue Metals Group (ASX: FMG) are all pushing ahead with their iron ore expansion plans, as well as Rio. Medium and small miners such as Atlas Iron Limited (ASX: AGO) are also expanding their output.

Foolish takeaway

With massive supplies of iron ore coming on-line, and China likely to reduce its iron ore imports as demand for steel falls, basic economics suggests that the iron ore price can only fall further from here. The writing is on the wall for iron ore miners – Foolish investors take note.

Oil, copper, and gold continue to be in high-demand — and their popularity doesn’t look to be slowing. We’ve uncovered three companies poised to benefit from the rising prices of these commodities. Get our brand-new report — “3 High-Risk/High-Reward Resources Stocks” — FREE!

More reading

Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!