Mining CEOs bite the dust

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(3 votes)

There’s been some major shake-ups in the mining industry lately with CEOs from eight of the ten largest companies asked to leave, rumoured to be leaving, or resigned in the past couple of years.

Tom Albanese of Rio Tinto is the latest CEO to bite the dust and will be replaced by Sam Walsh. Albanese’s position as CEO for nearly six years was cut short when the company was forced to write off $US14 billion in value of aluminum and coal assets on Albanese’s watch. His takeover of Alcan with a surprising foray into aluminum in 2007 was quashed with the commodity price collapse of 2007/2008.

Albanese stood down from his role as CEO of the world’s second largest mining company under pressure from Rio’s board members. Admitting his defeat the 55-year-old engineer said, “I fully recognize that accountability for all aspects of the business rests with the CEO.”

Albanese is not alone in the industry with shifting fortunes and prevalent company restructuring. Rio’s top competitor BHP Billiton is currently hunting for a successor for its chief executive Marius Kloppers.

Greg Wilson, CEO of Northern Mining, and Mark Calderwell who is managing director of Perseus Mining have also moved aside during the industry shake-up.

Mark Cutifani has been named the new CEO at Anglo American, a role that has been open since Cynthia Carroll stepped down last October, dissatisfied with the performance of the company.

Anglo American says Cutifani’s basic salary will be $1.8 million per year plus he’ll be eligible for a long term incentive plan comprised of 350 percent of his basic salary after three years.

Also on the list of cuts are CEO Roger Agnelli from Vale two years ago and Xstrata will also lose its CEO due to its merger with shareholder Glencore. The list of monumental changes goes on.

What many of these former CEOs have in common is a perceived lack of good judgment and bad performance, but they were more likely subject to bad timing.

Most of the CEOs to get the sack started their position as commodities experienced a cyclical downturn from the 2008 market crash. New mine developments, expansions and cost escalations essentially out of direct control all contributed to them approving huge capital expenditures that were necessary at the time.

Project costs escalating far from projections were often too much for shareholders to come to terms with.
The industry itself as well as metal prices may change as a result of all this restructuring at upper levels. New CEOs will be more cautious and less likely to engage in massive capital cost developments.

In a cyclical industry, new CEOs may be entering at a time when global economies may start to pick up as the current cycle closes.

As major projects cease, shortages may ensue causing a boost in metals prices which will be good news for the new mining leaders in the short-term. Then shortages will kick in and large projects will resume and as they always say, history repeats itself. Mining CEOs may just be destined for a short shelf life.

References:


http://www.theaustralian.com.au/business/mining-energy/sam-walsh-rises-to-the-top-after-rio-tinto-shake-up/story-e6frg9df-1226556203318
http://www.smh.com.au/business/albanese-axed-in-rio-shakeup-20130117-2cw4s.html
http://online.wsj.com/article/SB10001424127887323468604578247011197822002.html

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Is the mining boom in Australia over?

Is the mining boom in Australia over?

No, it's just media hype.
Yes as a result of lower demand.
Still plenty of resources.
There will be a second boom.
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