Mozambique 'challenges' cost Rio Tinto dearly
MOZAMBIQUE has proven a costly venture for Rio Tinto, with the multinational miner forced to admit almost $3 billion has disappeared as it attempted to mine coal in the south-east African nation.
The country is one of the few with coal reserves - both coking for steel making and thermal for electricity - that compares to Queensland's in quality.
Mozambique has repeatedly been held up as a potential competitor for Australian mining investment.
It was considered a low-cost oasis compared to Australia, away from the high wages, royalties and new taxes levied on the resource sector here.
But the move into the developing nation - one Rio Tinto is not alone in making - cost Rio chief executive Tom Albanese his job after the company struggled with poor infrastructure and apparent government hurdles.
Such a problem reinforces Queensland and Australia's position as a comparatively safe place for investment, but may sharpen up Rio's need to keep costs low in all its businesses, including those in Queensland.
In its announcement on Thursday evening, Rio admitted it lost up to $10.5 billion from a fall in value of its Alcan and Pacific Aluminium businesses and $2.8 billion from its Mozambican coal operations.
By way of explanation, Rio's statement said, "In Mozambique, the development of infrastructure to support the coal assets is more challenging than originally anticipated."
Coal would have to be moved from its mines then loaded on to a train so it could travel 600km to the Zambezi River where it would be taken to the coastline.
But Rio could not win the approvals to ship the coal down the Zambezi.
To compound its challenges, coal prices have stayed weak and Rio appeared to overestimate the amount of coal it could access in Mozambique.
Even as Rio emphasises its desire to keep working with the Mozambican government, Deutsche Bank analysts reckon its plans could now take four years longer than expected.
The mining powerhouse owns three coal mines, three aluminium operations and a powerstation in Central Queensland.
It also has a majority stake in coal mines in the Hunter Valley.
Representatives for Rio Tinto did not return calls by deadline
EARLIER: Mining multi-national Rio Tinto has lost two of its top two executives after revealing it would write-off billions of dollars in overseas assets.
The company announced on Thursday night it would drop more than $2.8 billion in value from its Mozambique operations while its aluminium arms lost $9.4 billion, particularly Rio Tinto Alcan.
These mammoth write-downs prompted chief executive Tom Albanese to step down, with iron ore boss Sam Walsh taking his place from today.
Mr Albanese said he accepted responsibility for the powerhouse's significant loss.
"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," he said.
The man who led Rio Tinto's Mozambique deals - Doug Ritchie - has also stepped down.
Rio Tinto's board agreed with both stepping down.
Earlier this week, Rio announced a strong year for its iron ore business despite some struggles in its Queensland coal business.
Chairman Jan du Plessis reiterated, in a statement, that Rio was "taking decisive action to improve our competitive position further with an aggressive cost reduction plan".
Mr Albanese will remain with the company until July 16.
Both he and Mr Ritchie will receive their base salaries, with no chance of lump-sum payment, bonuses, or further share deals.