Australia accounts for more than three-quarters of Rio’s profit. Photo: Rob Homer
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Is it time for Australia to get rid of the Brits for once and for all and bring Rio Tinto home?
If I was Walsh, the first thing I would do is shut down Rio’s ivory tower in London and move it to Perth.Charlie Aitken, Bell Potter
After another $US14 billion ($13 billion) of write-downs last night and dumping its chief executive, Tom Albanese, who has been replaced by an Australian, Sam Walsh, maybe the time is now.
In the process it would right what some saw as a wrong when clever investment bankers worked up a scheme that saw control of one of the country’s biggest miners go offshore in the mid-1990s.
Eighteen years ago, Macquarie Bank hatched a scheme mimicked on the dual-listed structure of some UK-Dutch entities such as Royal Dutch Shell, which saw control of what was then known as CRA move abroad, to London.
Born and bred in Australia, by the mid-1990s CRA had emerged as a significant mining house, with fingers in a range of pies, from iron ore to diamond mines and bauxite mining.
Its largest shareholder at the time, with just under half of the shares, was RTZ, a UK mining house which had traditionally been an investor in mining companies but had begun to invest directly in mining projects.
Traditionally, CRA had limited itself to projects in Australia but it had decided to pursue offshore opportunities, which meant it was starting to bump into Rio abroad.
But despite all of the efforts of Rio’s head office to develop in other regions over the past few decades, Australia is still the crown jewel in the group, accounting for more than three-quarters of Rio’s profit.
It is hard to see just what the UK-based head office has brought to the table over the years - with the Alcan merger, and then pursuing a fruitless and embarassing merger with China to stave off an unwanted bid from BHP surely enough to reinforce to shareholders that ‘‘absentee managers’’ sitting in a remote location are no substitute for those with direct mine management exposure.
Certainly, Bell Potter commentator Charlie Aitken thinks the time has come to make the move.
‘‘If I was Walsh, the first thing I would do is shut down Rio’s ivory tower in London and move it to Perth. Rio will generate 90 per cent of its profits in the medium term from Australian assets (iron ore, thermal coal) and I can’t see why in this day and age the head office remains in London,’’ he told his clients this morning.
So, is now, is it time to bring it back home?