Iron ore chief Sam Walsh has signed on as chief executive for three years.

Iron ore chief Sam Walsh has signed on as chief executive for three years. Photo: Louise Kennerley

HE MAY be no spring chicken, but the move by Rio Tinto's board to select a fellow director who is close to retirement to run the company speaks more of a decision seeking to stabilise management ahead of a period of transition.

This week Rio dumped Tom Albanese, the chief executive at the time of the $US38 billion Alcan purchase in 2007, as it took $US14 billion of write-downs both against Alcan and the Riversdale Mining purchase.

The elevation of Sam Walsh from running the iron ore division to running the company comes as Rio's chief financial officer, Guy Elliott, is also set to depart this year, along with Doug Ritchie, who led the disastrous Riversdale Mining purchase in Mozambique.

There are questions surrounding the Riversdale acquisition, given that $US3 billion of the $US4.2 billion purchase price has been written off, amid doubts about the underlying quality of the resource.

The genial and soft-spoken Walsh, a father of three and grandfather of four who turned 63 last month, has given a commitment to run Rio for three years, which few take at face value.

Walsh's appointment gives the board plenty of time to find a new chief executive while Walsh rolls up his sleeves and puts renewed focus on Rio's inherent management strengths.

Not only do the changes place an Australian back in the top job at Rio, which was the case since RTZ and CRA merged in the mid-1990s until Albanese's appointment in 2007, but it also underscores where it makes nearly all of its money.

Born and bred in Melbourne's seaside suburb of Brighton, Walsh joined Rio's aluminium arm in 1991, after a 20-year career in the car industry, first at General Motors before moving across to Nissan.

Walsh first ran Southern Aluminium, a Rio venture established in the late 1980s to produce aluminium wheels. This was an era of fractious union-management relations, but Southern Aluminium had a single union, which was a significant development and a forerunner of what has become widespread.

That breakthrough followed an intense amount of work throughout the group as it rethought its approach to trade unions, an approach that continues today.

While making aluminium wheels, Walsh also had a seat on the board of the aluminium smelter at Bell Bay, which paved the way for him to move up the company's ranks, first in aluminium, before spending a few years in iron ore.

Then it was back to head up the aluminium arm before being tapped eight years ago to run iron ore. This was followed by an appointment to the board in 2009, two years after the disastrous $US38 billion purchase of Alcan.

Timing is everything in business and on his watch Walsh was able to ensure Rio capitalised on the unprecedented iron ore boom, which has involved not only lifting output to keep abreast of surging demand from China but, equally importantly, maintaining sole control of its railway operations in the Pilbara by preventing upstarts such as Fortescue Metals from getting access to Rio's infrastructure.

His pragmatism was also demonstrated when he was able to stitch up the Hope Downs iron ore deal with Gina Rinehart in 2005, forging a 50-50 venture and arriving at a deal both parties were happy with.

But it hasn't all been smooth sailing, since there was also the matter of Stern Hu, the former Rio staffer in Beijing, who was sentenced in 2010 to 10 years' jail for bribery and stealing business secrets.

Walsh is believed to have backed Hu until towards the end when, finally convinced of his guilt, he cut him off.

The shake-up at Rio comes as the goldmining sector is going through fundamental change as well, with a push to focus on ''all-in'' costs rather than just cash costs after poor performance.

One former employee of CRA, the local forerunner of Rio, who knows Walsh well, says he is a personable man who would be patient with mum and dad shareholders.

''He does have an appeal, he is certainly vastly different to a Marius Kloppers [the BHP chief executive] who has an IQ that's off the scale and doesn't suffer fools very readily,'' he said. ''Sam is far more approachable. But there is some steel there, when he doesn't want to answer something he won't.''