News

BREAKINGVIEWS-Rio Tinto could have high-grade chairman in Davis

Date 11/14/2017 3:58:30 PM Source: Reuters
    SINGAPORE, Nov 14 (Reuters Breaking views) - Rio Tinto RIO.L could have a high-grade chairman in former Xstrata boss Mick Davis. Big miners usually prefer statesman-like chairmen to dealmakers. So Davis, who Sky News and the Financial Times say is frontrunner for the job, would be an odd choice for the $90 billion giant at this point in the commodity cycle. But he's smart, thinks big and would keep headstrong Chief Executive Jean-Sébastien Jacques on his toes.

    Davis is justly admired as the man who turned a jumble of coal mines bought from sister company Glencore  GLEN.L  into an ambitious, new-generation miner. Not everything worked for Xstrata: a bet on platinum in 2008 was a disaster, and the

group's eventual absorption into Glencore proved controversial. But most other deals, like the bid for miner Falconbridge in 2006, did.

    In life after Xstrata, he again turned to deals - or tried to. Few materialised. Rio, by contrast, has spent much of the past four years atoning for the M&A mistakes that cost Tom Albanese his job in 2013. Last year's appointment of Jacques handed control to a younger, more technocratic leader.

    Having a conventional grandee in charge of the board is no guarantee of future conservatism, in either deals or investment. Jan du Plessis, a board veteran with an impeccable pedigree, presided at Rio over both top-of-the-market deals and the cuts and writedowns that followed.

    Still, Rio's Anglo-Australian rival BHP Billiton BHP.AX sent a strong signal by hiring a former packaging executive, Ken Mackenzie, to the top job. BHP is admittedly fighting off an activist investor, but this appointment hints at a miner centered on industrial processes and ruthless efficiency, not volumes.

    Dismissing Big Mick, as he is sometimes dubbed, would be a mistake for three reasons. First, the industry needs to reinvent itself and Davis has shown vision. He ran Xstrata much as a private-equity investor would. That was before many others in the industry had switched their focus from digging up as much metal as possible to generating solid returns on equity.

    Second, he would have valuable industry expertise. That experience at the literal coalface is unusual for big miners.

And third, he is a strong personality who could hold the chief executive and his team to account. That sounds like a valuable mixture.

     

    CONTEXT NEWS

    - Sky News and the Financial Times reported on Nov. 13 that former Xstrata boss Mick Davis was the frontrunner to become the next chairman of Rio Tinto, respectively citing a "City source" and people familiar with the matter.

    - Davis built Xstrata into a mining heavyweight, and sold the company to shareholder Glencore in 2013. He later set up a mining fund, X2 Resources, but struggled to find deals. He is also chief executive of Britain's ruling Conservative Party.

    - Rio, the London and Sydney-listed miner, said in March that Chairman Jan du Plessis would retire and it planned to announce a replacement by the end of 2017. Du Plessis, who has been appointed chairman of BT, the telecoms carrier, will depart by no later than Rio's 2018 annual general meeting in Australia.

Edited by SHMET