Rio’s $14 billion rough ride

Rio Tinto’s recent uranium acquisition of the Canadian Roughrider deposit is said to be just one project that will be written down in a massive round of impairments.

Next month Rio will release full details of the $US14 billion of impairments which cost the company’s CEO Tom Albanese his job on Friday.

SMH reported the impairments include a write-down of between $US10 billion and $US11 billion against Rio's aluminium assets, and about $US3 billion against its coal assets in Mozambique.

However, write-downs will not stop there, the company said there would also be “a number of smaller asset write-downs in the order of $US500 million''.

It is these smaller write-downs that are expected to hit the company’s uranium projects, Australian analysts believe.

Following a bidding war with uranium miner Cameco, Rio acquired the Canadian uranium deposits just over a year ago in its $638 million purchase of Canadian junior Hathor Exploration.

Cameco chief executive Tim Gitzel said at the time that beating Rio's offer would have been ''too much to pay for that asset''.

At the time, Rio thought it was buying the asset at the bottom of the uranium market which had faulted badly following the Japanese Fukushima nuclear disaster in March 2011.

However, uranium prices took another hit and fell almost 15 per cent in 2013, hovering around $US42 per pound.

In comparison to impairments expected to hit Rio’s aluminium and coal assets, those levelled against Hathor are relatively small financially.

However, they are not small symbolically, considering the relationship between Albanese and his chairman Jan du Plessis, SMH reported.

It is understood that du Plessis was willing to consider the company’s aluminium failure as a kind of ''first strike'' for Albanese, given that the acquisition occurred prior to de Plessis' appointment as chairman.

This was not meant to be, with the number of failed acquisitions stacking up during du Plessis’ time as chairman, including another smaller Mozambique write-down which is said to be the prime reason for Albanese’s sacking.

The full details of Rio’s impairments will be announced on February 14 when the company reveals its annual results in London.

Albanese, at the age of 55 could have many years ahead in the corporate arena.

Pengana Capital resources fund manager Tim Schroeders said Albanese would be a good candidate for the board of one of Rio’s rivals, including BHP Billiton.

''In terms of a chief executive role, I think BHP would be copping too much flack if they appointed him. But at some stage, with the benefit of time and experience, he is probably a very valuable candidate for someone like the BHP board,'' Schroeders said.

"There is no doubt the guy has good experience, understands markets and has probably got some wonderful insights in terms of relationships with the Chinese and other key countries.

''I'm sure he would be a valuable non-executive director and probably very well sought-after I would imagine.''

Rio has already enlisted former BHP chief financial officer Chris Lynch as a non-executive director.

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