RIO Tinto has admitted it was a big mistake to purchase aluminium maker Alcan six years ago and as a result the company is now more likely to favour some commodities over others.
Addressing his first annual general meeting, chief executive Sam Walsh said Rio was focused on raising funds by selling assets in 2013.
“We are targeting significant cash proceeds from divestments and are reviewing a number of potential non-core assets for divestment, in addition to those we’ve already announced, such as Pacific Aluminium and Diamonds,” Mr Walsh told shareholders in London.
Rio in February announced its first ever full-year net loss of almost $US3 billion ($2.9 billion). Since then the world’s second-largest iron ore producer has been slashing jobs to cut costs. Mr Walsh said Rio had also bolstered investment committee controls and procedures.
“This will ensure … that we invest only in projects that deliver returns well above our cost of capital,” the chief executive said. He said 2012’s capital expenditure of $US17.4 billion “will be our peak year of investment”.
Rio acquired Alcan in mid-2007. Chairman Jan du Plessis said in hindsight the transaction was “badly timed at the top of the market”.
“In retrospect, we therefore have to acknowledge that the acquisition has had a significant negative impact on shareholder value,” he said.
Chief financial officer Guy Elliott said as a result of the Alcan experience Rio had begun “to reconsider the agnostic approach that we might have towards one commodity versus another”.
“We do (now) have views upon each commodity and probably do favour some more than others,” he said in London.
Rio has been criticised for its near total dependence on iron ore despite calling itself a diversified resources company.
Iron ore in 2012 contributed $US9.24 billion of the group’s $US10.2 billion in earnings.
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