Go easy on deals, investors tell new Rio Tinto boss

Fri Mar 18, 2016 11:45am EDT
 
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By Sonali Paul and James Regan

MELBOURNE/SYDNEY (Reuters) - Top investors in Rio Tinto (RIO.L: Quote) (RIO.AX: Quote) say they want the global miner's new boss to proceed cautiously on acquisitions, focusing on the core, cash-generating iron ore business and on developing his own copper mines before looking for new assets.

Jean-Sebastien Jacques, who will take over from Rio's veteran boss Sam Walsh in July, was previously the head of its copper and coal business. His appointment on Thursday has been read by some as an effort to rebalance the iron ore-focused miner and a pointer - given his negotiating credentials - towards deals.

The front-runner for the job had been iron ore boss Andrew Harding, whose division generated nearly 90 percent of the group's earnings in 2015. Jacques' copper and coal unit made up just 6 percent of the total.

But shareholders said Jacques should tread with care.

While the Frenchman may be taking over as more than $30 billion worth of mine comes onto the block amid the toughest mining downturn in decades, it is unlikely that many assets will be of the high quality, large, long-life caliber - so-called "tier one assets" - they said.

"We don't want them to be going out and aggressively acquiring stuff," said Andy Forster, a portfolio manager at Argo Investments, the second-largest Australian stakeholder in Rio.

Outgoing CEO Walsh said in February the most desirable copper assets were locked in the hands of other big miners and it would take a longer period of weak copper prices before those players crack.

Bankers have named mines including Cobre Panama, owned by First Quantum Minerals (FM.TO: Quote), Freeport McMoRan's (FCX.N: Quote) Cerro Verde in Peru and Grasberg in Indonesia, which is co-owned by Rio Tinto, or Anglo American's (AAL.L: Quote) Los Bronces and Collahuasi in Latin America as potential targets.   Continued...

 
Head of Rio Tinto's copper and coal division Jean-Sebastien Jacques speaks in this handout photo from Rio Tinto taken on September 19, 2014. REUTERS/Rio Tinto/Handout via Reuters