Rio Tinto turns to iron ore boss to restore fortunes

MELBOURNE/SYDNEY Thu Jan 17, 2013 6:46pm EST

New Rio Tinto chief executive Sam Walsh poses for photographs at a Rio Tinto office in London January 17, 2013. REUTERS/Neil Hall

New Rio Tinto chief executive Sam Walsh poses for photographs at a Rio Tinto office in London January 17, 2013.

Credit: Reuters/Neil Hall

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MELBOURNE/SYDNEY (Reuters) - Rio Tinto's new chief executive Sam Walsh takes the helm at a time when some critics say the global miner is too dependent on one commodity -- iron ore.

Walsh for the past nine years has led the iron ore division to where it now generates nearly all of the firm's profits. He now must address the deep problems of weaker divisions such as aluminum and coal in a myriad of operations in more than a dozen countries.

His toughest hurdle will be unloading the struggling Pacific aluminum business, a legacy of Rio Tinto's ill-timed $38 billion takeover of Alcan, which led to his predecessor Tom Albanese's downfall.

Followers of Walsh's rise at Rio Tinto over the past two decades say he is well-prepared to take on the challenges, but question whether he would be a long-term solution for the group.

"He's a savvy operator who manages to cut through a lot of the rubbish," said Tim Schroeders, a portfolio manager at Pengana Capital.

"The question is whether he is a long-term choice or a stop- gap measure," he said, adding investors had long speculated that Walsh, 63, never sought the top job because he didn't want to move to London from Perth.

Walsh joined Rio Tinto in 1991 after 20 years working for General Motors and Nissan Australia and rose up the management ranks before being named to head the iron ore division in 2004.

Under Walsh, the world no.2 iron ore producer behind Brazil's Vale (VALE5.SA), invested $24 billion in expanding iron ore mines, railways and ports, and automated its operations with driverless trucks and trains run from a NASA-style command post in Perth, 1,000 km (620 miles) away from its Pilbara mines in Australia's far west Outback.

"He's been an integral part of Rio Tinto's growth and the success of the iron ore business," Schroeders said.

SOFTER SIDE

One of the biggest feathers in Walsh's cap was wresting control of the rich Hope Downs iron ore deposit from Anglo American's (AAL.L) Kumba Resources and negotiating development of the prized asset with Australia's richest woman mining magnate Gina Rinehart.

"He (Walsh) dealt with her directly and answered her numerous questions," Adele Ferguson said in a biography of Rinehart.

"He also did everything he could to massage her ego," Ferguson said in her book. "Walsh told the media it must have been music to Gina's ears."

The hard-nosed Walsh also sports a softer side.

He once shrugged off a depiction of himself in a glossy magazine sporting a black tutu, his face superimposed on a lithe ballerina's frame.

He laughed at the spoof, much to the relief of the reporter who wrote the accompanying story on his ardent promotion of the arts in his home town of Perth, where he chairs the Black Swan theatre.

He also boasts a collection of around 350 antique milk jugs, including one that is 2,000 years old.

"He's very gentlemanly in the way he approaches things, but he's extremely tough and extremely competitive," said Lawrence Grech, an analyst at PhillipCapital.

The grandfather of four favors Hawaiian shirts and has been spotted in Bermuda shorts at a supermarket near the beach, close to the suburb where he lives near longstanding and newly-minted mining moguls, including Andrew "Twiggy" Forrest, and Rinehart.

He is highly respected in the industry for his ability to communicate with investors, politicians, Aboriginal landowners as well as the company's biggest customer, China.

Growth in Rio Tinto's copper business is near the top of the agenda, with the giant Oyu Tolgoi mine expected to start selling ore by June from Mongolia, where he faces tricky talks with a government that has made noises about wanting to grab a bigger share of the project.

He is experienced in driving cost cutting across several divisions of the company, so is well-placed to continue that from the top.

But a major measure of his success will be how he tackles the loss-making aluminum business, which nearly brought the company to its knees during the global financial crisis.

Rio Tinto sacked his predecessor Albanese on Thursday after revealing a $14 billion write-down in connection with his two most significant acquisitions, Mozambican coal and the Alcan aluminum group.

"Ultimately to be able to restructure, particularly the aluminum division, it's good to have a fresh pair of hands to undertake that final leg of rehabilitation," PhillipCapital's Grech said.

(Editing by Ed Davies)

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