Rio Tinto Probed by SEC Over Mozambique Impairment


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For Rio Tinto, Another Africa Headache


SYDNEY—Rio Tinto PLC's new chief executive faces another regulatory headache, as U.S. authorities investigate the mining company over an impairment booked in 2012.

The Anglo-Australian miner said on Thursday it is cooperating with a probe by the U.S. Securities and Exchange Commission, which it said started in 2013. The company was responding to media reports that the SEC is examining the timing of $3 billion in impairment charges on a Mozambique coal deal.

The write-down came as part of $14 billion in charges—including against another ill-timed deal, Rio's 2007 acquisition of Alcan Inc.—that in early 2013 triggered the departure of Tom Albanese as chief executive.

That probe prompted the company last month to fire one of its most senior operational executives and its head of legal and regulatory affairs, sending shock waves through the executive ranks.

"I take integrity and our code of conduct very, very seriously," Jean-Sé bastien Jacques, who has led the global miner since July, said at an industry event in Melbourne, Australia last week. He declined to comment further on the Guinea situation.

On Thursday, Rio Tinto said it would be "inappropriate to comment further" on the Mozambique probe while the investigation continues. A representative for the SEC couldn't immediately be reached for comment.

Rio acquired its Mozambique coal business in 2011 through its $3.7 billion takeover of Riversdale Mining Ltd., as coal prices were rocketing on ballooning demand from Asia and supply disruptions in major coal-producing countries. Riversdale projected Mozambique would become one of the world's big coking-coal exporters.

But coal prices then fell as new mines planned during the boom moved into production.

In Mozambique, Rio Tinto had planned to ship the coal along the Zambezi River. That proved unworkable because of problems encountered dredging the river and securing the required government approvals. The coal's high ash content also required costly processing, while the miner downgraded estimates on how much coal it could actually recover from the deposit.

When announcing the large write-down, Rio Tinto chairman Jan du Plessis described it as "unacceptable." Doug Ritchie, who led the acquisition and integration of the Mozambique coal assets, also stepped down at that time.

It turned out to be a costly deal for Rio Tinto. In 2014, the company sold the Mozambique business, which included a majority stake in the Benga mine and other coal projects in the Tete province, to an Indian investment group for $50 million.

Ian Walker contributed to this article.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com


  (END) Dow Jones Newswires
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This article appears in: Energy , Commodities
Referenced Symbols: CRA1 , RIO , RIO1


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