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Rio Tinto staff brace for fresh shake-up

By Peter Ker

Rio Tinto staff are bracing for another round of restructuring and cutbacks, as new chief executive Jean Sebastien Jacques wields the knife in Australia and Mongolia.

The leadership team overseeing Mongolia's Oyu Tolgoi copper and gold mine will be shaken-up as the company pushes ahead with the $US5.3 billion expansion underway there.

Rio Tinto shares closed on Wednesday at $49.60.

Rio Tinto shares closed on Wednesday at $49.60.Credit:

Rio's exposure to Oyu Tolgoi comes through its 51 per cent stake in Turquoise Hill Resources, which in turn owns 66 per cent of Oyu Tolgoi LLC, and there have long been discussions over how best to streamline the arrangement.

Andrew Woodley has been chief executive of Oyu Tolgoi LLC since October 2014, but he will be replaced by Armando Torres from August 1.

Jean Sebastien Jacques, incoming chief executive officer of Rio Tinto Group, is expected to wield the knife.

Jean Sebastien Jacques, incoming chief executive officer of Rio Tinto Group, is expected to wield the knife.Credit: Bloomberg

Mr Torres has recently worked in the aluminium division with a particular focus on improving refineries in the Australasian region. Prior to that he was chief operations officer of Bauxite and Alumina.

Mr Woodley was well known to Rio's Australian workers, having previously served as the general manager of the Hail Creek coal mine in Queensland, and he also spent time at the Bell Bay aluminium smelter in Tasmania.

Focus on iron ore division

The miner's iron ore division in Western Australia is also expected to be among the areas targeted by the broader reorganisation, with new divisional boss Chris Salisbury set to deliver the cuts barely one month after being appointed into the role.

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While Rio retains the crown as Australia's lowest cost producer, Mr Salisbury has been charged with reviving the momentum of the iron ore division, and he may find inspiration in the stunning unit cost reductions flagged by Fortescue Metals Group on Wednesday.

Fortescue has flagged unit costs of between $US12 per tonne and $US13 per tonne over the next 12 months. Rio told investors its iron ore unit costs were $US13.20 per tonne in the month of January.

Australia's miners have slashed costs in the last few years in the face of plunging commodity prices. Rio, BHP Billiton and South 32 have all reduced headcount as they work to protect their margins.

Mixing assets

Rio reorganised itself into four divisions on June 21, with the diamond assets paired with Arnaud Soirat's copper division, and a range of non-core businesses lumped into the "energy and minerals" product group under the stewardship of Alan Davies.

Iron ore and aluminium have continued as stand alone divisions run by Mr Salisbury and Alf Barrios respectively.

There has been speculation that the assets in Mr Davies division – borates, salt, titanium dioxide, uranium and coal – are eventually primed for a demerger, although Mr Jacques has expressly denied such a plan.

Rio shares rose 1.9 per cent on Wednesday to close at $49.60.

Since the start of the year the stock has risen 11.2 per cent, compared with 10.9 per cent rise in BHP stock and a 135 per cent jump in the share price of Fortescue.

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Original URL: https://www.smh.com.au/business/companies/rio-tinto-staff-brace-for-fresh-shakeup-20160727-gqeubs.html