Sometimes life just catches you by surprise. For Tom Albanese, the Rio Tinto
boss, it’s been happening since last year, when rival Anglo-Australian miner
BHP Billiton launched a £70 billion takeover offer for his firm. With that
now midway through a regulatory-approval process, who should Albanese bump
into at the Olympics the other day?
“Yeah, I was at a lunch in Beijing given by the Australian prime minister and
there was Marius.”
Marius being Marius Kloppers, the BHP boss, who has been hounding Rio Tinto
ever since the bid. Did they high-five each other? “Er, no,” laughs
Albanese. “We gave each other a firm handshake, and then had a cordial
discussion, rather conscious that there were a lot of people watching us.”
A discussion about . . . ? “Oh you know, we have joint ventures.” Enough said.
Compact and bespectacled, Albanese gives a pensive look. Born on America’s
East Coast, trained in “mineral economics” at Alaska University, he still
speaks with a New Jersey drawl and has an informal, boyish manner which many
take for niceness. In a battle of the mining titans that might be misread as
weakness.
Beneath, however, there is single-minded drive – he’s good at motivating
others and accomplished at blending strategy with macro-economic insight, an
essential in the 21st century resource sector.
That’s why big mining chiefs, controlling vast chunks of the world’s
resources, sound more like radio-friendly economists than pick-and-shovel
men these days. It’s also why young bosses like Albanese, 50, and Kloppers,
45, are among the most powerful executives on the planet.
Just don’t tell Albanese that further consolidation is inevitable. Yes, his
first move on reaching the top at Rio Tinto was to gobble up aluminium
producer Alcan last year, but the BHP offer, he says, is simply not good
enough.
“We’ve not said there are no synergies,” he sighs, “just that the bulk of
where synergies would come from would be the superior positions Rio Tinto
has in those areas where synergies can be created.”
In short, it’s all about value, and Rio Tinto – the world’s third-biggest
miner – will create more value on its own rather than when folded into BHP,
already No 1.
Time will tell. Last week BHP announced a sparkling set of results. This week
Rio Tinto will announce its own, expected to show half-yearly, underlying
earnings up 46% to over $5 billion (£2.7 billion). For Albanese, banging the
value drum, that’s vital, whatever the threat of global downturn.
Meanwhile, the BHP bid moves like a slow shark through prolonged regulatory
scrutiny from competition authorities. That should make Albanese anxious,
likewise the letter sent by BHP’s chairman to Rio Tinto shareholders last
month, telling them what a good deal is coming. But sitting high up in Rio
Tinto’s new head office in the City of London, perched on the edge of a
sofa, Albanese is engagingly cheery.
Look around, he says, this is the new Rio Tinto: modern, airy, its reception
dominated by an imposing piece of contemporary art charting the world’s
elements mined by the group.
Gone, by implication, are the fusty, insular ways that once made the business
disliked for its environmental, political and safety records. Rio Tinto,
whose products include copper, diamonds, gold, iron ore and aluminium, now
aims to be a leader in sustainable development.
Yet the BHP proposal – which became a preconditional, hostile offer in
February – isn’t going away.
How long will the regulatory process take? “If you take the roadmap of
established processes and procedures, it could take until the end of the
year,” shrugs Albanese. If the regulators wave it through, the offer would
then go to shareholders in early 2009. If BHP wants it quicker, it could
raise its offer until Rio Tinto’s board accepts.
That’s a lot of ifs. Does the sheer length of time strengthen Albanese’s
defence?
He won’t be drawn. “I’ve said from the very beginning it will be a long
process. We have a strong set of businesses, great capabilities, strong
macro . . .” Albanese slips easily into economist-speak, pushing back his
glasses, plugging Rio Tinto. But what about BHP’s repeated claim that it is
outper-forming Rio Tinto?
“Look, it’s about where you pick the starting points,” says Albanese. “BHP had
a bad time in the latter 1990s after a series of bad investments, bad
strategic directions and a lot of value destruction, and you’ve got to give
their previous chief executive, Chip Goodyear, credit for recovering from
that. But the early part of this decade was sort of a trough point. So if
you want to compare performance, you pick that trough point.”
Is it about personalities? There have been rumours of a bid coming for a
decade. Goodyear, an American similar in style to Albanese, always
hesitated. Kloppers, an Afrikaner judged more ruthless, leapt in.
Would Goodyear have made the same call?
Albanese smiles. “Great question, why don’t you ask him?” Others suggest
Goodyear wanted to, but wouldn’t go hostile. This is now a long-running
distraction for both companies.
But there is an upside, says Albanese. It has enabled him to drive through
change. His $15billion disposal programme is on schedule, with $10 billion
targeted for this year. “The company is energised by this, we haven’t been
out there trying to present ourselves publicly before, we’ve got a new head
office, we’ve refined the brand, we’ve been very open and employees like
seeing themselves being talked about.”
He won’t say how much Rio Tinto’s defence has cost – that may be revealed this
week – but it is likely to run into many millions. His finance director
heads a young team, “dozens” in number, which works full time on the bid.
That allows senior executives to concentrate on operations.
“One of the challenges when you are enjoying strong margins is focusing on
cost reduction and improvement. I don’t want to see anyone working on their
golf game – just focusing on safety, performance, cost and delivering growth
targets.”
Albanese is a persistent presenter, enthusiastic and analytical – qualities
that first drew him to the attention of Rio Tinto’s top bosses. Leigh
Clifford, his predecessor as chief executive, says Albanese was always the
“stand-out” man on his way up, working through whatever challenge was thrown
at him: mining in Alaska, exploration in Indonesia, running a copper smelter
in Utah, integrating a sensitive acquisition in Australia.
“Tom’s got great technical skills, real presence. He’s ambitious and he’s
someone you could trust with your chequebook,” says Clifford, now chairman
of Qantas. “He’s also tremendously resilient.”
That was forged young. Albanese is the eldest of five in a third-generation
Italian American family. His father, a chemical engineer, died in an
industrial accident when Albanese was 12.
Albanese’s passion was the outdoors. He was an active Boy Scout and eventually
signed up to study geology in Alaska. He later persuaded the university
there to put together a new mineral economics degree. “I talked them into
it, just for me.”
He married a fellow geologist. Summer jobs prospecting for oil companies led
to full-time work in minerals exploration, and his early ability to work
computer spreadsheets took him into management. He was already climbing the
ladder at Nerco Minerals, based in Portland, Oregon, when it was bought by
Rio Tinto in 1993.
That Rio Tinto, known as RTZ, was the product of an earlier merger between
British and Australian giants. Planning in the sector remains consistent,
however.
“Some 80% to 90% of all profits in this industry will be from the top 40 ore
bodies,” says Albanese, “and the strategy is very simple: get as many of
them as you can. Discover them or buy them.”
And that, of course, is what BHP is doing in its pursuit of Rio Tinto.
Albanese has no objections. He has known Kloppers for years and they have
overlapped on joint-venture projects. “We don’t go out drinking with each
other, but we have a healthy level of professional respect.”
Albanese just foresees a better future for his company apart from BHP. Rio
Tinto, he says, will be buoyed by continued demand from developing
economies, even if Europe and America go into economic decline.
So this is not about egos? “No,” he says. “The BHP offer was taken seriously,
considered on the basis of value, and rejected on that basis. It’s just a
focus on value – you know, you’re only going to get the same old phonograph
from me.”
But isn’t value Kloppers’ argument, too? He smiles. And so it goes on. No
surprises, until the next one comes along.
The life of Tom Albanese
VITAL STATISTICS
Born: September 9, 1957
Marital status: married, with two daughters
School: Hunterdon County High School, New Jersey University:Alaska
First job: looking for copper in Alaska
Salary: £907,000 plus bonus
Car: silver BMW convertible
Home: Oxshott, Surrey
Favourite book: 1434, by Gavin Menzies
Favourite Film: any spaghetti western
Favourite music: The Moody Blues
Favourite gadget: Blackberry Pearl
Last holiday: St Petersburg
WORKING DAY
THE Rio Tinto chief executive wakes at his home in Oxshott, Surrey, at 5.45am.
Tom Albanese is picked up at 6.30am and is behind his desk at Rio Tinto’s
City of London base an hour later. “I’ve got a group of 10 senior executives
who report to me. I spend two-thirds of my time on internal business – the
rest is shareholders, journalists and other stakeholders.”
He eats lunch at his desk and works until after 7pm. He is only in London one
week in five. At other times he is travelling the world, visiting key
operations and offices. “Three out of five nights last week I was sleeping
on planes,” says Albanese. “That’s normal.”
DOWNTIME
TOM ALBANESE likes to relax with a good book. “I am on the road a lot so I
love reading,” says Albanese, “usually serious stuff – economic history,
different views of history.” He also loves watching westerns. His mobile
ring tone is the music from The Good, the Bad and the Ugly.
He is not a sports fan, though he does ski. His one indulgence is a barge he
bought for narrowboat holidays in Britain. At present it is moored on the
River Wey.
“I hope it’s still floating, I haven’t seen it since last year. Plan A is to
spend some more time on it, but I don’t take much vacation. That’s an
American thing.”
