Rio Tinto shareholders plan board room coup; want Jim Leng back

19 February 2009

Some of the important shareholders of Rio Tinto are threatening a boardroom coup to oust present board including its chairman and CEO and reinstate chairman-elect Jim Leng who resigned from Rio Tinto last week due to differences with them on reducing debt.

The London-based The Times reported that certain important shareholders and investors are disturbed the way Rio Tinto board has gone about raising funds to reduce its $38.9 billion debt burden without giving shareholders the option of further investing in the company, but chose to give preference to a single shareholder.

Last week, China's state-owned Aluminium Corporation of China (Chinalco) said that it would invest $19.5 billion in troubled mining giant Rio Tinto. (See: China's state-owned Aluminium Corporation of China)

The "strategic partnership" would give Chinalco stakes in Rio's mining assets and bonds that will be converted to Rio shares, enabling it to raise its overall stake in Rio to 18 per cent.

This angered and disturbed investors, who now want Jim Leng to be reinstated, as they feel he had resigned due to differences with chairman Paul Skinner and chief executive Tom Albanese for having looked at the Chinalco deal as the only option, instead of opting for a rights issue as well to reduce its debt burden.

Less than a month after being named for the job, Corus chairman Jim Leng, who is also deputy chairman of Tata Steel, resigned from the board of Rio Tinto saying he would not join the company. (See: Corus chairman quits Rio Tinto's board; rules out joining it)