Rio¡¯s Chief Albanese Gets ¡®Last Chance¡¯ With Chinese Bailout

Tom Albanese¡¯s proposed bailout of Rio Tinto Group by Aluminum Corp. of China may be his last chance to hold on as chief executive officer.

He¡¯s having trouble convincing shareholders and regulators that the $19.5 billion cash injection, which includes the sale of stakes in some assets and a convertible bond issue, is the best way to slash Rio¡¯s $38.9 billion of debt. Rio shareholders will meet today in London to vote on proposals including the appointment of directors and their remuneration.

Albanese and Rio, the world¡¯s third-biggest mining company, are under attack from Australian politicians because the plan would hand partial ownership of some mines and plants to a state-owned Chinese firm. Rio¡¯s No. 3 shareholder is calling for an alternate proposal. The 51-year-old CEO angered investors with the acquisition of Alcan Inc., which caused Rio¡¯s debt to balloon 19-fold in 2007, and his decision to spurn an offer worth as much as $194 billion from BHP Billiton Ltd. last year.

¡°This would have to be Tom Albanese¡¯s last chance,¡± said John Wong, a fund manager with CQS UK LLP in London who doesn¡¯t own Rio shares. CQS manages the New City Natural Resources Fund. ¡°I am surprised management has stayed as long as they have. They really haven¡¯t done a good job for shareholders.¡±

When London-based Rio unveiled the Chinalco accord on Feb. 12, Albanese described it as ¡°the best financial solution¡± to reduce debt. Rio already has plans to cut spending by half, sell more assets and fire 14,000 workers to lower borrowings by $10 billion this year. Rio must repay $8.9 billion of Alcan-related debt this year and $10 billion in 2010.

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