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Sir Mick Davis’s attempt to return to the top of the mining industry as chairman of Rio Tinto has alarmed a group of powerful shareholders.
The Investor Forum, a London-based body representing some of the world’s biggest money managers, has written to the Anglo-Australian company following reports linking Sir Mick with the job.
The letter is being treated seriously by Rio, the world’s second-biggest mining company, and could hurt Sir Mick’s attempt to become its next chairman, said people familiar with the situation.
Reports that Sir Mick, the former head of miner Xstrata, was frontrunner for the job emerged earlier this month, surprising many analysts and investors because of his past association with high boardroom pay and aggressive dealmaking.
Others said he had the experience to scrutinise deals and provide counsel to Rio’s executive team.
The mining industry is emerging from its worst downturn in a generation and investors are keen to make sure companies such as Rio to do not repeat the mistakes of the past by expanding too rapidly as commodity prices recover.
As such, they would prefer to see excess cash returned via dividends and share buybacks rather than spent on acquisitions or ambitious new projects.
Sir Mick, chief executive of the UK Conservative party, came under fire from shareholders in 2012 when he and a group of senior executives at miner Xstrata were offered a £140m retention package to stay at the company after a proposed merger with Glencore, the Swiss mining and trading group.
Investors vetoed the package and forced Xstrata’s board to push for generous financial terms in its merger talks with Glencore. Xstrata was eventually taken over by Glencore.
After leaving Xstrata, he went on to set up X2 Resources, a mining investment fund. However, it failed to pull off any deals during the depth of a commodity market downturn, in part because of opposition from some of its investors to deals it wanted to do in coal.
The Investor Forum, Rio Tinto and Sir Mick all declined to comment.
Its search has been complicated by several issues, including the departure of John Varley, the non-executive director who was tasked with finding a replacement from Mr du Plessis. He resigned from the Rio board in June after he was charged with fraud over his time as chief executive of Barclays, the UK bank.
Ann Godbehere, another Rio board member, is now leading the search.
Then in October, Rio was charged with fraud over a bungled coal deal in Mozambique that US regulators say it tried to hide.