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 Jean-Sebastien Jacques, who will take over from Rio's veteran boss
Sam Walsh in July, was previously the head of its copper and coal
business. His appointment on Thursday has been read by some as an
effort to rebalance the iron ore-focused miner and a pointer - given
his negotiating credentials - towards deals.
The front-runner for the job had been iron ore boss Andrew Harding,
whose division generated nearly 90 percent of the group's earnings
in 2015. Jacques' copper and coal unit made up just 6 percent of the
total.
But shareholders said Jacques should tread with care.
While the Frenchman may be taking over as more than $30 billion
worth of mine comes onto the block amid the toughest mining downturn
in decades, it is unlikely that many assets will be of the high
quality, large, long-life caliber - so-called "tier one assets" -
they said.
"We don't want them to be going out and aggressively acquiring
stuff," said Andy Forster, a portfolio manager at Argo Investments,
the second-largest Australian stakeholder in Rio.
Outgoing CEO Walsh said in February the most desirable copper assets
were locked in the hands of other big miners and it would take a
longer period of weak copper prices before those players crack.
Bankers have named mines including Cobre Panama, owned by First
Quantum Minerals <FM.TO>, Freeport McMoRan's <FCX.N> Cerro Verde in
Peru and Grasberg in Indonesia, which is co-owned by Rio Tinto, or
Anglo American's <AAL.L> Los Bronces and Collahuasi in Latin America
as potential targets.
Among the easier options would be taking control of Grasberg and
mopping up Rio Tinto subsidiary Turquoise Hill Resources <TRQ.TO>,
which holds the majority stake in the massive Oyu Tolgoi copper mine
in Mongolia.
The more ambitious, according to some bankers, could include a tilt
at indebted Anglo American <AAL.L>, or at least some of its assets.
But Rio investors that Reuters spoke to wanted more of the old,
conservative approach and less of the boom year mega-deals like
Rio's acquisition of Alcan aluminum group and Mozambican coal, two
debacles which led to the exit of Walsh's predecessor and brought in
a period of conservatism.
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TIGHTEN THE SCREWS
While Jacques has built a reputation as a sharp negotiator, working
on the Oyu Tolgoi project in Mongolia, he is also seen as an astute
salesman, having overseen the sale of the Northparkes copper mine
and the Bengalla coal mine in Australia - both at higher than
expected prices.
"We would be more impressed by what he divests, more coal, uranium,
etc. than acquisitions - and how he tightens the screws on
underperforming assets," said Peter O'Connor, a mining analyst with
Shaw & Partners in Sydney.
"Whilst some desire a 'growth junkie', we would like a CEO who
inspires the optimization of return on invested capital from every
existing asset."
In the meantime, shareholders say they are braced for some
reshuffling at the top. Several said they would not be surprised to
see iron ore chief Harding and Chief Financial Officer Chris Lynch
eventually leave after missing out on the top job.
Chairman Jan du Plessis too, after seven years in the job and having
resolved the chief executive role, may also move on, company
executives said.
"Short-term sentiment might be affected, but there are plenty of
good people out there looking for jobs," said Tim Schroeders, a
portfolio manager at Pengana Global Resources Fund.
(Additional reporting by Freya Berry and Anjuli Davies in LONDON;
Editing by Clara Ferreira Marques and Alex Richardson)
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