Rio Tinto - Australia's disaster?

Australians might joke about Americans saying that what is good for General Motors is good for the United States but we do have our own example. BHP, which now has that funny word Billiton tacked on, is the symbol for Australians of the good and safe company that helped build a nation. If that mining giant was ever to be under threat of collapse there really would be a crisis of confidence for ordinary Australians. Thus we should all be grateful that finally the big Australian abandoned its quest to become the giant international  by taking over fellow mining company Rio Tinto. 

The sad truth is that Rio Tinto,  the second biggest company in the Australian mining industry, is crippled and if BHP Billiton had taken it over if too would be a threatened species.

There was a rather harsh assessment of the troubles confronting Rio in the London Daily Telegraph just before Christmas with the comapny described as sinking under a huge $39bn debt pile. The debt was created, said the paper, to finance the $38bn Alan deal -  a deal that will never ever, create value for shareholders.

What is truly troubling is the inability of the management of Rio to concede that there was anything wrong with the Alcan purchase. The chief executive Tom Albanese told the Toronto Globe and Mail this week that "I think, again, creating without exception the world's leading aluminium company is something that I'm proud of, what I've seen go on over the past 12 months."