Investors force Rio Tinto to ditch plans to have Mick Davis as chairman

The group of shareholders, who make up about 20% of Rio’s stock, wrote to the miner’s board last week saying that appointing Davis would be “unacceptable.”

It seems like the main concerns were related to bonuses he paid to the executive team of Xstrata when he was in charge as the company was taken over by Glencore (LON:GLEN) in 2012. Investors were also said to be wary of Davis’ aggressive deal-making.

The mining veteran had emerged as the frontrunner for the top post at Rio Tinto two weeks ago and, up to the time this article was written, it was still unclear whether he had withdrawn from the process through choice once he was made aware of the Investor Forum’s letter.

Davis is a well-known name in the mining industry as he led Xstrata from a $500 million-business in the early part of the last decade to an operation so big that — at one point — it made a takeover offer for Anglo American (LON:AAL).

After selling Xstrata to Glencore he set up X2 Resources, a mining fund that was unable to score any deals in the three years since launch.

Rio Tinto, the world’s second largest mining company, has been looking for a new chairman since March this year, but the search has proven to be more difficult than originally thought.

To make things worse, John Varley, the non-executive director tasked with finding a replacement for Jan du Plessis, had to step down in June, as he was charged in the UK with fraud over his time as chief executive of Barclays.

Three months later, chief financial officer Chris Lynch announced he was also retiring this year. Under his direction, Rio cut debt significantly and, in February, it was able to post its first gain in annual profit since 2013.

Chief executive officer Jean-Sébastien Jacques, who took the helm in July last year, has since then replaced nearly all of the top executive team as he dealt with the aftermath of a series of probes. Those investigations included an inquire into a questionable payment made to an external consultant over the Simandou iron ore project in Guinea, and a $3bn write-down on a mine in Mozambique.

Ann Godbehere, the Rio board member who is now leading the search for a new chairman, has said the new leader’s name would be announced before the end of the year.