Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
* CEO Power leaves voluntarily in Feb 2018
* Company says consistent with succession plan
* No successor named; COO Lilleyman tipped in market
* Shares drop to lowest in nearly a month (Adds quotes, details, updates shares)
By James Regan
Fortescue Metals Group Chief Executive Neville Power will step down in February, a voluntary but surprise departure that sent shares sliding, as the world’s fourth-biggest iron ore producer looks to diversify beyond mining.
The stock closed down 4 percent at A$5.81,the lowest in nearly a month. Power’s departure after more than six years at the helm was announced just a few weeks after the 59-year-old steered the company to a record final dividend on annual profit that more than doubled.
The move – “a major loss for Fortescue” according to Macquarie Securities – comes at an inflection point for the $14 billion mining firm. Executive chairman and founder Andrew Forrest told reporters on Friday Fortescue it now looking to move into other unidentified businesses 14 years after it was formed around a kitchen table.
“This is consistent with our long-term succession plan,” Forrest said, noting it was Power’s decision to leave to spend time on a family ranch and private ventures, and expressing “personal sadness” at the departure. Fortescue didn’t name a successor, and didn’t say when an appointment would be announced.
Now was a “great time” to change chief executives, Forrest said, with Fortescue “entering a period of growth without using its balance sheet”.
“If you were thinking along the lines of just narrowing us into the mining sector, I wouldn’t do that,” Forrest said, declining to say what business areas were under consideration for development.
Fortescue’s chief operating officer, Greg Lilleyman, who joined in January from mining rival Rio Tinto , is viewed as a potential successor.
“I don’t think there is anything sinister, not least because Greg Lilleyman was brought in with a view to this changeover,” said Shaw and Partners mining analyst Peter O’Connor.
Power became CEO in 2011, seeing it through a near-death experience when iron ore prices tanked and hundreds of workers were let go.
He went on to lead an expansion that took ore production to 170 million tonnes last year from 55 million when he started, bringing a sharp focus on costs to combat unpredictable swings in internationally traded iron ore. Fortescue’s costs have dropped to under $13 a tonne, the lowest in the industry.
Home-schooled until the age 12, Power said on the call he would initially spend time running several private businesses and working on his family’s cattle ranch.
($1 = 1.2511 Australian dollars)
(Reporting by James Regan; Additional reporting by Rushil Dutta and Siddharth Cavale in BENGALURU; Editing by Muralikumar Anantharaman and Kenneth Maxwell)
