By Jamie Freed and Paola Totaro
JIM LENG, the chairman designate of Rio Tinto, has confirmed that his shock resignation from the board of the mining giant just weeks after his appointment is over his opposition to the sale of assets to China as part of its debt reduction strategy.
While Rio has declined to elaborate on Mr Leng's resignation, other than saying last night that it had been accepted by the board "unanimously", Mr Leng's own statement makes clear he does not support the strategy of the group's chief executive, Tom Albanese.
This proposed a potential cash injection from Chinalco, the Chinese state-owned aluminium producer and Rio's largest shareholder.
The deal will inject cash of up to $US20 billion ($30 billion) into Rio in return for minority stakes in some prized mines and a convertible bond that could increase the Chinese company's equity stake beyond 9 per cent.
In an email to the Herald last night, Mr Leng said he had made the decision to resign after much deliberation.
"I have decided to resign as a director and chairman designate with regret and after a great deal of deliberation. As the company previously stated, it has a financial issue to resolve in terms of its debt and repayment and there has been a difference of opinion over which option the company should pursue. I am hopeful that my resignation will enable the board to reach a consensual decision.
"The company's strategy has never been questioned. It has served its shareholders exceedingly well in the past and I hope it continues to do so. Rio is a great company and I wish it well as it attempts to resolve its issues."
Rio and Chinalco hope to strike a deal by Thursday to coincide with the publication of Rio's full-year results. But other options, including a combination of asset sales to other parties and a large rights issue, remain under consideration.
In a statement, Rio said Mr Leng had resigned from the board "with immediate effect" and would no longer replace Paul Skinner as chairman after the miner's annual meeting in April.
Mr Skinner, who has been criticised in some circles over the Rio board's refusal to enter merger negotiations with BHP Billiton last year, has agreed to stay on until the middle of the year so the company can search for a replacement.
Mr Leng is chairman of the European steel maker Corus, which in 2007 agreed to a takeover bid from India's Tata Steel. He serves as the deputy chairman of Tata and was awarded the top prize at the Non-Executive Director Awards in Britain last week.
Fund managers said they would press Mr Skinner and Mr
Albanese for more details during results briefings this week.
The proposed issue of a convertible bond to Chinalco could prove controversial, as many Rio shareholders would prefer that all investors have an equal opportunity to participate in any capital raising to shore up the heavily indebted miner's balance sheet.
Rio is expected to report full-year underlying earnings of about $US10 billion on Thursday. The market is bracing for the possibility of heavy write-downs on its $US38 billion acquisition in 2007 of the Canadian aluminium producer Alcan.
Rio shares rose $2.65 to $49.40.