Up the Zambezi: why Rio Tinto’s colossal coal cock-up is going to court

Another week, another blue-chip in the dock. The US Securities and Exchange Commission has brought fraud charges against London-based mining giant Rio Tinto and two former executives in relation to an ill-starred coal venture in Mozambique. Whatever its legalities, this was a colossal corporate cock-up.

In 2010, Rio paid $3.7 billion for Riversdale, an Australian company that controlled large coal deposits in the Tete region of Mozambique. The plan was to send coal by barge 400 miles down the Zambezi river to the coast, for shipping to Chinese power stations. But the coal reserves proved disappointing, while the Mozambique government refused to permit the barge operation and a rail link proved too expensive. Rio’s chief executive Tom Albanese (already tainted by an earlier takeover disaster, of Alcan) lost his job. Riversdale was sold by his successor for a token $50 million to an Indian consortium which is reported to be thinking of converting the coal to gas, to make it easier to transport.

Now Albanese and former Rio finance director Guy Elliott have been accused by the SEC of burying from investors and others the bad news ‘that a multi-billion-dollar transaction was a failure’. Elliott, who has also sat on the boards of Cadbury, Shell and the brewer SAB Miller, is a hitherto respected FTSE grandee — as were John Varley of Barclays (awaiting trial) and Sir John Rose (facing SFO inquiries after his company, Rolls-Royce, plea-bargained to avoid bribery charges). The spotlight of justice is notoriously capricious in the corporate field, but it’s disconcerting, to say the least, to see these establishment pillars lining up one after another to have their collars felt.