Impaired judgement

18 October 2017 By John Foley Follow @johnsfoley

Rio Tinto has been accused by the SEC of hiding the plunging value of a coal mine it bought in 2011. The charges are serious, but at least accounting procedures are fairly clear. If only there were rules that could prevent mining bosses getting carried away during M&A upswings.

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Rio Tinto and two of its former top executives were on Oct. 17 charged with fraud by the U.S. Securities and Exchange Commission, which says the Anglo-Australian mining company inflated the value of a coal mine in Mozambique and then concealed critical information.

Rio bought Riversdale, the owner of coking coal reserves in Mozambique, for $3.7 billion in 2011. It subsequently sold the business for $50 million in 2014, after Chief Executive Tom Albanese had announced a major writedown and resigned.

The SEC says Rio, Albanese, and former Chief Financial Officer Guy Elliott failed to follow accounting standards and company policies. Rio says the case is unwarranted.

Britain’s Financial Conduct Authority on Oct. 17 fined Rio Tinto 27 million pounds over the Riversdale acquisition. It said that while it did not believe the company knew it needed to impair the Mozambique assets ahead of time, Rio had showed “serious misjudgements”.

Rio Tinto’s UK listed shares were trading down 0.4 percent as of 0955 BST, at 36.94 pounds.

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