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Melbourne – Rio Tinto Group (RIO) extended the contract of Chief Executive Officer Sam Walsh, backing his leadership as the world’s second-biggest mining company readies its defenses against any new approach from Glencore Plc.
Walsh, 64, whose contract was due to end in December 2015, now has the board’s open-ended endorsement to stay for the “long term,” the London-based producer said yesterday in a statement. Chief Financial Officer Chris Lynch will also have his tenure extended, it said.

The decision to keep Walsh, who was appointed in January 2013 after the sudden departure of Tom Albanese, is a potential obstacle to any further Glencore approach. A merger would have created a producer with leading positions in coal, iron ore and copper worth $160 billion, usurping BHP Billiton Ltd. as the industry’s leader.

“The board’s probably pretty happy with the job that they are doing,” said Paul Phillips, a Melbourne-based partner with Perennial Growth Management Pty, which manages about $19 billion of assets including Rio shares.

“It’s not entirely clear that there are ready-made successors to them amongst the next level of management.”
Rio said this month it had rejected a merger approach from Glencore. Walsh’s scheduled departure had been seen as potentially aiding Glencore’s approach, two people familiar with the situation said October 7.

“Many have speculated that the Glencore approach would put a fire under Rio to do something beyond its current strategy of materially increasing cash returns to shareholders,” Liberum

Capital Ltd analysts Richard Knights and Ben Davis wrote yesterday in a note. “We now see any drastic change to the company’s strategy as unlikely.”

Lynch will also have his contract extended beyond a planned expiry of February 2017, Rio said.
Both executives will move to rolling contracts with no end date, with the changes subject to shareholder approval.

“For quite some time, Sam has made no secret of the fact that he loves his job and would like to continue well beyond next year,” Chairman Jan du Plessis said yesterday in the statement.

“Given his performance and his enthusiasm to continue in the role, the decision to extend his tenure has been an easy one for the board.”
The producer won’t halt plans to return money to shareholders, even as prices decline for iron ore, its most profitable unit, Walsh said last week.

A cost-cutting programme which has stripped out $3,2 billion of expenses since 2012 is setting Rio on its way to becoming a “cash machine,” for investors, he said in August.

A further $1 billion in savings are being targeted by the end of next year, Walsh said.
Albanese exited the company in the wake of $14 billion in writedowns on the value of failed deals.

Rio declined 1,8 percent to 3 034 pence at 9:36 am in London trading where the stock has dropped 11
percent this year. BHP Billiton Ltd, the world’s largest mining company, slid 1,5 percent at the same time. – Bloomberg.