After a £9bn write-down forces the departure of yet another mining CEO, Rio and its rivals look to more conservative leaders to negotiate a very different era.
Not with a whimper, but a bang. So an era ended on Thursday, as Tom Albanese, the chief executive of Rio Tinto (Xetra: 855018 - news) , was forced out of the mining giant by a staggering $14bn (£9bn) write-down of its assets.
Doug Ritchie, Rio's head of strategy, who had been involved in buying the written-down assets also left that day, while Guy Elliott, the veteran CFO, had already announced his retirement.
As the company's iron ore head, Sam Walsh, takes the top job. It marks a "changing of the guard at Rio", said Chris LaFemina, mining analyst at Jefferies bank. And it is a story being repeated across the industry.
Meanwhile, Mick Davis at Xstrata (Other OTC: XSRAF - news) , the fourth-biggest miner in the FTSE, is being replaced by Ivan Glasenberg, his counterpart at trading behemoth Glencore, as the companies merge.
Nor is the shake-up confined to the FTSE 100 giants, with the world's biggest gold miner, Barrick Gold, in recent months ditching its own chief executive.
All in all, 2013 marks the start of a very different era in mining. And, as the old guard departs, the reasons are various, but there is a thread running through a creeping suspicion that these once-dear leaders did not make the right decisions to exploit the commodity price boom.
"In the case of the big companies, it is almost like they [the chief executives] had done their five or so years each," said Charles Gibson, head of mining at Edison Investment Research. "But I think what they all have in common is that there's a degree of disappointment."
Or, as Liberum Capital's Ash Lazenby summarised the developments at Rio: "Another week, another CEO, another write-down."
One write-down in particular did it for Albanese. The group has suffered years of embarrassment over its top-of-the-market purchase of Canadian aluminium company Alcan for $38bn. Analysts estimate that Thursday's $11bn write-down of Rio's aluminium arm means it has now written $28bn off Alcan's value.
Still, that deal was well in motion when Albanese took the reins as chief executive and to stop it, supporters suggest, would have been like turning around a tanker. The market knew further write- downs were coming Rio had warned as much in November (Xetra: A0Z24E - news) and he perhaps should have survived the latest.
But Mozambique was another matter. In April 2011, Rio completed its purchase of Canadian company Riversdale for A$3.9bn (£2.6bn).
That brought it a string of coal assets in the country. But Rio has run into problems.
The company did not secure the government permits it needed to ferry its coal down the Zambezi. Instead, Rio has had to use more expensive rail, and getting the right infrastructure in place continues to be a problem.
The bigger issue however, is simply that the amount of coking coal used to produce steel that it thought it could dig up, is not there. Both Albanese and his strategy chief Ritchie, then heading its energy division, had backed the plans to the board. Hence their ignominious exits.
It proved to be the final straw for Jan du Plessis, Rio's chairman, who said on Thursday that the board "fully acknowledges that a write-down of this scale in relation to the relatively recent Mozambique acquisition is unacceptable".
The issues at the company are Rio's alone. But the wider context is not. The mining sector was caught unprepared by the strength of the uptick in commodity demand at the turn of the century, which unleashed a price boom.
As miners looked for ways to boost growth to meet Chinese and Indian appetites, what was seen as a backwater sector became the place to be to make deals worth billions.
Companies plunged into takeovers and acquisitions, as well as ploughing money into ambitious plans to expand their existing assets. Only now are some of the assets bought and projects initiated starting to reveal their realities, against the backdrop of a much tougher environment in the commodity markets.
On average, 22pc of sector earnings over the past five years have been lost through asset write-downs, according to Liberum's Lazenby.
"While there are offenders across the board, and to some extent write-downs are unavoidable in such a capital- intensive and volatile sector, it's clear that Rio, Anglo and Xstrata have been the worst offenders," he added.
And shareholders are increasingly critical, as prices for raw materials come down from their recent heights.
"In a period of increasing commodity prices, companies can get away with capital allocation decisions that may not be optimal," said LaFemina at Jefferies. "But when commodity prices are potentially more range-bound, shareholders are looking for ways to get rewarded without having to rely on higher commodity prices, and that comes down to things like dividends.
"Capital (Other OTC: CGHC - news) allocation policy, dividend policy, is becoming increasingly important for shareholders, and bringing in large growth projects becomes less important. Capital allocation decisions are under much more scrutiny than they have been."
For Anglo American, it is its decision to chase growth in Brazil that is turning out to be its major headache. Its flagship Minas Rio iron ore project is running way over-budget likely triple initial estimates and compounding pressure on management, who are also struggling with the explosive situation in South Africa, where Anglo has major exposure through its platinum arm, Amplats. Liberum Capital analysts are bracing for $3.7bn of write- downs at Anglo over the platinum assets and Minas Rio.
Over at BHP Billiton, Marius Kloppers has actually been under some pressure for not pulling off deals. It, too, has not avoided running into difficulties over its growth projects. Last year it wrote down the value of its US shale gas assets by $2.8bn, prompting Kloppers to waive his bonus.
The gold sector in particular has been clearing the decks, as companies' share prices fail to keep up with the "safe haven" metal's sustained bull run.
Barrick Gold, the sector leader, last year referred to "disappointment" over its share price as it ousted chief executive Aaron Regent. Meanwhile, at rival Kinross Gold (Other OTC: KNRSF - news) , CEO Tye Burt found his $7.1bn purchase of African-focused Red Back Mining would spell the end for him, as the acquisition failed to live up to expectations.
Now (Other OTC: NWPN - news) , having chased production volumes in recent years, gold bosses are talking about cash flows and efficient management of their assets, as they see costs grow and quality deposits harder to find.
"When you get the metal price going up, it gives a huge following wind to the industry. When the metal stops doing that, the market starts worrying, not about the top line, but more about the second line the cost line," said Gibson at Edison (Milan: EDNR.MI - news) . "That's where you get managers, rather than entrepreneurs, and it's possible we are going through a moment like that."
Much the same could be said of the wider mining sector, too. Goodbye to the "ego-driven" chief executives who wasted billions on failed acquisitions, was the view of one top 15 Rio Tinto investor.
"It is all change on the chess board. The old era has gone. None of the 2007 chief executives, apart from Ivan, have survived. Now, we want CEOs to stick to their knitting and make these companies more cash generative."
It is no coincidence that Albanese is being replaced by Walsh from the iron ore arm, its biggest money-earner, who is seen as a steady pair of hands. Likewise Cutifani at Anglo.
"At both companies, the new CEO will be somebody who's a very good operator. It highlights the focus on operational performance," noted LaFemina. "Tom [Albanese] was a very dynamic guy, it seems Sam [Walsh] will be a little more conservative."
So where does that leave the majors? Rio, for all its talk of diversification, is being valued in the City as an iron ore play. If you like the China story, buy, is the thinking. Despite Thursday's drama, the shares closed down only 0.5pc that day after an initial plunge. Another Rio shareholder said investors had been very vocal about Albanese's exit, but that the company had responded quickly. In contrast, Anglo American was seen as having failed to meet shareholders' demands quickly enough. "The board really failed to listen to what investors wanted. Carroll should have gone a year before she did," the investor said.
On the whole, Rio and its rivals look about to get a bit, well, boring.
"The best time to do deals is, potentially, when nobody else wants to," said LaFemina. "But the majors BHP, Rio, Anglo are more likely to be focusing on operating existing assets, delivering organic growth and returning capital to shareholders. They want to improve free cash-flow generation to enable dividends to reward shareholders."
But not quite all of the dash of the old days is gone. The leadership change at Xstrata is a case apart from the rest, though write-downs are expected. While chief executive Mick Davis has faced shareholder anger over his vast pay packets, his departure ultimately comes down to the fact that Glencore's Ivan Glasenberg, its billionaire chief, wants to head the combined company.
He takes the top job after months of negotiations between parties involved in the deal. And, as everyone else concentrates on running their assets, look to Glasenberg, whose company is soon to be propelled to 13th place in the FTSE 100 once regulatory concerns have been allayed, to enjoy the support of top investors to consolidate the market.
He, at least, will not be content for his new super-predator Glencore Xstrata to confine itself to operational expertise.
"Ivan is different," said the Rio investor. "But he is the only one."