Rio Tinto Dumps City Adviser Amid Fury Over 'Glencore Conflict'

Directors of the FTSE-100 mining giant Rio Tinto (LSE: RIO.L - news) have severed its relationship with a long-standing City adviser amid anger about its work for rival Glencore (Frankfurt: 8GC.F - news) two years after cursory talks about a mega-merger of the companies.

Sky News has learnt that Rio, which recently installed Jean-Sebastien Jacques as its chief executive, was furious that a senior Credit Suisse (LSE: 0QP5.L - news) banker was named on a Glencore deal announcement in June despite private assurances that work for the two miners would be handled separately.

Rio has now appointed Deutsche Bank (LSE: 0H7D.L - news) to work alongside JP Morgan, its other corporate broker - a role which involves investment banks acting as a company's "eyes and ears" in the capital markets.

The decision brings to an end one of the longest-standing corporate broking ties in the City, with sources suggesting that the Swiss bank had worked for Rio for more than 20 years.

The shake-up underscores the sensitivity within corporate boardrooms about the nature of their ongoing relationships with City banks, and comes as the Financial Conduct Authority (FCA) investigates conflicts of interest and competition in the investment banking sector.

While there is no suggestion that Credit Suisse or its senior banker, Mark Echlin, acted improperly, Rio directors are said to have been disappointed that he was named as an adviser to Glencore on the sale of a 9.99% stake in its agricultural commodities unit in June.

One source close to the situation said that a dearth of top mining bankers - of whom Mr Echlin was one - meant that potential conflicts were inevitable and required careful handling.

Mr Jacques's appointment as Rio's chief executive saw him succeed Sam Walsh in July.

The management change came at an important juncture for the global mining sector, which has been wrestling with the implications of a sustained downturn in some commodity prices as it continues to pour billions of pounds into new development projects.

Anglo American (LSE: AAL.L - news) is pursuing a string of asset sales which effectively amount to a break-up of the company, while last week BHP Billiton (NYSE: BBL - news) announced a pre-tax annual loss of £5.6bn - the largest in its history.

In October 2014, Glencore, led by the pugnacious executive Ivan Glasenberg, made an unsolicited approach to merge with Rio in a deal which at the time would have created a company valued at $130bn.

Rio's board, which is chaired by Jan du Plessis, the man overseeing the sale of brewer SAB Miller to AB InBev, swiftly rejected the approach.

Glencore now has a market capitalisation of £27.2bn, while Rio's London-listed shares are valued ay £45.6bn.

On Wednesday, Swiss-headquartered Glencore announced strong progress towards a key debt reduction target following a collapse in its value last year.

Rio declined to comment, although a source close to it insisted that the appointment of Deutsche should be interpreted as reflecting the quality of work already undertaken for it by the German bank.

Deutsche worked for Rio on its defence against the Glencore bid approach in 2014.

Credit Suisse also declined to comment.