We sometimes forget that big, global mining companies are run by people.

People, no matter how fat their salaries, are prone to letting emotions and egos get in the way of rational investment decisions.

How else do you explain Rio Tinto betting the farm on Alcan in 2007 by paying $38 billion – outbidding Alcoa by a whopping 33%?

As we now know, Rio badly overpaid at the top of the market, probably because it was obsessed with fending off a pending bid from BHP Billiton.

It is easy to be wise looking in the rear-view mirror, but even Blind Freddy could see that Rio went out on a limb in 2007 by splurging on a tough, energy-intensive business that was dependent on high aluminium prices to justify the acquisition.

This misguided optimism shook confidence in Rio’s reputation for making no-nonsense business decisions and avoiding the bungles that have too often dogged BHP in the past decade.

Yet, up until last week, Alcan was seen as a one-off, very expensive, misjudgement driven by the previous chairman.

Surely Rio wouldn’t make the same mistake again?

Well, they did, and the $3 billion impairment on the $4 billion Riversdale coal purchase two years ago couldn’t be conveniently attributed to past management, so CEO Tom Albanese and Strategy Chief Doug Richie had to go.

Gone, too, are the last vestiges of Rio’s bragging rights that it is better managed than BHP.

Goldman Sachs calculates that, over the past six years, Rio’s asset impairments are nearly four times greater than BHP’s at around US$34.4 billion – with about 83% of the total due to aluminium.

“We believe that the negativity created around the recent impairment, coupled with the change in CEO, leaves Rio searching for some goodwill in the market,” GS said.

“To that extent we believe Rio may look to give shareholders what they want, which is cash back.”

BHP, in contrast, has written off $7.7 billion – most of it on nickel and US shale gas – in the six year period.

Of course, this particular survey period doesn’t include project cost blowouts such as Worsley Alumina, while it also avoids BHP’s earlier failures such as Beenup mineral sands, Hartley Platinum and HBI.

And BHP could write down more assets in its results next month, with GS seeing potential for a $2-3bn charge against aluminium.

Yet the broker doesn’t see any significant bad news looming in shale gas, enabling it to justify its preference for BHP over Rio Tinto in a climate of falling metal prices.

“Given BHP has pulled back from the mega-projects and has structured a diverse asset portfolio with late cycle commodity exposure, we believe the company has been better positioned to deliver value in the long term,” it said.

The Outer Harbour at Port Hedland is one of those mega-projects now on the back-burner for BHP, which won plaudits for showing some restraint last year on capital spending amid an uncertain economic environment.

Mind you, BHP wasted years on studying the $20 billion Harbour project before conceding the economics didn’t stack up.

Rio, pushing ahead with its 353 expansion down at Cape Lambert, didn’t make much effort to hide its jubilation when BHP hit the pause button.

In a recent interview with The Australian newspaper, Rio iron ore president Greg Lilleyman described the outer harbour as a "one-hit wonder", illustrating BHP’s lack of options in expanding its iron ore business.

And Rio Tinto recently chose to publish its Pilbara production costs for the first time, reinforcing its long-held brag as the country’s lowest-cost iron ore producer.

Iron ore, which forms the bulk of Rio’s profits these days, is quarantined from the messy M&A scandals elsewhere in the company’s portfolio.

Indeed Rio’s acquisition of North Ltd. a decade ago proved to be a masterstroke when the market boomed, as the deal provided a readily-expandable port at Cape Lambert.

And, under Sam Walsh, iron ore built on its reputation for cost control, including development of the integrated mine-to-port model likened to an assembly line in Walsh’s old career– making automobiles.

Rio also proved to be the first mover in trucking automation and fancy remote operation centres, allowing it to claim that BHP Iron Ore is "behind the game" in technology.

So, in that sense, Walsh is the obvious caretaker CEO for Rio Tinto as it tries to pull its head in and rebuild that most precious of commodities – market reputation.

One thing’s for sure – the new CEO won’t be planning any adventurous M&A deals; he seems more likely to offload some assets such as diamonds and uranium.

It is even possible that Rio may try to cut its losses and offload a certain coal asset in Mozambique.

This article first appeared in ILN's sister publication MiningNews.net.