Feb. 9 (Bloomberg) -- Rio Tinto Group is searching for a new chairman following the resignation of Jim Leng, less than a month after he was appointed to the position, because of a disagreement over how to reduce the company’s debt.

“There has been a difference of opinion over which option the company should pursue,” Leng said today in an e-mailed statement. Rio has “a financial issue to resolve in terms of its debt and repayment. I am hopeful that my resignation will enable the board to reach a consensual decision.”

Paul Skinner, due to step down as chairman on April 20, will remain until mid-year, by which time a successor will be selected, London-based Rio said today in a statement. Rio’s board was “unanimous in accepting Jim Leng’s resignation,” senior independent director Andrew Gould said in a separate statement provided by London-based spokesman Nick Cobban.

Rio slid 37 pence, or 1.9 percent, to 1,920 pence on the London Stock Exchange. The stock has dropped 63 percent in a year, valuing the company at 29.5 billion pounds ($44 billion).

Leng clashed with Chief Executive Officer Tom Albanese over plans to sell a stake to Aluminum Corp. of China, known as Chinalco, to reduce Rio’s $38.9 billion of debt, the Financial Times reported today.

“When you get that dramatic a turnaround in events, something has gone wrong,” said Shaun Giacomo, who helps manage $2.5 billion at SG Asset Management Pte. in Singapore. “They are under pressure, they are under siege and investors like myself are basically unhappy with the board.”

Debt, Equity

Rio said last week it was in talks with Chinalco to raise cash by selling debt and stakes in some units to reduce the loans taken to buy Canadian aluminum maker Alcan Inc. in 2007. The U.K.-based company plans to sell assets, cut jobs and reduce spending to lower debt by $10 billion this year.

The dispute “shows which way the wind is blowing in the Rio Tinto boardroom -- speeding the ship to China,” Evolution Securities Ltd. analyst Charles Kernot, who has a “sell” recommendation on Rio, wrote today in a report. “Selling growth assets, or stakes therein, to repay debt reduces potential returns. Rio Tinto loses full control of cash flow.”

Rio is also in talks to sell $5 billion of assets to Japan’s Mitsui & Co., the Wall Street Journal reported Feb. 6.

BHP Billiton Ltd., which in November dropped a $66 billion takeover bid for Rio partly because of its debt, would also be interested in buying stakes in some Rio assets, BHP CEO Marius Kloppers said last week.

Leng’s Background

Leng, deputy chairman of Tata Steel Ltd. and chairman of the Indian company’s European unit, was announced as Skinner’s replacement on Jan. 14. He was chairman of Corus Group Plc from June 2003 before the company agreed to a 6.2 billion-pound takeover by Tata two years ago.

Corus Group’s London-based spokesman Bob Jones didn’t immediately return calls from Bloomberg News seeking comment.

Leng was also chief executive officer of chemicals maker Laporte Plc from 1995 to 2001 when it agreed to be acquired by German company Degussa-Huels AG.

Skinner, 63, may be hired by BP Plc as chairman, the Daily Telegraph reported in October. BP Chairman Peter Sutherland has agreed to remain in the post beyond his planned departure date in April, the Financial Times reported on Jan. 31.

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net.

Last Updated: February 9, 2009 12:11 EST