By David Winning
SYDNEY -- Rio Tinto PLC said its chief executive would step down
as it battles to contain the fallout from the destruction of two
ancient rock shelters in Australia's minerals-rich Pilbara region
that were culturally significant to a local indigenous group.
Rio Tinto said Jean-Sébastien Jacques would leave the company no
later than March 31 after more than four years as CEO, bowing to
pressure from investors for its senior leaders to be held
accountable for the destruction of the caves at Juukan Gorge on May
Rio Tinto, the world's second-largest listed mining company by
market value, said a search for a new CEO was under way and Mr.
Jacques would leave sooner than March 31 if a successor is found.
Two other executives, including Chris Salisbury, the head of its
iron-ore division, will also leave the company at the end of this
Rio Tinto's troubles show how environmental and cultural issues
have taken center stage in an industry that is fighting to change
investors' perceptions that mining is problematic. Many mining
operations are on land traditionally owned by indigenous groups,
including in South America, Africa and the Arctic Circle. Their
activities can be a source of friction if residents don't feel they
benefit from the mining activity nearby.
Rio Tinto has apologized for blowing up the caves during work to
expand its iron-ore operations, and last month cut bonuses for Mr.
Jacques, Mr. Salisbury and head of corporate relations Simone Niven
for governance failures outlined in an internal review that aimed
to ensure similar missteps cannot happen again.
In a review of the event released Aug. 24, Rio Tinto found that
no single individual or error was responsible for the destruction
of the rock shelters. In documents submitted to a federal
parliamentary inquiry in Australia last week, the company said no
senior leader of its iron-ore unit or group executive was aware of
the high significance of the Juukan rock shelters before May
The indigenous group that is the traditional owner of land
around the Juukan Gorge site said archaeological research there
revealed several ancient artifacts, including a bone fragment
sharpened into a pointed tool, grinding and pounding stones, and
plaited human hair that appeared to have come from an ancient hair
Many investors were unhappy with the conclusions of Rio Tinto's
review, and Australian lawmakers have criticized the company's
decision-making. One document Rio Tinto submitted to the
parliamentary inquiry showed the company had instructed a law firm
to prepare for a possible injunction brought by the indigenous
group, the Puutu Kunti Kurrama and Pinikura people, or PKKP, at
least three days before the blast.
"We have listened to our stakeholders' concerns that a lack of
individual accountability undermines the Group's ability to rebuild
that trust and to move forward to implement the changes identified
in the Board Review," Chairman Simon Thompson said on Friday.
It isn't known whether Mr. Jacques' departure will satisfy
investors. On Thursday, HESTA, an Australian pension fund for
health-care workers, said it had lost confidence in Rio Tinto's
ability to reset relations with traditional owners on its own.
"Accountability for the destruction at Juukan Gorge should rest
at the highest levels of Rio, but a larger, systemic issue of how
the company and the mining sector negotiates agreements with
Traditional Owners needs to be urgently addressed," said HESTA,
which owns Rio Tinto shares worth around US$182 million.
Mr. Jacques became CEO of Rio Tinto in mid-2016 as the global
mining industry was emerging from a prolonged downturn in metal
markets. Formerly Rio Tinto's copper chief, Mr. Jacques sold all of
the company's coal pits and avoided major acquisitions that had
weighed on the miner's stock price in the past.
However, his tenure also coincided with Rio Tinto becoming the
subject of several regulatory investigations around the world.
In 2018, the Australian Securities and Investments Commission
alleged that Rio Tinto and former executives "engaged in misleading
or deceptive conduct," misrepresenting the reserves and resources
of its Mozambique coal assets. A year earlier, Britain's Serious
Fraud Office said it had opened an investigation into suspected
corruption by London-listed Rio Tinto in the Republic of
Rio Tinto is defending the allegations, and describes the
regulatory proceedings as unwarranted.
Mr. Jacques has also faced operational setbacks, including in
Mongolia, where an expansion of its flagship Oyu Tolgoi copper mine
underground has been delayed by more than two years to mid-2023 and
could cost $1.9 billion more than originally estimated.
Still, a rally in iron-ore prices has kept profits high. Rio
Tinto recently reported $4.75 billion in underlying earnings for
the six months through June, enabling directors to increase the
midyear dividend payout to shareholders. Its Australian shares have
risen more than a quarter in value from lows in March, when the
coronavirus pandemic intensified.
Rio Tinto didn't break any laws when laying explosives at Juukan
Gorge. It was authorized by the Western Australia state government
to conduct activity at its Brockman 4 mine that would affect the
Rio Tinto has been working closely with the PKKP in regard to
the Juukan area since 2003, and formally reached an agreement for
use of the land in 2011.
The PKKP said it was first advised of Rio Tinto's intention to
blast the gorge near the rock shelters on May 15, and that
explosives had been laid. Attempts to negotiate with Rio Tinto to
stop the blast foundered when independent experts advised it wasn't
safe to remove the charges, the indigenous group said.
Pressure on Rio Tinto's board intensified after they decided to
impose financial penalties on executives last month.
AustralianSuper, which manages more than $130 billion in retirement
savings, said it had met with Rio Tinto's chairman and told him
those penalties fell "significantly short of appropriate
responsibility for those responsible."
The Australian Council of Superannuation Investors, which
represents local pension funds, also raised concerns with Rio Tinto
board members, including the issue of accountability.
"The destruction of the caves resulted in a devastating cultural
loss," ACSI CEO Louise Davidson said following Rio Tinto's review.
"In addition, it is of significant concern to investors because it
puts at risk Rio Tinto's relationship with key stakeholders and its
social license to operate."
The destruction of the caves at Juukan Gorge could have
ramifications for other miners operating in the Pilbara, including
BHP Group Ltd. and Fortescue Metals Group Ltd., two of the world's
four largest iron-ore producers. Lawmakers in Western Australia
this year said they intend to introduce new legislation that resets
the relationship between indigenous groups and land users,
About 60% of the world's iron ore traded by sea comes from the
Pilbara, including from Rio Tinto's operations, and the region is a
major source of the commodity for China and other fast-growing
Write to David Winning at email@example.com
(END) Dow Jones Newswires
September 10, 2020 20:59 ET (00:59 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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