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Rio names new CEO as scrutiny over Australian blasts lingers

Highlights
  • CFO Jakob Stausholm appointed CEO, joined company in 2018
  • Jean-Sebastien Jacques announced departure earlier this year

Rio Tinto Group appointed Jakob Stausholm as chief executive officer to replace Jean-Sebastien Jacques, who stepped down from the role after an investor backlash over the destruction of an ancient Aboriginal site in Australia.

Stausholm, 52, joined as chief financial officer in 2018 and will start his new role Jan. 1, the company said in a statement. Jacques will step down the same day and leave Rio on March 31, while 27-year Rio veteran Peter Cunningham has been appointed interim chief financial officer.

Rio’s new leader will need to convince investors, regulators and legislators in Australia that the company can address governance failings in its iron ore unit – the division that accounted for more than 90% of first-half earnings. He will also take on a flagship copper mine expansion in Mongolia that’s been beset by delays and a budget blowout.

In a statement, Stausholm said he was “acutely aware” of the need to restore trust with traditional landowners, adding that he viewed it as a key priority for the company. Previously a low-key figure since his appointment, he was among executives and directors who led meetings with investors, Indigenous leaders and legislators in the aftermath of the blasts in May that opened up a mining area at an iron ore operation and destroyed 46,000-year-old landmarks.

Chairman Simon Thompson is also under pressure to shake up the board to ensure the views of the Indigenous community are better incorporated into the company’s decision making. Rio, which is headquartered in London, has been criticized for a lack of understanding about community issues in Western Australia.

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“As an investor, we are closely watching how Rio’s board and it’s senior leadership take action to improve governance and oversight,” said Debby Blakey, chief executive officer at Hesta, one of Australia’s biggest pension funds. “Investors have an expectation of significant and lasting change. A vital first step is opening up all agreements with traditional owners to an independent review.”

On the plus side, Stausholm will assume the top job at a time of booming commodity prices, with iron ore trading at multi-year highs and the copper market facing a deficit as the global economic recovery from the pandemic gathers momentum.

Bridges to Mend

The departure of Jacques, who joined Rio in 2011 and became CEO in 2016, comes amid wider upheaval in the top ranks of the mining industry as the sector prepares for a longer-term slowdown in demand from China and navigates moves to decarbonize the global economy.

Top miner BHP Group installed Mike Henry as its CEO in January, 2020, while Glencore Plc’s long-term boss Ivan Glasenberg in December announced plans to retire to be replaced by insider Gary Nagle.

Stausholm, who is Danish, previously served as CFO of shipping giant A.P. Moller-Maersk A/S and spent 19 years with Royal Dutch Shell Plc. Alf Barrios, a former oil executive who runs Rio’s aluminum business, and Bold Baatar, a Mongolian ex-investment banker who leads the energy and minerals unit, had both also been regarded as potential internal successors to Jacques.

Under Pressure

Rio had faced pressure from Australia’s government to appoint a local person as the new CEO in recognition of the country’s key role as the company’s profit center, and also fielded calls from some investors to prioritize external candidates over its existing management team.

“He’s got some bridges to mend that’s for certain. The problem is he’s part of the company where that happened,” said David Lennox, resources analyst at Fat Prophets. “It may have been better to have brought somebody in from outside.” But, “it’s a trade-off – he knows the company well, he knows its operations.”

While Jacques tenure was tainted by the Juukan Gorge crisis and delays to Oyu Tolgoi copper mine in Mongolia, his leadership also delivered gains for investors. Rio’s London-listed shares more than doubled, beating gains by key rivals, and the company handed record amounts of cash to investors, including about $20 billion in the past two years.

Jacques also successfully exited from thermal coal mining, getting ahead of competitors who’re now under investor pressure to divest assets.

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