However, Stausholm, who hands over the business to his iron ore boss Simon Trott in coming weeks, says it’s something bigger than that.
“We’ve been getting back the mojo,” Stausholm tells The Australian.
When he steps down on August 24, the Rio boss wants to be remembered for the impact he had on cultural change and especially for rebuilding bridges after the external shock of the Juukan Gorge cave scandal. The lead up to the Juukan destruction represented a period where the miner had lost its way. “We were on our knees,” he says.
Then, the miner was increasingly run out of London, and the core of Rio’s once-powerful operational managers were being sidelined. The structure of the business was a mess that hadn’t been tackled, leading to complex shareholdings across some of its most important operations, like the giant copper mine in Mongolia.
There’s still a way to go, but Stausholm confronted some of Rio’s darker cultural demons and spent much of his tenure presenting a miner who was serious about working with rather than against its partners.
Stausholm, who has had top executive roles with Shell and Maersk before Rio, says the lesson is that once you get the right culture in place, this becomes the foundation to build out an entire business.
“You actually then start seeing better operational performance, better execution of projects, and for the financial community, suddenly you have a business that actually grows – consistently profitable growth,” he says.
His comments came as Rio delivered first half underlying earnings of $US11.5bn ($17.7bn), this was down 5 per cent on softer iron ore prices, but slightly ahead of market expectations. However, the dividend of $US1.48 a share fell short of expectations. This weighed on the miners shares in London.
Rebalancing
Significantly, increased production and higher earnings from the in-demand copper and bauxite helped offset a 13 per cent drop in iron ore prices. Rio’s cashflow was mostly flat at $US6.9bn. While the contributions move around on commodities prices, Rio’s copper and aluminium businesses are now star performers, representing around 20 per cent of the company’s cashflow each. Previously it was closer to 10 per cent. Iron ore still dominates at 55 per cent of cashflows. Earnings from aluminium jumped 50 per cent thanks to higher volumes and prices.
Rio also disclosed it was hit with a $US321m tariff cost, thanks to Donald Trump, but tariffs are starting to become a net positive for the miner, given the jump in copper prices.
“When you look at other miners, basically none of them are growing, and we are growing (production). We’ve said long term, the next 10 years, we can grow 3 per cent a year, but the reality is, we grew 6 per cent in the first half, 13 per cent in this in the second quarter”.
We’re really unlocking growth here, right now, and that’s just comes from these underlying things – you get it right with the people, and we are already blessed with amazing assets”.
“You have not seen the best yet”.
Still, Stausholm’s tenure was cut short by his board. Just weeks after the annual meeting in May, the miner announced Stausholm’s sudden retirement and launched a search for his successor. Two weeks ago, Trott, an Australian, was named his successor. Stausholm’s high cost growth agenda, including near $10bn bet on lithium and expanding aluminium, is thought to have sat uncomfortably with the board. Since May, Stausholm has declined to discuss his looming exit except to say he is “very happy” the board has backed an internal successor. However, he defended broader criticism around costs.
“There were a lot of things that needed to be rebuilt,” particularly around relations with traditional landowners, he said. Rio’s productivity improvement program, the Safe Operating System, has been a major investment underway for four years and this is now behind the rising volumes coming out of existing mines and downstream operations like aluminium. But the trick in any company is to balance the rising costs that come with growth, he concedes.
Under Trott, the challenge for Rio will be around the execution of the slate of development projects it has in front of it. Like rival BHP, it’s now moving into a period of increased capital spending of between $US10-11bn over the medium term on projects like Simandou iron ore in Guinea; expanding the Pilbara; building out aluminium capacity; and the battery minerals bets that include the acquisition of lithium major Arcadium and the development of the Rincon project in Argentina. In recent years Rio has been spending around $US6-7bn a year on capex. There was nothing in the recent results to suggest that Rio would be on a different track.
Stausholm has a high conviction in the projects ahead of Rio, with the company now in a place where it is executing well. Nor is he phased on the current malaise in lithium prices,
“It doesn’t really matter, to be quite frank, for us, because what matters for us is what is the lithium prize five years from now. What we’re trying to be is countercyclical and think long term”. This is now all on Trott to deliver.
eric.johnston@news.com.au
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Jakob Stausholm will leave Rio Tinto as a miner that’s more predictable and again has a slate of growth options in front of it, compared to the aggressive and insular operator he took charge of a little over four-and-a-half years ago.