Simon Trott’s elevation from iron ore head to new chief executive comes after the cultural reset of Danish boss Jakob Stausholm and shows that Rio is determined to get more from its existing businesses. This includes reclaiming the former glory of being the lowest-cost Pilbara miner, while it faces a pivotal moment with several new mega-projects around the world now under way at once.
However, the return of an Australian to the top management seat acknowledges the importance of iron ore at the heart of Rio’s business.
It also shows that Rio’s chairman, Dominic Barton, believes the miner has a full slate of greenfield projects in front of it and needs a hands-on operator to get them delivered.
The elevation of Trott, a 50-year-old Western Australian who grew up in the wheatbelt town of Wickepin, underscores the swing back to execution by big mining at a time when investment spending is again ramping up. For Rio there’s a $US10bn to $US11bn ($15.2bn-$16.7bn) annual investment commitment for the medium term, a jump from around US$6-7bn of the past few years.
Trott’s first big challenge, when he takes charge from later next month, will be to name his own replacement to run Rio’s iron ore operations. This is the finely tuned Pilbara machine that generates 66 per cent of Rio’s earnings and is the cash machine to fund everything else, including dividends to shareholders. However, it is from there he inherits greenfields projects – from Africa to the Americas – which need careful oversight.
Trott is widely seen as the continuity candidate and is thought to have been Stausholm’s preferred pick. He’s also had the backing from legendary Rio boss Leigh Clifford.
He edged out another key internal contender, Rio’s chief commercial officer Bold Bataar, who was favoured by the London-based investors. Trott had the backing of Australian investors who loathe to see the miner take its eye off the ball in the Pilbara.
It is understood the board interviewed four names for the role, including Australian chief Kellie Parker and aluminium boss Jerome Pecresse, who was thought to be linked to the top job.
It was Trott’s rollout of the new operating model – dubbed the “safe production system”, which was as much a productivity program as a safety reset in the Pilbara – that caught the attention of the board.
This stabilised and has now started to reverse Rio’s long-flagging performance in the Pilbara, adding an incremental five million tonnes of output in both 2023 and 2024. This represents the addition of $US500m in additional earnings from productivity improvements.
He also delivered two new Pilbara mines in recent years – the $US3.1bn Gudai Darri and the $US2bn Western Range. Both were delivered on time and managed without any cost blowouts.
Trott, too, was instrumental in making good on Stausholm’s promise to reset relations with Indigenous communities, after Rio was sent reeling by the Juukan Gorge caves disaster that led to the ousting of former chief Jean-Sebastien Jacques and a boardroom clean-out.
Global challenge
The challenge, however, for Trott will be applying the same operational discipline to Rio’s big development projects outside Australia.
Here he needs to bed down last year’s $US6.7bn buyout of US-based, Argentinian-focused lithium player Arcadium. This gives Rio a boost in “brine” lithium production in Argentina and adds much-needed scale to the miner’s existing and nearby Rincon project.
Investors are not fully convinced about Stausholm’s big bet on lithium, which is a key battery material, at the expense of other in-demand minerals such as copper.
Elsewhere, Trott will be forced to navigate the politics of the giant Simandou iron ore project in Guinea, which is expected to start shipping to China later this year. Politics too will dominate in Mongolia where Rio is the majority owner of the giant Oyu Tolgoi copper mine, and legacy tax issues endure.
Rio’s biggest opportunity now becomes Trott’s to deliver. It has been more than two decades in the making and lies in Donald Trump’s America.
Rio Tinto is the majority owner and operator of the Resolution copper mine in Arizona. It’s partner in the project is BHP.
The mine has the potential to become the biggest copper mine in North America at a time when Trump is using tariffs, and whatever means available, to drum up critical minerals projects at home. Resolution has been long stalled amid negotiations with Native American landowners. Although, in a sign of the shifting political mood, it recently was given a boost by the US Supreme Court from a landowner appeal. Stausholm had always intended to move ahead with Resolution, but was in no hurry – opting for caution in dealing with local landowners.
It is understood that inside the Rio boardroom there was comfort the right country leaders were in place for the bigger issues facing the miner, and the stronger desire was around operational improvements.
Trott’s appointment goes a great deal towards helping the Rio board navigate with what has been a bumpy ending, when Stausholm’s tenure was cut surprisingly short in May. Trott was one of Stausholm’s first key appointments when he took charge at Rio with a mandate to stabilise the global miner.
The two worked together closely, particularly on Stausholm’s cultural reset. They are both keen cyclists and would regularly go mountain-bike riding across Rio’s Pilbara sites when Stausholm was on his regular Australian visits.
Barton is understood to have been unconcerned by the recent leadership uncertainty, whereby the CEO flagged an exit without an immediate successor named.
Barton has argued to investors that the succession process had been running for more than two years and followed a template of other big organisations such as HSBC or Chevron.
NAB’s CEO challenge is being a leader, not a line manager
The bigger issue is Andrew Irvine has found it hard to let go of his old job, where he relished constantly being on the road with customers.
‘You were either a Mike person or a Scott person’: frictions aplenty in Atlassian’s toxic workplace
They were once the country’s most famous, and inseparable, ‘tech bros’. But tensions at work that not even a counsellor could solve – and wives who ‘couldn’t stand each other’ – led to one of the biggest break-ups in Australian corporate history.
Rio Tinto’s board has reached for operational experience over strategy as it bets on an Australian to see the miner through to the next decade.