2019 CEO Survey: Jean-Sebastien Jacques, Rio Tinto

Rio Tinto CEO, Jean-Sebastien Jacques. Picture: Jane Dempster.

Every year The Australian’s John Durie asks some of the biggest names in Australian business five key questions about what’s coming in the year ahead.

Here, in his own words, is what Rio Tinto’s Jean-Sebastien Jacques sees ahead in 2020.

Read more from the 2019 CEO Survey.

How is your company affected by low-interest rates and what is needed to boost the economy?

Interest rates: As a global business with a strong balance sheet, we access funds from international markets and sell most of our products overseas.

What is the impact of government regulations on your company, including those applying to the financial sector?

Economy: I am really proud that our company has been part of the fabric of Australia for more than a century. Australia is home to the largest part of our business, and almost 20,000 employees. We are committed to this country, as part of its heritage, as part of what we contribute now and as part of its future. In a global economy where competition for capital investment from other resource-rich economies is intense, we need to continue to position Australia to attract investment. Many factors influence decisions to invest in resources projects. Improvements in the following areas would make Australia more competitive in attracting investment.

Energy: Clearly, energy policy needs to be resolved so that Australia, as an energy-rich country, has the affordable, secure and flexible supply it needs. We have gone from having some of the most competitively priced energy to nearly the most expensive in the developed world.

Red tape: Streamlining and enhancing the efficiency of government approvals processes, while still maintaining strong environmental safeguards, can deliver significant economic and social benefits.

Improvements could include further removing duplication between federal and state processes, more clarity on the threshold for projects deemed “significant” under legislation and extra resourcing for agencies. It’s encouraging these issues are now receiving greater attention from federal and state governments, because the potential benefits from enhancing the process are huge.

Tax: We need an internationally competitive tax regime to attract foreign investment into capital-intensive resource projects in Australia. In recent years, Australia’s tax competitiveness has declined compared to both OECD member countries and our regional competitors. Australia has the second-highest corporate tax rate in the OECD. The bringing forward of federal tax cuts for small and medium-sized businesses is a welcome step in company tax reform.

Skills and Education: A globally competitive and growing mining sector depends on access to a growing pool of local talent. A challenge facing Australia is the decline in mining engineering enrolments, which are at their lowest level since 2000. There is also evidence of a looming skills shortage in areas associated with the digital revolution that is disrupting nearly all industries. We need 21st-century solutions to this 21st-century problem. That means governments, industry and the education sector collaborating more on the future of work, ensuring education systems are providing young people with the right skills for a world that technology is changing rapidly. Workers with broad and transferable skills in science, technology, engineering, arts, and maths are critical for Australia’s future productivity and global competitiveness. We want to be a part of the solution, and that’s why we’ve partnered with the WA Government and TAFE to develop the first nationally recognised qualifications in automation. We also recently announced a new program with Amazon and Blue Chilli whereby we’ll work with start-ups to help boost skills needed by school children for the future. But it’s just the start and clearly more needs to be done.

What percentage of company revenues are spent on research and development, and how is your company using technology to improve performance?

We spend about $US200m on research and development, spread across our product groups and in our Growth & Innovation business. We then spend far more each year on the scaling and deployment of new tech into our business. We have one of the oldest heritages in the mining industry, but it is our ambition to continue to lead the sector in adopting new technologies to deliver the safest, most efficient and most productive operations.

We have been on our technology journey for more than two decades – starting with automation, where we now lead the industry. Today, our strategy and our aspirations stretch far beyond automation through value chain optimisation and the emerging areas of data science and artificial intelligence.

From heavy mobile equipment to rail and beyond, automation has been a game-changer. It’s not just that drivers are no longer on board, delivering safety and productivity benefits, it is the wealth of data we are now able to generate, analyse and act upon to make smarter decisions. This will also enable the next step in automation, which is processing control.

Digital transformation is a game-changer for the industry, and our work in this field to date puts us in a great position. There is enormous value in moving beyond automation to digitise and then integrate systems across the entire value chain. Turning the huge streams of data we gather from our automated equipment into intelligence is another huge opportunity. We have an in-house data science and analytics team and have just launched an open data environment that will drive more external partnerships in this area. Our data science team works with operational and technical experts to further improve our business. There are many exciting opportunities to apply new technology and partner with others on critical challenges like improving energy efficiency, reducing greenhouse gas emissions and ensuring tailings are safely dealt with.

What are the three major policy issues facing the country and what should be done about them?

Energy policy, red tape and future skills shortages.

What are the major impediments to long term growth facing your company and what can or is being done about them?

Over the next decade, the global mining business is likely to experience a pace of change and level of complexity that will be far, far greater than in previous times. This includes greater regulation and scrutiny, a war for talent and new competitors. Mining companies will need to find a way to grow value in a world of finite resources and slower global economic growth, to transform through new technology as digital platforms become the new frontier and to connect with society through partnerships as all stakeholders demand higher corporate ESG standards.

To grow value, mining companies may need to think smaller and faster instead of chasing big-bang maximum-NPV developments. Smaller mines that can be built quickly and safely with options for growth can return cash flow earlier to shareholders, communities and governments and de-risk later investment decisions. This is an approach we are considering with our Winu copper project in WA.

We may also need to find growth in new profit pools, such as recycling or processing mining waste using innovative thinking. For example, at our Boron site in California, we are developing a breakthrough process to generate battery-grade lithium from borates waste.

On environmental, social and governance issues, our efforts include forming partnerships to take a more active role in managing our carbon footprint across the entire value chain, including customer’s emissions. We have partnerships with customers in aluminium, like Apple, and iron ore, like Baowu steel. We believe the only way to truly tackle climate change is through partnership across the value chain.

Fixing Australian energy policy, minimising red tape and a more competitive tax system would significantly improve the investment climate in the Australian resources sector. We welcome recent federal and state government moves to improve red tape. But there is more to do, and the potential benefits from enhancing the process are huge.