Rio Tinto faces Future Fund fury over Juukan Gorge blast
The Future Fund has added its muscle to the push to force Rio Tinto’s board to take stronger action over the destruction at the Juukan Gorge.
The federal government’s $160bn Future Fund has added its muscle to the push to force Rio Tinto’s board to take stronger action against key executives over the destruction of heritage sites at Juukan Gorge, with representatives of the massive sovereign wealth fund understood to have confronted Rio chairman Simon Thompson with their concerns in recent days.
The rare intervention of the Future Fund, chaired by former treasurer Peter Costello, could be a major tipping point as the Rio board weighs the future of chief executive Jean-Sebastien Jacques, iron ore boss Chris Salisbury and corporate relations chief Simone Niven.
All three escaped direct blame for the destruction of the 46,000-year-old heritage site in Rio’s internal review of the debacle, but the miner’s decision to allocate no blame and merely strip the trio of about $7m in short-term incentive entitlements has faced a rising tide of criticism from key institutional investors.
New Future Fund boss Raphael Arndt expressed concerns to The Australian about Rio’s actions in August, saying the fund’s attention to sustainable investment meant Juukan Gorge “is exactly the sort of issue we are focused on”.
The timing of Rio’s board meeting, and the details of what action it will consider remained unclear on Thursday night. But it is understood Rio chairman Simon Thompson has told major institutional investors he will outline a response to their concerns by Friday.
The direct intervention of the Future Fund in a critical week for Rio’s board carries the weight of its own substantial investment in the company. It held $366.2m worth of shares in the company at June 30, 2019, according to its own disclosures.
But it has a $200bn presence in the market, including both its own funds and the management responsibility for other government funds including the Medical Reserve Fund, Aboriginal and Torres Strait Islander Land and Sea Fund, Disability Care Fund, Future Drought Fund and Education Investment Fund.
That means its opinions also carry an outsize weight with the dozens of fund managers it uses to manage its portfolio of both debt and equities, including market giants such as BlackRock, UBS and Macquarie.
The Fund Fund is only the latest major investor to add its voice to the backroom criticism of Mr Jacques and the limp response of Rio’s board to the Juukan debacle. It is understood other institutional investors spent Thursday rushing to compile final submissions to the Rio board ahead of a meeting, said to be due this week, to consider further action against the executive trio over the destruction of the heritage sites.
Superannuation fund Hesta, which manages $52bn on behalf of more than 850,000 Australian workers, wrote to Rio’s board on Thursday, demanding it agree to a public inquiry into all of the agreements the company has signed with traditional owners and saying its conduct posed a risk for the entire mining sector.
In a statement Hesta said it had “lost confidence” the company could be trusted to deal with traditional owner groups fairly and good faith, based on evidence to the parliamentary inquiry looking at the destruction of Juukan Gorge indicating Rio’s agreements restricted the ability of Native Title groups to challenge the company’s actions in public. “Rio’s public statements to the Parliamentary Inquiry indicate that agreements do exist with clauses requiring the surrender of certain legal rights, past and future, and they remain currently in use,” Hesta said. “A change in the ranks of Rio’s senior leadership won’t mitigate this risk for investors. Only a broader review of current practices and the agreements with Traditional Owners will provide certainty to investors that these risks are properly managed by Australia’s mining industry with fair outcomes for all.”
On Wednesday international investors ended their relative silence on the issue, adding to Rio’s woes, with the Church of England pension fund publicly criticising Rio’s response to the crisis.
West Australian Treasurer and Aboriginal Affairs Minister Ben Wyatt has described Rio Tinto as suffering from a colonial mentality, brittle governance and a disconnected board, a view he says he conveyed forcefully in a call on Monday with Rio’s London-based chairman Simon Thompson.
He said the call from Mr Thompson came after he delivered his “aggressive” assessment in Perth to Rio’s visiting chief executive Jean-Sebastien Jacques of Rio’s shortcomings in the wake of the Juukan Cave blast in May that destroyed heritage sites dating back more than 40,000 years.
“I said the greatest risk to Rio’s business is the fact that they are absent from Western Australia,” Mr Wyatt told The Australian.
“Perhaps I was a bit aggressive but I wanted to make this point that Rio holds itself out as a global company and they have board members from America and Europe. But when you get 75 per cent of your earnings from the Pilbara, you’re a Pilbara company.
“I said ‘This is where your attention needs to be all of the time’.”
In May Rio detonated explosives next to the 46,000-year-old heritage site, against the wishes of traditional owners. It later admitted to a litany of failures in its consultations with the Puutu Kunti Kurrama and Pinikura people, and its failure to recognise the importance of archaeological evidence of the historical significance of the rock shelters.
Amid ongoing problems with the Brockman mine which includes the site, Mr Jacques admitted to a parliamentary inquiry into the disaster that Rio had destroyed the rock shelters to access higher grade iron ore.
An internal review from Rio’s board subsequently cleared Mr Jacques and key executives of any blame for the act.
Rio shares closed up $1.37, or 1.4 per cent, to $100.45.
Additional reporting: Victoria Laurie
