Rio Tinto unveils a higher vision after scandals

Rio plans to overhaul its mission statement to focus on more than shareholder value, a move the CEO says is overdue.

Rio Tinto CEO Jean Sebastien Jacques in Sydney. Picture: Renee Nowytarger

Rio Tinto plans to overhaul its mission statement to focus on more than just shareholder value, in a move that new chief executive Jean-Sebastien Jacques says is long overdue and will help the mining giant pull through the Guinea corruption scandal that has claimed the scalps of two top executives and sparked bribery investigations in three countries.

“It is clear that if you want to take Rio to the next level and become a blue-chip company, we need to have a strong sense of purpose,” Mr Jacques told The Australian yesterday.

“The question of not only shareholder value, but us being part of a solution and providing for a modern society will be ­essential.”

The new “vision and values” statement will be launched in January, in accordance with a board discussion held in Sep­tember.

“The intent is to really take Rio Tinto into the 21st century. It’s long overdue but we are going to get there,” Mr Jacques said.

“The fact we have this issue with Guinea makes the relaunch of the vision with a higher purpose and the values of the company even more important.”

Mr Jacques fronted investors in Sydney yesterday in his first presentation since taking over from Sam Walsh as chief executive in July, and the first official Rio outing since the Guinea scandal broke on November 9.

Last week, Rio sacked its minerals and energy chief Alan ­Davies and legal and regulatory affairs chief Debra Valentine after having earlier reported itself to anti-corruption authorities in the US, Britain and Australia over a $US10.5 million payment to a consultant helping negotiate a settlement with the Guinea government concerning the Simandou iron ore project.

At the investor presentation, where Mr Jacques outlined plans to boost annual cash flow by more than $US5 billion ($6.8bn) in the next five years through productivity gains and flagged more asset sales, he said the Guinea scandal had been “challenging” but that he took integrity and Rio’s code of conduct seriously.

“For me, it is absolutely non-negotiable — we must do the right thing wherever we operate,” he said.

After the presentation, Mr Jacques told The Australian that the internal fallout, which he previously said had left staff “shell-shocked”, was improving.

He said it was important for the company to improve its ­reputation externally but also to attract the next generation of ­potential leaders.

“All the studies show that if you want to retain the people who will run the company in the next five, 10 or 15 years, and get the best talent we can, we need to have a strong sense of purpose, and that just making money, creating shareholder value, is not sufficient,” Mr Jacques said.

“Therefore, our company being part of the solution is very important.”

In his presentation, Mr Jacques set himself a five-year target of boosting annual cash flow by more than $US5bn, on top of previously announced targets to cut costs by $US2bn.

“It’s a first step,” he said.

“I don’t have any doubt in my mind that the potential is much, much higher.”

He said asset sales would be another measure of driving shareholder value.

Mr Jacques was “cautiously optimistic” about China, after a recent visit and conversations with Rio’s biggest shareholder, state-owned Chinalco.

“We don’t have major concerns about the Chinese economy in the foreseeable future,” he said.

“I will put a caveat there ... depending on what may happen from the geopolitical standpoint with (US president-elect Donald) Trump and a few others.”

At yesterday’s investor presentation, Mr Jacques expanded on a “value over volume” strategy he had previously spoken of, after it was fleshed out and approved at Rio’s annual strategy board meeting in September.

At the briefing, new iron ore chief Chris Salisbury gave a positive update on the progress of the company’s long-overdue Autohaul driverless train program, where problems are capping the company’s Pilbara iron ore ­capacity at about 340 million tonnes, despite having a port and mines that can process 360 million tonnes.

Mr Salisbury said the program, which had been slated to be up and running last year, was on track to be fully operational by the end of 2018, in line with indications from chief financial officer Chris Lynch.

The fact Rio will be able to get the project going will relieve some investors. “Rio’s pathway to using 360mtpa of infrastructure in iron ore remains one of the key questions for investors, particularly under the ‘value over volume’ mantra,” Citi analyst Clarke Wilkins said.