Shortly after Rio Tinto boss Jakob Stausholm was named as chief executive, he reached out to the three men who had shaped the modern day miner. The formidable Leigh Clifford; the razor sharp John Ralph; and the quiet change agent Leon Davis. These were the names that towered over Rio’s golden age from the early 1990s into the late 2000s.
Davis broke new ground on hostile relations between miners and Indigenous communities and became an outspoken supporter of native title laws. Davis was the original ESG advocate, a concept that rolls so easily off many powerpoint presentations today.
Ralph – who was head of Rio Tinto’s Australian predecessor, CRA Group – forged ground on industrial relations and Clifford, as chief executive of Rio, doubled down on iron ore, ensuring Rio was the lowest-cost miner and dominated over arch rival BHP.
Stausholm, who took charge as the Covid-19 pandemic was still underway at start of 2021, still regularly talks with the three.
The 52-year-old Danish national was appointed following the succession of three chief executives who were forced from their post early under clouds. (Former CEO Sam Walsh later had his reputation restored after being cleared around the circumstance of a payments investigation.)
Stausholm’s immediate predecessor, Jean-Sebastien Jacques, had seen massive governance failings around Rio’s Juukan George cave explosions, and relations with the PKKP traditional owners had broken down.
Stausholm is on a journey to repair Rio Tinto – a miner that, while still spitting out cash, has lost its way from the golden era. It was misfiring on the social and governance front, and then on the operational front rivals BHP and Fortescue were running rings around it on lowest iron ore mining costs. At the same time, Rio had missed key production targets during peak iron ore pricing cycles.
As a former finance and strategy executive with multinationals including Shell and shipping giant Maersk, Stausholm knows that global companies need to get the local right in order to move ahead. And this involves working on relationships and keeping the business simple.
This is part of the reasoning behind the debt-free Rio making a $US2.7bn ($3.75bn) swoop on Canadian miner Turquoise Hill. This is a first big step in taking greater control over one of the largest copper deposits in the world. Rio already has a 51 per cent stake of Turquoise Hill, which in turn owns a 66 per cent stake of the giant Oyu Tolgoi copper-gold mine in Mongolia.
The Oyu Tolgoi project, in which Rio is an operator, has been troubled. The Mongolian government, which also has a minority stake in the project, has been at loggerheads given the multibillion-dollar investment needed to develop the underground part of the project, as well as power supply.
By moving on Turquoise Hill, Stausholm can take direct control of the relationship between the Mongolian government, rather than rely on multiple negotiations as a minority holder. He also gets a full stake in one of the world’s newest copper mines at a time when the global economy is screaming out for more of the metal, which is seen as a key ingredient in renewable-energy projects.
If the takeover of Turquoise moves ahead, the consolidation in ownership of Oyu Tolgoi would increase Rio’s group copper production by 10 per cent over the next five years and 17 per cent over the next 10 years, according to estimates by brokerage Macquarie.
Following his recent visit to Australia where he presented the miner’s annual results, Stausholm took the opportunity to catch up after two years of Covid lockdowns. He travelled mostly by himself to Melbourne, Sydney, Hobart, and Brisbane, and met with key members of the Morrison government in Canberra. He jumped on one of the first commercial flights to Perth when the Western Australia border reopened on March 3.
Stausholm met with Tasmanian Premier Peter Gutwein to reset talks around energy investment for Rio’s Bell Bay smelter in the state, and also held talks with Queensland’s Palaszczuk government around renewable-energy projects for its Yarwun alumina refinery near Gladstone. In both cases, this was a shift in approach about working with stakeholders to ensure the high-cost energy-hungry smelters could remain open.
Elsewhere on the development agenda is advancing the high-risk Simandou iron ore deposit into a mine. This project, which is still years from the first lump of iron ore being shipped, is being championed by China to release more ore into the global market. In December last year Stausholm flew to Guinea to meet with Guinea’s President, Prime Minister and Minister of Mines.
More recently, Rio pulled back on its planned Jadar lithium mine in western Serbia following massive community backlash. The thinking inside Rio is that there is still a way forward for the mine, delivering much-needed investment into the Balkans country, but Stausholm needs to work with the politics.
There is plenty of work to be done rebuilding trust with Indigenous communities in Australia, and Stausholm made the call last month to publicly release a landmark independent report into bullying, sexual harassment and racism inside the miner.
He has acknowledged that, while commodity prices are booming, it allows him to spend more time repairing the non-operational areas where Rio has fallen behind.
As a CEO, Stausholm has said at times he tries to block out the noise – he has a summer house in Denmark where he can continue to work through ferocious periods without the daily interruptions of a schedule or Zoom calls.
He also rides a bike where he can – including the tough Mt George mountain bike trail situated on land belonging to Rio’s Bell Bay aluminium smelter but which is open to the public. Some fund managers noted that, after the Rio chief’s Tasmanian visit, Stausholm carried a slight limp on his left leg – the result of a mountain bike crash that left plenty of Danish skin behind.
When meeting investors recently in Sydney, Stausholm proudly noted a legacy left by a Dane – the Opera House. He pointed out that next year the Sydney Opera House celebrates the 50-year anniversary of its opening. Rio next year celebrates its 150-year anniversary from its formation as a copper miner in Spain. If Stausholm gets his way, he believes that his mining house will endure for the ages.
johnstone@theaustralian.com.au
Read related topics:Rio Tinto