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Rio Tinto looks to shelter from self-detonation

An article by Elizabeth Knight Business Columnist of The Age 4 August 2020

As the adage goes: “when you are in a hole stop digging”. Amended for Rio Tinto it would read “when you are in a cave stop blasting”.

For the past few months the pressure has been mounting on Rio’s management and board. But on Friday, when a Senate inquiry heard that the miner annihilated 46,000 years of invaluable archaeological and Indigenous cultural history to derive $135 million worth of iron ore, Rio effectively detonated itself.

The long and rich history of listed companies making mistakes of this magnitude suggests heads must roll. It is a point that Rio’s current boss Jean-Sebastien Jacques has studiously avoided over the past couple of months. He has dead-batted all questions on board and management consequences begging instead that everyone hold fire until an internal investigation is completed as early as September.

When asked during the Senate grilling about whether any penalties had been imposed, Jacques said no single person was responsible and there had been no consequences to date.

There is usually no single person to blame in most corporate catastrophes but, unfortunately for Jacques, there is one person that has to take responsibility – the chief executive.

His Senate hearing evidence that he did not appreciate the heritage significance of Juukan Gorge until May 24, and that a 2018 archaeological report that warned of the high significance was not read by any of Rio’s executive leadership team may not be sufficient for him to avoid consequences.

The heads of Australia’s major banks were not particularly aware of the misconduct going on in the bowels of their organisations in regards to money laundering or the stiffing of their wealth management customers – but that didn’t save them.

Meanwhile, Rio’s chairman, Simon Thompson, has been conducting an apology tour visiting large investors – some of whom have expressed their concerns about the incident but shied away from issuing any public statements. It will be nine months before Thompson and the board need to stand before shareholders for re-election. It is unlikely that any of Rio’s blue-blood directors will be keen to take a bullet for Jacques, if it comes to that.

Assurances that this won’t happen again and that Rio’s internal processes will be enhanced may not cut it with shareholders, especially those who profess to care deeply about the social licence corporations hold. Any hope that this massive error of judgment and colossal mismanagement won’t have serious consequences, must now have evaporated. A company that has prided itself on its corporate governance and the strength of its partnership with traditional owners has rebranded itself a profiteer.

To put the $135 million into perspective, in the 2019 full year Rio reported revenue of more than $US40 billion. To have sacrificed its brand and damaged its relationship with traditional owners for $135 million is incomprehensible. It represents less than a decimal point to Rio’s revenue and earnings.

Until this week Rio’s fallback position has been a recognition that its destruction of the Juukan site in West Australia’s Pilbara region was a regrettable, albeit legal, action – for which it has apologised to the Puutu Kunti Kurrama and Pinikura people.

Rio said it believed it had the consent of PKKP – a view that the traditional owners have strongly contested.

This week in a submission to the Senate inquiry which has been established to learn what went wrong and whether laws regarding Indigenous sites are fit for purpose, Rio finally said that the destruction of the rock shelters at Juukan Gorge should not have taken place.

In the submission Rio characterised the difference in the recollections of conversations between the company and the traditional owners as more of a miscommunication.

But what became clear during evidence from Jacques is that the PKKP were not made aware of the three other options available to Rio Tinto for the mining of Brockman 4.

Rio’s submission contained lengthy accounts of numerous reports over 10 years from a number of archaeological experts that had strongly expressed views on the extreme significance of the caves. Adding to Rio’s woes is a growing conga line of former staffers who have condemned the decision to blast the site in order to expand its Brockman 4 mine.

But none could be more damaging than the interview with former Rio chief executive, Sam Walsh published by the Australian Financial Review in which he revealed that he issued instructions in 2013 for Juukan Gorge to not be mined.

Walsh suggested that Rio’s 46-page Senate inquiry submission, which made no reference to his orders, lacked integrity. In effect he has labelled Rio’s account of the lead up to the Juukan Gorge explosion as an exercise in revisionism.

Walsh says he has confirmed his version of events with Greg Lilleyman who was Rio’s general manager of mining operations back in 2013. Lilleyman has since moved to Fortescue.

Rio has countered that it has found no evidence of Walsh’s instructions while conducting its own internal inquiry.

Perhaps Walsh and Lilleyman should be called before the inquiry to give their explosive accounts of the events leading to Juukan catastrophe.