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Investors warn Rio Tinto of need to forge closer bond with Australia

After facing weeks of condemnation over its proposal to penalise those responsible with bonus cuts instead of dismissals, the mining giant’s board finally bowed to pressure on Friday and announced CEO Jean-Seabstien Jacques, iron ore boss Chris Salisbury and corporate affairs boss Simone Niven would depart the company within the next six months.

Following the appointment of Australian director Simon McKeon as Rio’s senior independent director, Mr Silk said he expected this to be a first step in ensuring a “more Australian-focused” board that had greater sensitivity to Australia and its cultural identity.

AustralianSuper chief Ian Silk pushed for tougher penalties over Rio's destruction of Juukan Gorge.

AustralianSuper chief Ian Silk pushed for tougher penalties over Rio’s destruction of Juukan Gorge. Credit:James Alcock

Rio Tinto chairman Simon Thompson told The Age and The Sydney Morning Herald the board felt it was now more important than ever to have greater representation in Australia and engagement with local stakeholders.

The world’s second largest miner, which is dual-listed on the Australia and London stock exchanges, has drawn criticism from investors and politicians for years amid accusations it has been disengaged from Australia, where its iron ore operations make up more than 90 per cent of group profits.

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Future Fund chairman Peter Costello recently discussed with Mr Thompson the need to remove the executives held responsible for Juukan Gorge and expressed concerns about Rio’s leadership being based outside of Australia.

When he was federal treasurer, Mr Costello set requirements for BHP to base its operations and executive leadership team in Australia after the miner merged with Billiton in 2001. Conditions set by former prime minister Paul Keating on Rio Tinto’s 1995 merger with CRA failed to ensure leadership would be kept mainly Australian.

Western Australia’s Aboriginal Affairs Minister and the nation’s first Indigenous treasurer, Ben Wyatt, on Friday suggested the lack of local representation on Rio Tinto’s board had contributed to the Juukan Gorge catastrophe.

Meanwhile, the Australian Council of Superannuation Investors (ACSI), which was among the investor groups to pressure Rio for greater sanctions, said Friday’s accountability measures provided the company the opportunity to address cultural heritage and risk processes “with fresh eyes”. ACSI chief Louise Davidson said she was pleased to see recognition that the board must increase its connection with Australian operations and communities.

“This work will be ongoing and must be a feature of future appointments to the board,” she said.

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The $52 billion super fund HESTA also welcomed the changes but cautioned they must not distract from the need for an independent review of all Rio Tinto’s agreements with traditional owners.

“The nature of these agreements and how they are negotiated represents a systemic risk for investors that will not be mitigated by executive changes,” chief executive Debby Blakey said.

The blasting of the Juukan Gorge was legally sanctioned as part of a long-planned expansion of Rio’s Brockman 4 iron ore mine, but it went against the wishes of the traditional owners, the Puutu Kunti Kurrama and Pinikura (PKKP) people, who said they were shocked and left devastated.

Rio Tinto has acknowledged that multiple failures in its communication with the traditional owners could have prevented the debacle.

Former Rio insiders have laid blame squarely on Mr Jacques, who overhauled the structure of the Aboriginal relations function when he became CEO in 2016, including shifting responsibility to a London-headquartered corporate affairs department.

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