Rio Tinto taps finance head as new chief executive

Jakob Stausholm, Rio Tinto’s new chief executive. (Image courtesy of Rio Tinto.)

Rio Tinto (ASX, LON, NYSE: RIO) has named finance head Jakob Stausholm as its next chief executive, who will have to put in practice his touted crisis management and peacemaking skills when dealing with the many issues that have fallen into his lap.

The 52-year-old Danish national will assume in January 2021, replacing incumbent Jean-Sébastien Jacques. The top boss had to step down following an international outcry over the miner’s destruction of sacred Aboriginal rock shelters.

Stausholm, who joined the company in 2018 from shipping company AP Moller-Maersk, will be tasked with rebuilding the world’s second-largest miner’s reputation.

Rio Tinto fell out of favour with the general public, including investors, following its decision to blast two 46,000-year-old Aboriginal rock shelters at Juukan Gorge to expand an iron mine in Western Australia.

The move, while legal, sparked global outlash and shined a spotlight on how the company’s internal culture may have contributed to the regrettable incident, which cost Jacques the post.

Jakob Stausholm’s nomination came as a surprise to investors and analysts alike, as most expected the company to pick an external, Australian candidate

It also triggered a parliamentary inquiry, which recently called on Rio Tinto to pay restitution to Indigenous Australians affected by the destruction and also fully reconstruct the damaged site.

Stausholm’s nomination came as a surprise to investors and analysts alike, as most expected the company to pick an external candidate.

“Some may perceive Mr Stausholm’s appointment as potentially indicating little change in overall strategy,” analysts at Morgan Stanley told Reuters, adding that the move should minimize the typical disruption period caused by management transitions.

Stausholm’s promotion also come as a surprise to Australian investors, who have argued that a new CEO should have local experience and be based in the country that provides 85% of Rio’s profits.

“Coming in at Rio at a time when the company’s social license has been so fundamentally undermined through its own actions is an enormous challenge,” said Adam Matthews, director of ethics and engagement at the Church of England.

Edward Sterck, Metals and Mining analyst at BMO Capital Markets, touted the appointment.

“We think Mr Stausholm is an excellent, cool-headed and sensible appointment, albeit unexpected as most observers were expecting an Australian appointee,” he wrote.

“We do not expect an immediate change in Rio Tinto’s corporate strategy, but we do anticipate a transformation in corporate culture over time,” Sterck said.

RBC’s Tyler Broda also said the appointment was a “clear positive,” but noted that Rio could face criticism from some investors who see the change as insubstantial relative to the magnitude of the Juukan Gorge incident.

Mongolian mess

Stausholm, who said restoring trust with indigenous groups and other stakeholders was “a key priority for the company,” will have to face a complex situation at Rio’s biggest growth project in Mongolia.

The vast Oyu Tolgoi copper-gold mine has been plagued by delays and cost blowouts that have triggered disputes with the country’s government and Rio’s partner in the project, Canada’s Turquoise Hill (TSX, NYSE: TRQ).

Rio’s new boss will also inherit a messy situation in Guinea, as the company is being subject of a probe into payments to a consultant who helped it secure rights to the northern blocks of the giant Simandou iron ore project.

Stausholm will have to simultaneously ensure his Chinese customers remain happy, given ongoing trade tension between Canberra and Beijing.

And while Rio Tinto has committed to spend $1 billion over the next five years to reduce its carbon footprint, its incoming boss will face stakeholder pressure to also tackle its “Scope 3” emissions — those generated by customers through the use of its products.

“He’s got some bridges to mend that’s for certain. The problem is he’s part of the company where that happened,” David Lennox, a resources analyst at Fat Prophets, told Bloomberg. “It’s a trade-off — he knows the company well, he knows its operations.”

Rio Tinto is the latest top miner to make key executive changes. Rival BHP’s (ASX, LON, NYSE: BHP) chief executive, Mike Henry, has been at the job only since January, 2020.

Top commodities trader and miner Glencore (LON:GLEN) is waving its long-term boss Ivan Glasenberg good-bye. The executive has announced his retirement and will be replaced by insider Gary Nagle.