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Rio Tinto’s new CEO Stausholm navigates tough first quarter

Rio Tinto lifted its iron ore shipments, battled wet weather and labour shortages and escalated efforts to repair broken relationships with traditional owners from the Pilbara to Arnhem Land during a critical first quarter for new chief executive Jakob Stausholm.

While Mr Stausholm has been touring the country striving to restore trust following the disastrous destruction of the Juukan Gorge Indigenous rock shelters last year, Australia’s second-largest miner increased exports of its top commodity, the steel-making ingredient iron ore, by 7 per cent from the same time last year.

Rio shipped 77.8 million tonnes of iron ore in the three months to March 31, its quarterly review said on Tuesday, as Chinese industrial activity drove greater demand and global economic growth continued to rebound.

However, iron ore production volume fell 2 per cent year-on-year to 76.4 million tonnes as above-average rainfall across Western Australia and labour shortages affected mine and port operations, Rio said.

“A mediocre quarter from Rio Tinto,” said Tyler Broda, a London-based analyst with the Royal Bank of Canada. “Some mixed weather in February and challenges in plant reliability drove a 6 per cent miss to our iron ore production forecasts.”

The miner’s quarterly shipments, meanwhile, were largely in line with analysts’ expectations, and have placed it on track to deliver its full-year target of between 325 million and 340 million tonnes at a time when the price of iron ore has surged to a 10-year high of around $US180 a tonne.

Mr Stausholm said the miner had achieved an “overall solid” operating performance in the first quarter and had successfully managed the effects of significant rainfall across its iron ore assets in WA’s Pilbara.

But Mr Stausholm added that the period had also been one of “deep reflection” for Rio Tinto as it continued facing the fallout of its disastrous decision last year to blow up the 46,000-year-old Aboriginal rock shelters at WA’s Juukan Gorge to make way for a mine expansion against the wishes of the land’s traditional owners.

“I have personally spent a significant amount of time listening, learning and taking actions, in particular, to better manage traditional owner partnerships and cultural heritage,” said Mr Stausholm, who was elevated to Rio’s top job after former CEO Jean-Sebastien Jacques resigned.

The Danish-born, London-based Mr Stausholm has been in Australia since January, travelling with Rio’s new head of Australia Kellie Parker across WA, the Northern Territory and Canberra to meet with traditional owners, First Nations leaders and politicians who were devastated and outraged following the Juukan Gorge disaster.

He intends to stay in Australia at least until Rio’s upcoming annual investor meeting in Perth on May 6.

Rio Tinto has previously described 2020 as a year of “sharp contrasts”, as its reputational crisis has coincided with a period of resilient operational performance and a stunning rally in the price of iron ore, Australia’s most valuable export.

Massive economic stimulus programs post-COVID-19 have been fuelling record-breaking demand for the steel-making raw material in China at the same time as disruptions are affecting rival iron ore suppliers in Brazil.

Rio Tinto and other top iron ore miners – including BHP and Andrew Forrest’s Fortescue Metals Group – have been posting bumper profits.

The rise in the price of iron ore has helped support the nation’s finances through the coronavirus pandemic. During 2020, iron ore accounted for $120 billion in export earnings – the first of any Australian export to top the $100 billion mark.

Commonwealth Bank commodities analyst Vivek Dhar said robust steel margins in China were supporting iron ore prices at levels not seen since September 2011. “The remarkable resiliency of China’s steel mill margins is noteworthy and indicates just how strong China’s steel demand is right now,” he said.

Performance across Rio’s other commodities in the quarter were mixed, according to analysts at JP Morgan. In Mongolia, an escalation of COVID-19 infections has caused some works to be temporarily suspended at the problem-plagued Oyu Tolgoi copper-gold mine expansion, threatening further delays.

“Overall, 2021 guidance is unchanged,” JP Morgan said. “And despite the soft start we don’t expect major changes to consensus earnings.”
Source: Sydney Morning Herald

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