Rio Tinto chooses iron ore boss as new chief executive
Simon Trott, a Rio veteran who has been with the company for more than 25 years, will succeed Jakob Stausholm running the world's second-biggest mining company on August 25.
The FTSE 100 group derives the lion's share of its profits from the iron ore division focused on the Pilbara region of Australia.
Trott, 50, who was formerly Rio's first chief commercial officer, became chief executive of the division in 2021 when his predecessor left after the 2020 Juukan Gorge scandal, when Rio blew up sacred ancient Aboriginal rock shelters in the Pilbara to expand a mine.
Trott will be seen as a 'safe' appointment, 'giving the reins to the head of Rio's most important business, with operational experience and perceived to be less inclined towards M&A compared to other candidates', according to analysts at Barclays.
Dominic Barton, Rio's chairman, said: 'Simon and the board are aligned that Rio Tinto's next phase is about unlocking significant value for shareholders from our portfolio, driven by operational performance, and cost and financial discipline.
'Simon came into our iron ore business at a time of significant challenges and has been instrumental in rebuilding culture, strengthening external relationships and setting us on a pathway for growth.'
Analysts at Macquarie said Barton had credited Trott with 'salvaging Pilbara's licence to operate' in the wake of Juukan Gorge.
Rio reported net profits of $11.6 billion last year. As well as iron ore it also produces copper, aluminium and various minerals, and under Stausholm it has embarked on a strategic push into lithium.
Rio announced in May that Stausholm was to step down after less than five years in charge, a surprise move for which it gave no clear reason. Rio's board asked him to step down to seek someone with more mining experience, the FT reported, adding that Stausholm had also been more sceptical than Barton on the merits of early merger talks with Glencore that began last year.
Barton told investors on Tuesday that Rio's portfolio would remain iron ore, copper, aluminium and lithium, diversifying away from the dominance of iron ore, and its focus would be on cost-cutting and simplifying its operational model. 'Rio has a lot of opportunities to grow internally but will have its 'eyes wide open' on broader industry consolidation, although the bar is very high to do so,' Barclays reported him as saying.
Ben Davis, analyst at RBC Capital Markets, said that Trott's appointment was a surprise given the desire to focus on costs, because costs in the iron ore division he has been running 'need to be brought under control'; data shows the cost gap with rival BHP widening since Trott took over the division.
A spokesman for Rio said the costs in its iron ore business reflected 'structural characteristics and changes ongoing at this point in time, such as a large operating footprint, ageing ore bodies and the drive to bring on four replacement mines to the end of the decade'.
'Simon has been instrumental in driving the measures needed at all levels in the system, to meet our cost targets — in addition to his work to unlock a more competitive future for the business,' he added.
Cost-cuttingTrott has been appointed with a clear mandate to cut Rio's costs through simplifying the organisation. Analysts at Bernstein say that 'changes in the way the business matrix, functions, regions (35 countries) are organised could make the operations simpler and more efficient to improve decision speed and ultimately business cost'.
Iron ore outputOne of the key decisions facing Trott will be 'whether Rio Tinto will delay replacement projects in the Pilbara to keep the iron ore market balanced and prices elevated, even though this would lead to loss of market share and higher unit costs', according to Ben Davis at RBC Capital Markets. Rio's Simandou project in Guinea is due to start up this year, putting downward pressure on prices.
Capital allocationRio has a large number of early stage projects that will compete for its investment capital, including lithium projects and the Resolution copper mine in Arizona. Deciding where to put its money will be a key question for Trott.
M&AThe scramble for copper and other metals needed for the energy transition has led to significant M&A activity in the mining sector in recent years, much of it abortive. Should talks with Glencore over a mega-merger be revived? Ben Davis of RBC said this felt 'more of a stretch than ever'.
Dual-listed company structureRio has been under pressure from the activist investor Palliser to scrap the miner's dual-listed UK-Australian corporate structure and merge into a single entity with a primary listing in Sydney. Rio has resisted the idea but with shareholder advisory groups in favour it is likely to resurface before long.
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