Latest News

Sources: Next Rio Tinto boss to cut costs and make big deals.

Rio Tinto's next CEO, who may be named as early as this month by the company, should be open for mergers and acquisitions that are transformative, as well as for cost-cutting and productivity improvements.

After announcing in May that Jakob Stausholm was stepping down after four and a half years, the world's largest iron ore mining company is now in the final stages of selecting a new CEO through an internal search and an external search.

Two other sources familiarized with the search process said that the finalist for the top position will present their case to the board this week in London. A decision could be made as early as the end of July.

The timing of board presentations and Chair Dominic Barton’s preference that the new CEO be open to large deals, as well as his preference for the CEO to have a positive attitude towards them, were not previously reported.

According to a report in May, internal candidates include Bold Baatar (chief commercial officer) and Simon Trott (chief executive of the iron ore division).

A fifth source said that Chief Technical Officer Mark Davies was also a possible candidate.

All sources spoke under condition of anonymity, as the search is confidential.

Rio, who is due to announce its half-year results July 30, has declined to comment. Barton Trott Baatar Pecresse Davies have not responded to requests for comments.

Barton met with stakeholders after Stausholm announced his departure to discuss this abrupt change of guard.

Two people who were privy to Barton's discussions about his priorities for a new CEO revealed that he had floated the idea of a "big ticket M&A", with another mining giant, if enough value could be found.

According to a source with knowledge of the matter, Glencore approached Rio about a possible asset combination in 2013. However, talks ended abruptly due to Stausholm's pushback. Analysts have suggested that a tie up with Canada's Teck Resources might be more suitable.

A new CEO must walk a thin line between cost discipline, and repositioning a miner to a dramatic shift to copper. Copper is expected to become in high demand because of the energy transition.

The two people Barton briefed said that the company has acknowledged the fact that its internal costs are excessive, including staffing. It needs a CEO to better manage these costs.

Financial results reveal that from 2020 to 2024 costs at Rio increased by 46.5% faster than BHP and Anglo American. This means a new boss must be disciplined in capital allocation.

RBC Capital Markets estimates that Rio will spend $30 to $35 billion over the next decade on capital expenditures, including $8 to $9 billion for lithium projects following Stausholm's May acquisition of two new lithium projects in Chile.

Kaan Peker, an analyst at RBC, said: "Jakob had previously stated that they were going to be aggressive on lithium. But I wouldn't surprise if some lithium growth projects get pushed back a little in favour of Copper."

Peker believes that any M&A is unlikely to happen in the near future because the new CEO would have to boost the share price of the company to get the best bang for the buck if it decides to use its shares to compete with another major miner.

CONSTRAINTS

According to a source familiar with the process of CEO search, the company has been discussing an internal hire.

Analysts and investors have said that all the top contenders face constraints when it comes to a board that is concerned about operational excellence and cutting costs in particular.

They added that it was uncertain whether a hire from within would be able to adequately address cultural issues, such as safety in Guinea or sexual harassment in Australia.

Trott was responsible for the final ramp up of the Gudai Darri mine, which led to the second highest iron ore shipment in history by 2023. He also brought in new replacement projects. He also handled sensitive Aboriginal heritage matters after Rio damaged rock-shelters at Juukan Gorge, in 2020.

Since Trott assumed the role of Rio in 2021 Rio has continued as the most expensive major Australian iron ore producers, its ore has decreased and it is currently guiding production to be in the lower half its expected range this year because of cyclones.

It's been four tough years. "The business showed a turnaround in 2023, but it was a difficult hand because of Juukan Gorge as well as the weather," said Barrenjoey Analyst Glyn Lawcock.

Baatar's concern is his relationship with the government, as he previously worked three years at Rio Copper, including the Oyu Tolgoi mine, in his native Mongolia.

Stausholm announced in 2022 a reset for Mongolia, including a $2.4 billion debt waiver. Rio announced last month that it was forced to alter its mine plan because the government had delayed the transfer of the mining licence.

Pecresse, a candidate who has led the Aluminium division to a 61% rise in EBITDA in 2024, is favored by some members of the board, according o ne source familiar with the process.

He was a former leader of GE's renewable energies division. His departure from GE saw a significant expansion in the global presence of this unit, which had struggled to be profitable.

Davies has been responsible for driving productivity improvements which could help cost-cutting initiatives. He led the smaller titanium and iron and marine arms of the company, but not its major operational divisions like other candidates.

Analysts said that there is only a small chance of Rio hiring an outsider.

Reports have previously mentioned that Newmont CEO Tom Palmer, and former Oz Minerals Chief Andrew Cole, are potential candidates.

Investors have said that Sandfire Resources' CEO Brendan Harris could also be a candidate. Harris didn't respond to a comment request.

(source: Reuters)