Rio Tinto's history lesson

Global mining behemoth Rio Tinto did something half sensible last week in appointing sandgroper and Rio lifer Simon Trott as chief executive.  While he is not a mining engineer, Trott has spent the past four years running Rio's Pilbara iron ore mines, the source of almost 100 percent of the company's free cash flows over the past decade. It is always good to see an iron ore company appointing a CEO who actually knows how to run an iron ore mine. Rio's stupendously remunerated board of directors had, in its prior two CEO selections, avoided the issue of mining competency altogether.[[Including the chairman, total non-executive director remuneration at Rio Tinto in 2024 was £3.9 million ($7.5 million). Excluding the chairman, average non-executive director FTE remuneration in FY24 was £267,000 (A$552,000).]] Outgoing chief Jakob Stausholm was a finance guy from the shipping and oil industries while his predecessor Jean-Sébastien Jacques – he of the infamous edict to staff to "fit in or f— off" – came via steelmaker Tata and cosmetics giant L'Oréal.

While Trott at least has a grip on the fundamentals, his term at the helm of Rio will be wasted entirely if he fails to learn from the mistakes of his predecessors, the list of which is so long it makes the Bayeau Tapestry look like a dish cloth. In the interests of helping Simon's career, I will provide a guide on how to avoid the pitfalls of being CEO of Britain's national mining champion.

To have any hope of creating value for shareholders, Trott will need to do three things. First and foremost, he should get the boffins from the back office to print out a list of every material asset the company has acquired since 1955, the sum invested in each asset, and the value of each asset today (or in most cases, the sale price after heavy write-offs). This list should be mounted on his office wall in the style of a Chinese scroll and referred to every day.