Rio’s Submission to Parliamentary Inquiry – A way Forward for Ethical Mining?

Summary

• The demand for iron ore in China is keeping the price of the commodity afloat with iron ore futures hitting another record high of RMB 897.00 per dry metric tonne on the DCE.
• In the light of an impeccable rally in iron ore prices, ASX-listed iron ore mining companies are now gearing up operations to boost the production.
• However, expanding the existing operations or looking for the new reserves come with consequences.
• While a majority of miners are now focusing on WA to expand the production capability, in this quest they are facing some ethical challenges.
• In the recent past, Rio Tinto and Fortescue Metals came under the community backlash for blasting an aboriginal site while exploring for iron ore.
• Rio responds and submits to an Australian Parliamentary Inquiry concerning the destruction of Juukan rock shelters while presenting methods and procedures to improve internal processes.

The iron ore supply chain normalcy is becoming more and more evident with each passing day as Vale operations picking pace, leading to the recovery in the Brazilian supply chain while on the domestic counter many ASX-listed iron ore mining companies such as Fortescue Metals Group Limited (ASX:FMG), Rio Tinto Limited (ASX:RIO) already meeting guidance and some even surpassing it.

To Know More, Do Read: Iron Ore Prices Poised to Weather the Supply Normalcy Storm?

However, despite a slight recovery emerging in the market, the demand for iron ore in China is keeping the price afloat with prices of iron ore futures hitting another record high of RMB 897.00 per dry metric tonne on the Dalian Commodity Exchange on 5 August 2020.

To Know More, Do Read: China- The Catalyst to Gold and Iron Ore Rally

In the light of an impeccable rally in iron ore prices, ASX-listed iron ore mining companies are now gearing up operations to boost the production in order to capture the market share, which has been dominated by Vale across the international front.

• However, expanding the existing operations or looking for the new reserve are bringing forward its own consequences, and with a majority of miners now focusing on WA to expand the production capability, it is putting forward some ethical challenges.
• For example, in the recent past, Rio Tinto and Fortescue Metals came under community backlash for blasting an aboriginal site while exploring for iron ore.

To Know More, Do Read: Rio Tinto Under Community Backlash After Blasting Indigenous Site

The destruction of the aboriginal land had put some lag in the internal review committee of ASX-listed iron ore miners.

To Know More, Do Read: How ESG Consideration Rings Bell In Assessing The Quality of A Mining Stock?

On back of such incidents, Rio reiterated its determination to ensure that such an event would never take place again.

Rio Submits to Parliamentary Inquiry

In a submission to the Australian Parliamentary Inquiry concerning the destruction of the Juukan rock shelters at the Juukan Gorge, Pilbara, WA, the miner laid out detail of its relationship with the Puutu Kunti Kurrama and Pinikura people since 2003 along with the circumstances over this period that led to the events.

Findings and Internal Improvement Procedures

In its submission to the parliamentary inquiry, Rio reiterated that the event should not have taken place in the very first place, but now, a board-led review would report on the event while improving the internal heritage standard, procedures, reporting and governance.

• Moreover, Rio suggested that it would examine relationship and communications with the Puutu Kunti Kurrama and Pinikura people (or PKKP) to identify improvements, whilst the conclusion arriving from the review would be applied across the group.
• The Company also suggested that it is essential to find more effective and flexible means to escalate and manage concerns regarding the preservation of the unique cultural heritage of Indigenous Australians, with a clear and predictable framework to enable long-term investment.

Rio also presented cultural heritage management areas which would require further consideration and consultation, including ways in which the Participation Agreement between the Company and PKKP people could accommodate cultural heritage management in the circumstances like the Juukan rock shelters.

• Additionally, Rio also mentioned that appropriate authority levels for Rio Tinto decision-making on cultural heritage issues along with processes for escalation and review of issues would require further consideration and consultation.

In its submission of suggestions, the Company mentioned that further areas of consultation and review would be pursued in the wake of the outcomes of the Australian Parliamentary Inquiry along with the current review of Western Australia’s legislative framework for heritage issues.

Furthermore, the board-led review, coupled with ongoing engagement by Rio Tinto’s Senior leaders with Traditional Owners across Australia, would also contribute to further areas of consultation and review.

Interim Actions Amidst Pending Conclusion from the Board-led Review.

• Strengthening Partnership with PKKP people

Rio is currently focusing on rooting strong partnership with PKKP while ensuring the right engagement, which already includes engagement at the most senior levels of Rio Tinto with the PKKP board and other interactions.

• 5-year Review of participation Agreement

The next 5-year review of the Participation Agreement between Rio Tinto and the PKKP is scheduled for 2021, which would be addressing ways of strengthening partnership and ensuring better communication at the right level.

• Improving ways of Conducting Heritage Risk Assessment

Rio is currently focusing on improving the way to assess heritage risk with a revised process designed to reinforce internal transparency on status, timing, and impact of disturbance activities on site.

In a nutshell, Rio has come under the community backlash after blasting an aboriginal site; however, the Company had apologised repeatedly and is putting in-place a board-led review to monitor and improve the internal chain of processes.

In reply to the Australian Parliamentary Inquiry, Rio has submitted its response, reflecting a sheer commitment of the Company to improve its internal processes, preventing any ESG-related issues.