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Rio Tinto board faces pressure on broken promise to Indigenous group

Exec reassignments prevent reconciliation on destruction of sacred site, body says

The destruction of the 46,000-year-old Juukan Gorge rock shelters sparked a public and investor uproar that led to the resignation of then CEO Jean-Sebastien Jacques and a promise by Rio Tinto to repair ties.   © Reuters

MELBOURNE (Reuters) -- Rio Tinto chairman Simon Thompson is set to face further pressure over the board's handling of the destruction of sacred rock shelters in Australia after an Indigenous group accused him of breaking a personal promise, analysts said.

The traditional owners of the rock shelters said Thompson had told them Rio's acting head of iron ore, Ivan Vella, who had led reconciliation efforts, would see the process through to its end, The Australian newspaper reported on Thursday, citing a letter to Rio from the traditional owners.

Rio announced last week that Vella would move to Canada to head up its aluminium business, while Chief Commercial Officer Simon Trott would take charge of iron ore.

The Puutu Kunti Kurrama and Pinikura (PKKP) had told Rio of their concerns that frequent leadership turnover prevented the groups building longstanding relationships of trust, the newspaper said.

The destruction last year of the 46,000-year-old Juukan Gorge rock shelters, while legal, sparked a public and investor uproar that led to the resignation of then CEO Jean-Sebastien Jacques and two deputies, and a promise by Rio Tinto to repair ties.

Thompson is likely to face increasing pressure to step down, given the recent spotlight on social issues that is worrying investors, even with solid financial results, said David Lennox of Fat Prophets in Sydney which holds Rio shares.

"The institutional shareholders are starting to get a greater whiff of the responsibilities of being a shareholder. In the past, they didn't care. Those days are long gone," he said.

In the letter to Rio, acting PKKP Aboriginal Corp Chief Executive Grant Wilson said the group had explicitly asked Thompson to clarify who would be responsible for mending the relationship, following the destruction of the shelters to extend iron ore mining, The Australian said.

"Mr Thompson was unequivocal in his response; Ivan Vella was nominated as having full board imprimatur for repairing the relationship from a Rio Tinto perspective. This responsibility was to have lasted from that meeting through to the conclusion of the repair," the letter said.

Shareholder advocacy group the Australasian Centre for Corporate Responsibility said the latest move by the global miner suggested "that Rio still views its relationship with traditional owners as 'an afterthought'."

"ACCR believes that investors should hold Thompson and other board members accountable, and insist on necessary, constructive change to the company's board composition," it said in a statement.

Rio is due to hold its London annual general meeting in April and its Australian AGM in May.

"The empty 'trust' bucket just got knocked over by the chairman ... it is becoming increasingly clear that changes need to be made at the board level," said analyst Peter O'Connor at broker Shaw and Partners in Sydney.

The PKKP said it only found out about the recent leadership changes through the media, and that Thompson had not made any formal contact to explain the changes and their impact on the reconciliation process, the paper said.

The PKKP told Reuters through a spokesman it had been in contact with Rio Tinto recently but declined to comment on the specific nature of any correspondence or discussions.

Asked for comment on the report, Rio Tinto said rebuilding trust with the PKKP remained a "priority", and that it was appropriate the relationship be led by the head of iron ore.

"We are encouraged by the progress on the planning for the remediation of the Juukan Gorge area but readily acknowledge we have a lot more work ahead of us," it said in a statement.

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