Rio Tinto picks iron ore boss Simon Trott as new CEO

[Redator]

Rio Tinto (ASX, LON: RIO) has picked iron ore boss Simon Trott as its new chief executive officer, selecting a 20-year company veteran to steer the mining giant through rising costs and long-term growth challenges.

Trott, 50, succeeds Jakob Stausholm, who unexpectedly announced in May he would step down after four and a half years at the helm of the world’s second largest mining company.

The Australian national will assume the role on August 25 and relocate to London. He has led Rio’s iron ore division, the miner’s most profitable business, since 2021

“Simon is an outstanding leader with a deep understanding of mining and a track record of delivering operational excellence and creating value across our business,” chairman Dominic Barton said in a statement.

Trott has worked across Rio’s global operations. Before leading iron ore, he served as chief commercial officer in Singapore and held senior roles in the company’s salt, uranium, borates, and diamonds businesses in Australia, Namibia, the US, Canada and Serbia.

“Simon and I have worked closely together during the last seven years (…) He’s made a huge mark already in strengthening our largest business and the relationships we have with stakeholders in Australia,” Stausholm said in a LinkedIn post.

While Rio considered external candidates, the frontrunners were believed to be internal and included Jérôme Pécresse, CEO of the aluminum unit, and chief commercial officer Bold Baatar.

Passing the torch: Incumbent CEO Jakob Stausholm and new CEO Simon Trott. (Image courtesy of Stausholm’s LinkedIn.)

The board sought a leader who could unlock value from key growth assets such as the Oyu Tolgoi copper-gold mine in Mongolia and the vast Simandou iron ore project in Guinea. 

Controlling costs was also a priority: from 2020 to 2024, Rio’s costs surged 46.5%, outpacing BHP and Anglo American, which added pressure for capital discipline.

RBC Capital Markets estimates Rio will need to spend $30 billion to $35 billion over the next decade, including $8 billion to $9 billion on lithium projects secured by Stausholm in Chile earlier this year.

Analyst Kaan Peker noted that lithium spending may be re-evaluated in favour of copper.

Growth and challenges

Growth will dominate Trott’s early agenda. Last year, Rio explored a potential merger with Glencore (LON: GLEN), which would have created a mining giant larger than rival BHP (ASX: BHP). Talks ultimately Talks collapsed over valuation gaps.

RBC analysts noted that with a new CEO designate in place, mergers and acquisitions (M&A) remain possible, but a Rio-Glencore merger “feels more of a stretch than ever.”

Trott also inherits reputational challenges. Rio Tinto still faces legal action linked to sexual harassment allegations at Australian mine sites, following the 2020 destruction of Australia’s ancient Juukan Gorge rock shelters, and a 2022 report detailing  widespread bullying, racism and sexual harassment across the company.

BMO Capital Markets welcomed Trott’s appointment, saying it removes uncertainty hanging over the stock.“ As an internal hire and head of its flagship iron ore business, we don’t expect any major changes to Rio Tinto’s existing strategy,” analyst Alexandre Pearce wrote on Tuesday.

Still, Trott has faced criticism from some investors over declining ore quality and rising costs under his watch. The division has also struggled to hit the top end of its production forecasts, but it has consistently met guidance since Trott took over.