Rio Tinto CEO Jean Sebastian-Jacques
Photo by: Bloomberg
Mining major Rio Tinto is bracing itself for a changed market environment post-Covid-19.
CEO Jean Sebastian-Jacques told delegates attending the Bank of America Global Metals, Mining and Steel Conference that the mining industry would need to transform to operate and thrive in a postpandemic reality.
“As we look to the future, it is fair to say that we do not know what the world will look like. But it is absolutely clear that things have got a lot more complex,” Sebastian-Jacques said, pointing to the global travel restrictions and the significant rate of unemployment currently experienced.
“The movement of people and goods will be restricted, as will the movement of data, and it is likely that wealth distribution will fundamentally shift. So, significant uncertainties will exist over the short, medium and, potentially, long term.
”Sebastian-Jacques noted that different countries were also in different phases of the pandemic, resulting in a lack of coordination and the emergence of a “realpolitik world”, with the potential for rising nationalism and increased geopolitical tensions, such as the US-China relationship, as well as trade dislocations.
He noted that postpandemic economic recovery would be dependent on a number of factors, including how society chose to respond, the effectiveness of the health measures in place and the effectiveness of economic stimuli.
“It is clear that, regardless of the shape of the recovery, the world will see slower gross domestic product growth and trade impacts, both key drivers of the mining industry.”
However, Sebastian-Jacques noted that, alongside the challenges, there were also opportunities.
“We are now, more than ever, focused on understanding and managing our critical risks. We do also see the potential for new opportunities to emerge. As history has shown, great innovation often springs from difficult times. “To make the most of these, we will enhance our resilience, strengthen our partnerships and continue to adapt – all with [the] aim to maintain our strong performance.”
“You have heard me say before that mining developments of the future may start smaller and be embedded with optionality for growth over stages, yielding quick cash flows to shareholders, communities and governments, such as our Winu project, in Western Australia.
“In the post-Covid world, this type of development approach may become more viable.”
Sebastian-Jacques noted that Rio would remain patient in terms of its investment decisions and would only make these based on market fundamentals.
“We know that adaption is also thinking about our future portfolio. We are keeping a watching brief on mergers and acquisitions. Right now, the market is finding it difficult to value companies and the Covid-19 recovery pathway is not clear.
“Rio Tinto will only transact if an opportunity creates value. We remain patient, but not complacent,” he added.