(Bloomberg) -- Top iron ore producer Rio Tinto Group has hired Canadian ambassador to China Dominic Barton as its new chairman, in a bid to bolster the relationship with its top customer amid frayed diplomatic relations between Beijing and Canberra.
He replaces Simon Thompson, who announced his intent to retire earlier this year after a scandal around the miner's destruction of ancient rock shelters in Australia's Juukan Gorge. Barton, who spent more than three decades at McKinsey & Co., announced earlier this month that he would step down from his envoy role at the end of the year, just weeks after the resolution of a diplomatic crisis between Canada and China.
Barton will bring the skills and experience Rio needs, Chief Executive Officer Jakob Stausholm said in a statement, including “his wealth of experience across Asia in both a business and diplomatic capacity.” Rio generates the bulk of its revenue from ore sales to China's steelmakers and is exposed to market gyrations caused by policy shifts in Beijing. Prices have halved since hitting record peaks above $230 per ton in May after the authorities imposed production curbs to meet tougher environmental standards.
Barton would have “immense diplomatic skills and experience in dealing with crisis situations, and most importantly avoiding them,” said Gavin Wendt, a mining analyst at consultancy MineLife Pty Ltd., adding that his contacts in Beijing would also be “enormously useful” to Rio.
China has banned a range of Australian commodities imports, including coal, barley and wine, as part of an escalating diplomatic spat with the government in Canberra. Iron ore, which accounts for about a third of Australia's total export revenue, has so far not been targeted, reflecting a lack of alternative sources of the steel-making ingredient.
Barton will also have the job of mending Rio's reputation in the communities where it operates, particularly in Western Australia's Pilbara region, home to its giant ore operations. The fallout from Rio's actions at Juukan Gorge in that region in May 2020 led to the departure of former CEO Jean-Sebastien Jacques and other senior executives.
READ: Rio Chair to Exit After Failings on Aboriginal Site Blasts
Stausholm, who was appointed last December and has reshuffled top management, has said he wants to re-establish the company as a trusted partner for host communities. Still, the company faces local opposition to major projects in Arizona, Mongolia and Serbia.
Barton, a former chairman of global mining company Teck Resources Ltd., will take over from Thompson on May 5. Rio shares declined 1% by 11:07 a.m. Sydney time, extending this year's drop to 15%, as the bourse's mining index lost 0.9%.
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