The Strategist

Investor warns Rio Tinto of reputational and legal risks after scandal over ancient caves

09/11/2020 - 03:13

Australian pension fund Hesta, which invests in mining company Rio Tinto, has demanded that all of its agreements with indigenous people be reviewed following the scandal over the destruction of ancient caves in the Pilbara region, writes The Guardian.

The requirement for an independent review is contained in Hesta's letter to Rio Tinto's board of directors.

"Mining companies that unfairly and in bad faith negotiate with the original owners increase their reputational and legal risks," the fund said.

Reputational costs could affect the value of companies' shares, warned the fund, which manages $ 52 billion on behalf of 870,000 Australians.

The authors of the letter added that they do not believe that the company can be trusted to review such agreements. They also believe that even a change in Rio Tinto's management will not reduce the risks of such situations recurring for investors.

Earlier it became known that agreements between Rio Tinto and indigenous groups contain provisions that prevent the latter from expressing their concerns about the preservation of cultural sites.

The 46,000-year-old caves of archaeological value were destroyed in May 2020 for access to an iron ore deposit.

Critics of this decision indicated that it was made without notifying the local population to whom these caves belonged, without examining the opinion of archaeologists, and they also said that there were alternative solutions that did not involve the destruction of the caves. The company's CEO, Jean-Sébastien Jacques, was called on to resign, but the company only cut him and two other top managers of the award.

An investigation by the Guardian Australia revealed that mining companies could destroy more than 100 Aboriginal historical sites as they received legal permission to do so.