![Jean-Sebastien Jacques, CEO of Rio Tinto, is described by colleagues as down to earth and direct.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/h/0/x/8/9/2/image.related.afrArticleLead.620x350.h0v6n3.png/1520552080410.jpg)
Shortly before becoming Rio Tinto chief executive in July 2016, Jean-Sebastien Jacques fronted a town hall staff meeting in Brisbane where he was asked about his approach to dealing with “deadwood” among the mining giant’s 50,000 employees.
Jacques replied that when it came to workers who didn’t pull their weight he was a firm believer in FIFO, a term commonly used in mining circles to refer to the fly-in, fly-out method of employing people in remote locations.
On this occasion, however, the CEO designate had a different definition.
“If someone is stuck in the past,” he told the gathering, “they can either fit in or f--- off.”
Reaction to this unfiltered piece of advice was mixed, according to people familiar with the meeting.
For some, the alternative version of FIFO was a much needed dose of candour at a company that required a shake up after a decade of high-profile operational and governance blunders.
For others, it was yet another example of Jacques not choosing his words carefully. “‘Oh my God!’ pretty much summed up the feeling in the room,” says one former Rio staffer.
Whatever your perspective, the remark exemplifies how many people inside the world’s second-largest mining house have come to view Jacques.
Blunt, unscripted and single-minded, his personal style has at times divided opinion since he took over from Sam Walsh in July 2016.
Rio’s head office can be found in London’s St Jame’s Square, an address that is about as establishment as they come, yet the French-born Jacques is refreshingly free of the old-school British stuffiness that has characterised the company for much of its 145-year history.
So much so that he used another town hall meeting in the middle of last year to canvass the benefits of having the boss located in Sydney where he could be closer to the miner’s main assets and customers.
This thought bubble is said to have provoked many sharp intakes of breath within Rio’s boardroom, where the majority of non-executive directors including the chairman are British.
Honest conversations
![Jean-Sebastien Jacques, right, with Rio's chief financial officer Chris Lynch.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/r/l/n/z/1/image.imgtype.afrArticleInline.620x0.png/1486540124109.jpg)
Jacques was just 44 when he got the top job, making him the youngest boss of a global mining company.
He is also the first CEO to have joined the upper ranks after the boom years during which the big miners torched billions of dollars on overheated acquisitions and ill-conceived expansion plans.
But despite being part of a new generation of mining bosses more focused on managing balance sheets than building empires, he has already earned himself a reputation for being something of a maverick.
“They were very honest conversations,” he says, when asked about the Brisbane gathering.
![Tom Albanese, one of Jacques' predecessors at Rio, who has had fraud charges filed against him by the US Securities and ...](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/z/3/g/h/l/image.imgtype.afrArticleInline.620x0.png/1520307754615.jpg)
“There were people in the room saying, ‘There is a lot deadwood.’ I said, ‘You know what? The vision is very clear, that’s where we want to take the company, we want to move forward and if some people are stuck in the past and don’t want to be on the train or the boat or the journey they have a choice [to leave].”
Jacques is famous in mining circles for what The Australian Financial Review business commentator Matthew Stevens describes as his peripatetic management style.
As a result he spends three out of four weeks on the road, talking to customers, suppliers, governments and, most importantly, Rio staff.
At a time when cost pressures and the rise of automated machinery such as driverless trains have caused big miners such as Rio to lay off employees – the company’s permanent workforce has halved over the past decade – he argues honesty is the best policy when it comes to internal communications.
![Rio Tinto chairman Jan Du Plessis ran a succession process that was, according to senior Rio sources, opaque.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/v/y/k/p/p/image.imgtype.afrArticleInline.620x0.png/1498146348343.jpg)
“I acknowledge that there will be jobs but not for everybody,” he says.
“That ‘s my philosophy in life, and I know sometimes I ruffle some feathers, but it’s better to tell the story the way it is. People will find out if you don’t tell the truth.”
Massive fight
The second of BOSS magazine’s two interviews with Jacques takes place in a nondescript hotel meeting room in Sydney ahead of the Australian leg of Rio’s investor roadshow. Jacques, wearing a white shirt embellished with a red Rio Tinto logo, is in good spirits.
Buoyed by strong Chinese demand for Pilbara iron ore, which accounted for 69 per cent of Rio’s underlying earnings in 2017, he has just unveiled a strong full-year profit, bigger than expected savings and a record dividend.
With the share price at its highest level in almost seven years, Jacques can even afford to make a joke about the noticeable damage done to one side of his face. The injury was sustained, he explains with a smile, during a disagreement with his burly chief financial officer Chris Lynch over whether it was prudent to return almost $US10 billion to shareholders last year in the form of dividends and share buybacks.
“We had this massive fight. I did win the argument. I got my $US9.7 billion. But I also got a black eye.”
The truth, of course, is more prosaic. Jacques was running one morning in London, made the mistake of checking his Apple Watch and promptly fell over on the uneven pavement.
![Andrew Harding was in charge of iron ore operations at Rio. He now heads rail group Aurizon.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/u/1/z/9/4/image.imgtype.afrArticleInline.620x0.png/1501056566121.jpg)
It is cute to turn this cautionary tale about the dangers of gadgets into a quip about how much money Rio has given back to its long-suffering investors.
The company’s final dividend was higher than analysts were expecting and underlines the amazing revival of the mining sector in the two years since Rio and main rival BHP were forced to slash distributions.
But the accident serves also as a reminder that Rio chiefs have developed a habit of slipping up in recent years.
The man known to colleagues as JS has had made a strong start but freely admits his legacy will be decided in “10, 15, 20 years”.
This means he will have to avoid repeating the mistakes of the past.
International culture
At first blush, Jacques conforms to the cultured French stereotype.
He quaffs vintage champagne in moderation, prefers rugby to soccer, and loves a Tchaikovsky opera almost as much as Walsh.
![Sam Walsh stepped into the CEO role after Tom Albanese was sacked.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/l/o/g/5/y/image.imgtype.afrArticleInline.620x0.png/1453170904083.jpg)
He attended the prestigious Lycée Louis-le-Grand school in Paris, alma mater of Maximilien Robespierre and Jean-Paul Sartre, and completed a master of science at the elite Ecole Centrale des Arts et Manufactures.
Yet Jacques was never comfortable about the idea of entering the cliquey French corporate establishment with its love of hierarchy.
After graduating, he did not know which industry he wanted to join so he set himself three criteria: the job should involve working with tangible objects (“something I could touch”); it had to serve a higher purpose (“the tobacco industry is one industry I couldn’t work for”); and it needed to be in Asia (“I can’t explain”).
When pressed about Asia, however, he does offer a reason of sorts. As a foster child growing up in rural France and Paris (a subject he will not discuss), his wanderlust was fuelled by by the large numbers of books he read about different parts of the world.
“Maybe it came out of that,” he says. “But I can’t explain. I really can’t. You build these pictures in your mind and then I had the opportunity to go for it and I did.”
I ask if he ever wanted to enter the French business world.
“Not for one minute.”
Perhaps Asia was a conscious or subconscious decision to get away from that environment?
![Jacques' wife Muriel Demarcus is enjoying life in Sydney and blogs as frenchyummymummy.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/y/b/i/m/5/image.imgtype.afrArticleInline.620x0.png/1511139514992.jpg)
“Oh, absolutely. No doubt about that.”
Jacques took a job with L’Oreal in Indonesia ensuring its shampoo production lines operated efficiently. It is a time he remembers fondly. He learnt Bahasa and still keeps an artwork the local staff sent him for Christmas after he left.
This led to an international career mostly working in heavy industry, with stints at Pechiney, the French aluminium group bought by Canada’s Alcan, and Corus, the British steelmaker.
When Indian group Tata Steel acquired Corus in 2007, Jacques was appointed head of strategy.
For most of the 2000s, London has been home for the Jacques family, which includes wife Muriel Demarcus and their two teenage daughters. Jacques, who speaks with a strong French accent, has a British passport and describes himself as being part of an international culture.
Clean up the mess
Jacques’ colleagues describe him as down to earth, ambitious and direct. If he wants an answer on, say, iron ore production performances, he will often go straight to the Rio expert instead of their boss.
Stuck in an airport lounge with a colleague for a couple of hours, he will talk to them rather than retreat to one of the two iPads he carries with him. And when he decided to move on from Tata in 2011, he emailed a group of CEOs out of the blue to see if there were any senior positions open.
![Jacques at the opening of the Silvergrass iron ore mine in Western Australia.](http://web.archive.org./web/20180314194120im_/http://www.afr.com/content/dam/images/g/y/7/f/c/0/image.imgtype.afrArticleInline.620x0.png/1519972336997.jpg)
Rio’s then boss, Tom Albanese, replied within half an hour to say he should come in for a chat.
Rio may be in good shape now but it wasn’t that way when Jacques joined.
Albanese was sacked in January 2013 after Rio revealed another multibillion-dollar writedown of Alcan, which had been bought for $US38 billion at the top of the market six years earlier in what is arguably the worst big mining deal ever.
At the same time the company announced a separate $US3 billion writedown of the Riversdale coal business in Mozambique, purchased for $US3.7 billion just two years earlier. Then commodity prices began to fall.
Walsh, then 63, was summoned from a long weekend in Singapore with his wife to clean up the mess. Installed as the veteran safe pair of hands, he went about winning back Rio shareholders by paying down debt, selling $US4.5 billion worth of assets and cutting costs.
It is an open secret within Rio that Walsh would have liked to have remained in the top job for longer.
Certainly, some insiders believe he had earned that right for putting Rio back on track and seeing off an opportunistic merger approach from Anglo-Swiss rival Glencore.
But chairman Jan du Plessis, a tough South African contemplating his own departure, had other ideas.
He ran a succession process that was, according to senior Rio sources, opaque and not immediately obvious to the executives involved.
One source familiar with the process half-jokes, “It was hard for those who lost out to be too upset because they didn’t know the race had started.”
After just five years working at Rio in the copper and coal division, Jacques had landed one of the biggest jobs in mining.
He had impressed the board by stripping out underperforming copper assets and completing a sensitive agreement with the Mongolian government that allows the company to expand its massive Oyu Tolgoi copper and gold project.
“I think the words to describe him are commercial and enthusiastic – he has a lot of energy,” says Deutsche Bank’s long-time mining analyst Paul Young. “He can articulate a corporate message very well.”
Yet as a relative newcomer who had never been in charge of the dominant iron ore operations, the announcement surprised many observers.
The main casualty of this decision was iron ore boss Andrew Harding, who left to run rail group Aurizon after Jacques made it clear he did not fit in with his plans.
Relations had not been helped by Jacques conducting a post-investment review when he took over the copper unit that had previously been run by Harding.
Some people close to Harding believe it was the decision of an ambitious executive looking to find fault in a rival. A source close to Jacques describes this interpretation as "bullshit", and says it is completely normal for a new executive to review their business.
Rio CFO Lynch, a highly-respected figure who had held senior roles at BHP, also had designs on the top job but was convinced to stay until later this year to ensure a smooth handover. Lynch and Jacques have nevertheless got on well by most accounts, even finding time to enjoy the odd barbecue at Lynch’s place on the Gold Coast.
Lynch may have been disappointed to miss out but he has told close colleagues Jacques was the next best choice. With du Plessis replaced by British investment banker Simon Thompson in early March, the changing of the guard at Rio is almost complete.
Best place
Change has also been a feature for Jacques’ family. During a town hall meeting with staff in London in the middle of last year, he raised the prospect of moving to Sydney to be closer to Rio’s key customers, operations and growing commercial hub in Singapore.
His remarks were duly reported in the Financial Review’s Rear Window column, which went on to reveal that Demarcus had her own blog, frenchyummymummy.com, in which she had declared, “I am falling in love with Australia”.
In November it was reported that Jacques had spent more than $3 million on a harbourside Walsh Bay apartment, while recent blog posts suggest Demarcus has not only made Sydney her home but is enjoying the experience.
“I have decided to stay in Sydney a little bit longer to enjoy the Aussie way of life,” she wrote in January.
“I had come to a point where I couldn’t take one more British winter and a change was long overdue after close to 15 years in Blighty.”
Questions about the whereabouts of the family home or the contents of his wife’s blog are mostly declined.
“The whole question for the location of the family is where is the best place for them to be from an educational standpoint and personal standpoint. I have been married for more than 20 years and I want to keep everyone together,” he says.
“But my policy for the past 25 years has been never to talk about family because it’s not fair on them and they have been very supportive,” says Jacques. “Me being under the spotlight is fine. It comes with the territory.”
He is far more forthcoming about the benefits of spending more time in Asia.
“Australia is 50 per cent of the assets and 75 per cent of the profit,” he says during our first interview in London late last year.
“I mean you want your CEO, your people, to be on the ground all the time meeting with suppliers and customers and shareholders and so on and so forth. So in a slightly provocative way, the concept of an HQ is a concept of last century.
"In other industries, if all your assets are in one place then having a big head office makes a lot of sense.
But with a company like Rio Tinto, what you don’t want is people sitting in the same office all day long. That doesn’t make any sense; welcome to the 21st century, welcome to Rio Tinto.”
To emphasise his point he gestures around the meeting room where we are sitting. It is big enough to contain a small London home and used to be Walsh’s office.
“I don’t have an office,” he says. “We joke internally that the head office changes from Singapore Airlines or Qantas or BA, although I don’t like them so much, or American Airlines.”
Jacques says he smiled about the initial news reports, based on his remarks at the London town hall, that suggested Rio might relocate its headquarters to Australia. But when I bring up “his Sydney move” during the recent second interview he is more taciturn. I’m left with the distinct impression Jacques – or someone else important at Rio – has had enough of this subject.
“I’m not in Sydney. I’m in London. The HQ is London. And I travel all the time.”
Jacques’ schedule is controlled by his executive assistant Jarka da Silva on a massive Excel spreadsheet. He laughs that she is the most important person in the company.
Last year, he travelled to the Pilbara five times, China five times, North America five times as well as trips to Singapore, Africa, Japan, Mongolia and other parts of Australia.
To stay energised Jacques rises before 6am, runs five kilometres every day and avoids booze at work functions. When the family was in London, he tried to be home by 5pm but he regularly works 14 hour days, particularly when travelling.
“It doesn’t matter if you’ve had a bad night or bad emails in the morning,” he says. “When you open the door and go on site or wherever, you need a big smile and lots of energy. Because otherwise people say, ‘Oh the company has big problems.’”
Relentless travel
When not meeting staff face-to-face Jacques is logged into Yammer, a social network for communications within organisations.
Jacques, who argues technology is changing all aspects of mining, is an enthusiastic proponent of Yammer, proudly noting that about half of Rio’s massive workforce are users. He has even discussed its benefits with ANZ boss Shayne Elliott.
Yammer is meant to be private but Jacques’ forthright posts have made news.
Following a trip to the Pilbara last year, he reflected on some straightforward conversations with staff by writing Rio might look at raising output from its iron ore mines in Western Australia to 400 million tonnes a year. This represented a big jump from the circa-330 million tonnes Rio expects to export this year. Some commentators suggested such musings should have been shared with the wider market.
The combination of Jacques’ relentless travelling and moments of shoot-from-the-hip candour can lead to the perception he is impetuous. But he says he has plenty of time to pause and think strategically on the plane, among other places.
“Jacques thinks strategically,” says DB’s Young. “I think a couple of the other [mining] chief executives are not as focused; in fact I think quite the opposite, not to name names.”
Young says investors are not worried about the travel and respect Jacques’ desire to meet people face-to-face. “I think all that sort of stuff helps you think,” he says. “When you are sitting at your desk it is amazing how unproductive you can be, getting bogged down in the minutiae”.
This is just as well as Jacques has plenty of big challenges to keep him busy.
The most obvious is managing the fallout from a series of explosive scandals that will keep the company tied up in regulatory knots for years.
Rio’s problems began in late 2016 when it reported itself to Australian, British and US regulators over a controversial $US10.5 million payment made to French banker Francois de Combret in 2011 for help negotiating with Guinea’s president over a giant iron ore project called Simandou.
According to leaked emails between three Rio executives, including Albanese and Walsh, de Combret provided “unique and unreplaceable services and closeness to the President”.
All executives involved say they have done nothing wrong.
Then, a month later, it emerged that the US corporate regulator had been investigating Rio’s disclosure of the disastrous Riversdale deal.
The SEC filed fraud charges against Albanese and his then chief financial officer Guy Elliott for violating the fraud, reporting and internal control provisions of US securities laws. Both men deny the allegations.
Such large-scale investigations, which span different jurisdictions, cost millions of dollars and take years to complete, can distract management. Rio has a team of staff and external advisers looking into both issues on the fifth floor of the St James HQ, which Jacques says is ringfenced from the bulk of employees working on day-to-day operational matters.
“There is no-one else on this floor,” says Jacques, who receives regular updates. “Those people have to deal with the legacy issues. I try to avoid mixing the drinks, if that is the right thing to say.”
Legacy issues
Jacques, who joined after the incidents under investigation occurred, says he doesn’t get annoyed about inheriting these governance problems. “I can’t change the past,” he says. “I try to look at the big picture.”
However, one legacy issue Jacques is trying to change is staff morale.
Perhaps not surprisingly given the wage constraints and job cuts following the end of the resources super-cycle, it is understood morale as measured by the Net Promoter Score method – which asks how likely an employee would recommend their company to a friend – is in negative territory at Rio.
Jacques points to an improvement in the results last year but says he needs to keep communicating.
“I believe that people come to the office or the site to do a good job. I don’t believe they come to do a bad job. So therefore if we can restore the pride of the people and unleash the positive energy I think we will be in good territory.”
The job of lifting morale is complicated by the fact Jacques is trying to imbue the business with a more robust performance culture.
This means more metrics such as monthly benchmarking across all the mines and fixed plants, or assessing leaders based on performance indicators from safety to employee engagement. Talking about this problem is as close as Jacques comes to criticising previous management.
“I knew from the start it would be be challenging. That was not really part of our DNA. Lots of people were talking about performance culture but very few people were doing it.”
The final challenge Jacques faces is to please investors scarred by the excesses of the boom by keeping the balance sheet in good shape and maintaining dividends while, at the same time, growing the company through expansions and prudent acquisitions.
As the head of Australian equities at Aberdeen Standard Investments, Rob Penaloza, puts it: “Rio doesn’t need to be conservative for the sake of it but it does need to demonstrate it sees value in potential opportunities.”
Penaloza, who is a Rio shareholder, says a major underground expansion of Oyu Tolgoi represents a big growth option if the company can negotiate the febrile relationship with the Mongolian government and technical risks associated with the block mining. “OT”, as the mine is known, represents about 35 per cent of the Mongolian gross domestic product.
If Rio can successfully execute plans to increase production to 500,000 tonnes annually over the next decade, it will be one of the biggest copper projects in the world.
But any project of this scale is fraught with political challenges and Rio has faced unexpected tax bills, transport disputes, immigration raids and concerns the Mongolian government may try to increase its 34 per cent stake.
“We need to stay very calm, very relaxed, and very patient,” says Jacques.
Then there is the company’s Amrum bauxite project in North Queensland, which is also in the midst of an upgrade, as well as the recently-opened Silvergrass iron ore mine in WA.
“Amrum and OT, together, are about $US7 billion or $US8billion in capital expenditure,” says Young. “Not too many mining companies in the world, if any, have that scale of projects under way. I think the market probably misses that.”
Rio has looked at buying SQM, one of the world’s top lithium producers based in Chile, as a means of capitalising on the growing demand for electric cars (lithium is used in batteries), which raises the prospect of acquisitions.
Jacques, rather predictably, says he will only consider M&A; if it is in the interest of shareholders.
But the impending departure of Lynch, who has traditionally acted as a handbrake when management’s enthusiasm for deals has run too hard, is causing concerns for some investors.
For his part, Jacques believes he can strike the right balance between growth and conservatism.
His strategy is not to make Rio the biggest, a clear reference to BHP and its Big Australian nickname.
Instead, he wants the company to become the most profitable, the most attractive and the most admired.
Having recently returned from Mongolia, he joined the Australian business delegation that is part of Prime Minister Malcolm Turnbull’s visit to the US. Next he’s off to China again.
He gives every impression of being a man in a hurry.
“People can say your strategy is very boring and that’s fine,” he says.
“The only industry that went backwards in the last 15 years in terms of costs and productivity was the mining business because when iron ore was $US190 per tonne it didn’t matter what you were doing. Now you have two ways of looking at. You can say, ‘What the heck have you been doing?’ But the truth of the matter is I can’t change the past. I can only take stock of it and move on.”