Rio's Walsh is mining's smiling face

When Sam Walsh decided to offer every Aboriginal teenager who passed year 10 at school a traineeship with Rio Tinto, nervous executives cautioned him against the move.

When Sam Walsh decided to offer every Aboriginal teenager who passed year 10 at school a traineeship with Rio Tinto, nervous executives cautioned him against the move. The fear was it would open the floodgates for a mass of applications, and subsequent disappointment.

"I said, 'lets do the numbers'," Walsh recalled.

"As it turned out we were not opening the floodgates, the numbers were a manageable 1650; which to me was a seriously good response."

Today, 80 per cent of indigenous apprentices and trainees make it through the company's recruiting system, a system that teaches not only work but life skills, including personal finance advice.

There is no obligation on the recruits to stick with Rio, but the company is the nation's single biggest employer of indigenous labour.

"If they stay on and work for us, that is fantastic. If they do not, then at least they have had a good education and a good background in business behind them," Walsh says.

Walsh is committed to open and direct engagement with traditional owners, whether they are in the Pilbara, Canada or Africa. More importantly, he does not see such engagement as a cost, but as an important advantage when it comes to maintaining Rio's position as the world's most efficient producer of resources - especially iron ore.

"We are not doing it to point-score and I am not doing it because of the competition. I am doing it because it makes good business sense and it is the right and proper thing to do," Walsh told Fairfax Media during a recent exclusive interview shortly before he was elevated to the position of chief executive of Rio.

"But we are not the Salvation Army ... there has to be a business case for everything we do," he adds.

As head of Rio's iron ore operations - accounting for 80 per cent of the company's annual earnings - Walsh pushed the multinational into more meaningful engagement with local communities, striking agreements with five Pilbara traditional owner groups.

Now that he has ascended to the chief executive's office, the company will push ahead with Walsh's grand plans.

"I had a vision of us engaging with local communities - a target of 650 Aboriginal employees and $1.5 billion in contracts with Aboriginal businesses - and we have since made seriously good progress on both fronts."

Walsh's 50-year vision for the Pilbara factors in further indigenous participation. "Rio is the lowest-cost producer, we are a proximate supplier to China, which is where the growth has been occurring, and beyond China there is India and south-east Asia."

Despite hefty fluctuations in iron ore prices, Walsh does not see any "bust" looming.

"Rio is continuing to expand operations in the Pilbara. We will move from 290 million tonnes next year to 360 in 2015. I am sure there will be expansion beyond that."

Philosophically, Walsh follows closely in the footsteps of the legendary Leon Davis, who 15 years ago steered the company (then known as CRA) out of the political quagmire of mining industry belligerence over land rights, land use agreements and the payment of meaningful royalties. Davis opted for negotiation and compromise based on cultural respect.

In the recent ABC Boyer lecture series, Professor Marcia Langton, chair of indigenous studies at Melbourne University, spelt out for the first time the rapidly changing economic landscape for indigenous Australians.

Last year in the Pilbara, Rio and Fortescue Metals employed 1300 Aboriginal workers and awarded contracts worth $300 million to 52 indigenous companies, a far cry from the Lang Hancock era.

Walsh defends Langton and her research, which has been attacked by environmentalists and Greens, who allege a lack of research funding transparency. Walsh says her conclusions have led to profound cultural change within the company. "She is in touch with people on the ground and knows what works. We do not always get it right, there are hiccups from time to time."

Those hiccups include claims by Aboriginal contractors that some lower-ranking managers have resorted to old boys networks and racial intolerance to sideline them in the tender process. "Those reports disappoint me, but I am not surprised because we are a very big organisation and it is sometimes difficult to get the message to every individual, even when it comes to safety and care for the environment."

Today, Rio is striving to contain costs through highly sophisticated computerisation that includes driverless trucks and trains and security systems operated from Perth. Latest figures show it is spending $1.6 billion with indigenous contractors in the $23 billion expansion of iron ore production.

No other company comes close, with the exception of Andrew "Twiggy" Forrest's Fortescue Metals Group, which is locked in a long dispute with the Yindjibarndi people.

Walsh says there is nothing contradictory about the need to slash costs inflated by the rising price of materials while expanding indigenous involvement; great synergies exist between both objectives. "The truth is we are changing the nature of jobs, they are becoming more sophisticated, but we still need people to carry out maintenance and repairs."

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