Rio Tinto Faces Investor Scrutiny Over Water Contamination Allegations

Rio Tinto Stock

Global mining titan Rio Tinto (NYSE:RIO), previously embroiled in controversy for the destruction of an ancient Indigenous site in Australia in 2020, now confronts fresh challenges from socially responsible investors and lenders regarding water practices at two of its mining sites.

A coalition representing UK pension funds, known as the Local Authority Pension Fund Forum (LAPFF), has voiced apprehensions about Rio Tinto’s water management at its Oyu Tolgoi copper mine in Mongolia and an ilmenite mine in Madagascar. This presents a thorny issue for CEO Jakob Stausholm, who was tasked with restoring the company’s social credibility following the detonation of an Aboriginal rock shelter at Juukan Gorge.

The scrutiny surrounding Rio Tinto’s environmental track record could complicate its endeavors to obtain government approvals for a lithium mine in Serbia and a large copper mine in Arizona, both projects long delayed due to local opposition.

LAPFF Chair Doug McMurdo cautioned that Rio Tinto’s water challenges in Madagascar and Mongolia, in addition to existing reputational risks from the Juukan Gorge incident, could significantly increase the threat of further reputational damage for the company.

McMurdo added that these challenges are highly financially significant, given the escalating instances of litigation worldwide related to water management and impending stringent regulations.

Rio Tinto affirmed its recognition of the crucial role of water for its host communities and pledged to drive effective water stewardship and heightened transparency for stakeholders.

LAPFF, representing members holding over GPB 350 billion ($445 billion) in UK pension funds, has been rallying support for a resolution urging Rio Tinto to conduct independent water impact assessments at its mining sites.

McMurdo stated that there is a growing perception that companies have engaged in greenwashing and need to be held accountable. He highlighted shareholder resolutions as an effective means to address concerns about water practices within the mining industry.

Rio Tinto received an “F” grade from environmental advisor CDP for failing to disclose water data to the group since 2016, mirroring similar fail ratings for non-disclosure among other major miners.

Tailings Seepage

LAPFF disseminated an investor briefing last year, highlighting concerns regarding water quality outside the mine lease at Oyu Tolgoi’s copper operations in Mongolia, questioning the watertightness of its tailings dam.

Civil society group Accountability Counsel, collaborating with Mongolian herders, reported instances of livestock becoming ill and perishing after the commencement of mine operations, which herders attribute to deteriorating water quality. These concerns, the group claimed, remained unaddressed by Rio Tinto.

Rio Tinto countered, asserting that Oyu Tolgoi has a stringent water monitoring program, with results consistently shared with stakeholders and public reports. The company stated it is undertaking corrective measures to address the seepage issue.

In Madagascar, local advocacy groups cited tailings dam failures at Rio’s QIT Madagascar Minerals (QMM) ilmenite mine in 2010, 2018, and 2022, exacerbating water quality issues, contributing to fish mortality, and inciting conflict in the Anosy region.

The Andrew Lees Trust advocated for independent audits to ensure transparency and accountability in resolving challenges at the QMM site and meeting international standards.

Critics questioned the comprehensiveness of Rio Tinto’s water audits at both locations and expressed concerns about the company’s practices in planned mines in Serbia and Arizona.

The pension fund group opted to postpone filing its proposed resolution until April 2025 following its engagement with Rio Tinto, which acknowledged the need for improvement at its Madagascar site. Rio Tinto acknowledged the necessity to address the raised concerns.

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