Australian Inquiry Into Rio Tinto Caves Blast Urges Restitution, Transparency

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Australian Inquiry Into Rio Tinto Caves Blast Urges Restitution, Transparency

Protesters rally outside a Rio Tinto office in Perth, Australia, on June 9, after the destruction of historic indigenous sites.

Photo: Richard Wainwright/Associated Press

SYDNEY— Rio Tinto RIO -0.11% PLC should compensate an Australian indigenous group over the destruction of two ancient rock shelters, an inquiry has found, while calling for an end to the secrecy over how miners secure land access.

Australian lawmakers have been investigating the destruction of the caves at Juukan Gorge in the north west of the country on May 24, which cost Rio Tinto’s chief executive his job and damaged the mining industry’s reputation more broadly.

On Wednesday, lawmakers recommended Rio Tinto negotiate a restitution package with the traditional owners of the site, the Puutu Kunti Kurrama and Pinikura people, or PKKP. They also urged Rio Tinto and its western Australian peers to end the use of gag clauses in land-use agreements that have stopped Aboriginal groups from speaking out against mining operations.

The inquiry has the potential to reboot the relationship between indigenous communities and miners, which rank among Australia’s biggest companies.

Globally, many mining operations are on land traditionally owned by indigenous groups, including in South America, Africa and the Arctic Circle. While environmental, social and governance standards have become increasingly important for investors in recent years, much of the focus has been on tackling emissions or curbing environmental disasters after waste-dam collapses.

The Australian inquiry highlighted the power imbalance between the mining industry and indigenous groups. It found most agreements contained clauses that prevented traditional landowners from taking legal action or raising concerns to prevent the destruction of heritage sites.

“We hope the inquiry’s preliminary findings prompt a fundamental reset of the sector, particularly in the relationships between traditional owners and mining companies, and pave a way forward for more equal partnerships,” said PKKP Aboriginal Corporation spokesman Burchell Hayes.

While Rio Tinto and its largest peer, BHP Group Ltd. , have signaled an intention to no longer rely on gag clauses, uncertainty remains over exactly how companies will unwind such measures, the report said.

The inquiry also found serious failings of laws designed to protect indigenous heritage.

“The PKKP faced a perfect storm, with no support or protection from anywhere,” said Warren Entsch, chairman of the committee handling the inquiry.

Rio Tinto, the world’s second-largest miner by market value, said in September that Chief Executive Jean-Sébastien Jacques would leave after more than four years in the role, bowing to pressure from investors for its senior leaders to be held accountable. Two other executives, including Chris Salisbury, the head of its iron-ore division, also stood down.

The rock shelters in Australia’s minerals-rich Pilbara region, which supplies more than half the world’s iron ore traded by sea, contained a trove of artifacts that indicated they had been occupied by humans more than 46,000 years ago.

“There are less than a handful of known Aboriginal sites in Australia that are as old as this one,” Puutu Kunti Kurrama Land Committee chairman John Ashburton said earlier this year.

Rio Tinto, which didn’t break any laws when destroying the site, has apologized and acknowledged that its actions damaged trust between the company and the indigenous landowners.

“We are committed to learning from this event to ensure the destruction of heritage sites of such exceptional archaeological and cultural significance never occurs again,” Rio Tinto Chairman Simon Thompson said.

The inquiry has raised questions over how to calculate fair compensation. Meredith Edelman, a law lecturer at Australia’s Monash University, suggested Rio Tinto could offer the PKKP an equity stake in the company, and in doing so, give the group influence to direct it on important cultural issues.

Rio Tinto had previously cut bonuses for Mr. Jacques, Mr. Salisbury and Simone Niven, head of corporate relations, but stakeholders demanded further action.

“Losing their bonuses were insufficient and irrelevant in the context of the destruction of irreplaceable heritage sites, the value of which is impossible to calculate,” Tal Lomnitzer, senior natural resources portfolio manager at Janus Henderson Investors, said in September.

Poor communication between Mr. Jacques and his team was part of a catalog of failings presented to the inquiry. Mr. Jacques told the inquiry he didn’t become aware of the site’s cultural significance until the evening of May 24, the day that the caves were blown up.

Preservation issues create frustrations for miners and landowners alike. Addressing heritage concerns can be complex for mining companies that plan massive projects over vast areas dotted with sites of varying cultural significance. Indigenous groups, meanwhile, complain that inflexible regulations don’t allow for new archaeological information to be considered once heritage consents have been granted.

“We have developed our mining plans to protect and avoid these places,” but sometimes “there are no easy answers,” said Elizabeth Gaines, the chief executive of Australian iron-ore company Fortescue Metals Group Ltd.

The committee said it has decided to continue its inquiry, citing the large volume of evidence it continued to receive and constraints imposed by the coronavirus pandemic.

Among other recommendations made Wednesday, the committee said Rio Tinto should rebuild the rock shelters at Juukan Gorge and commit to a permanent moratorium on mining in the area that would also protect it from other miners.

Rio Tinto said it was already working with the landowners on a rehabilitation program and was assessing ways to protect the area.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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