Rio Tinto named Jakob Stausholm as its new CEO .

Photo: david gray/Reuters

SYDNEY—The destruction of two ancient rock shelters in Australia this year cost three Rio Tinto RIO -0.38% PLC executives their jobs. Now, the global miner has promoted another insider, Jakob Stausholm, to CEO as it battles to repair its reputation with investors, lawmakers and indigenous groups.

Among the decisions facing Mr. Stausholm when he steps up from the chief financial officer role on Jan. 1, is how to rebuild trust with the traditional owners of the Juukan Gorge caves that were destroyed by Rio Tinto on May 24 as part of an expansion of a big iron-ore mine in Western Australia.

Rio Tinto, the world’s second-largest listed mining company by market value, must decide whether it wants to join with Chinese companies in a big African iron-ore development that could make its existing mines in Australia less profitable should the project weaken global iron-ore prices. Mr. Stausholm, a Danish citizen, will also need to steer the challenging expansion of a copper mine in Mongolia.

Chief Executive Jean-Sébastien Jacques was ousted amid the fallout from the destruction of ancient rock shelters, which contained a trove of artifacts that indicated they had been occupied by humans more than 46,000 years ago. He will leave Rio Tinto at the end of March.

“I am…acutely aware of the need to restore trust with traditional owners and our other stakeholders, which I view as a key priority for the company,” Mr. Stausholm said in a statement.

A government inquiry report this month recommended Rio Tinto negotiate a restitution package with the traditional owners of the Juukan Gorge, the Puutu Kunti Kurrama and Pinikura people, or PKKP.

It also made recommendations for the mining sector of Western Australia state more broadly, reflecting how the fallout from that calamity is reverberating throughout the industry. Australian lawmakers handling the probe have called on miners to review agreements with traditional owners, stop using contracts that limit those groups’ ability to disagree publicly with decisions and to hold off on requesting new heritage consents until local laws are strengthened.

“As an investor, we are closely watching how Rio’s board and its senior leadership take action to improve governance and oversight and respond to the very substantial recommendations of the parliamentary inquiry,” Debby Blakey, chief executive of Hesta, an Australian pension fund, said following Mr. Stausholm’s appointment. “Investors have an expectation of significant and lasting change.”

Rio Tinto, whose headquarters is in London, had faced pressure from Australian lawmakers to appoint an Australian successor to Mr. Jacques, given the company generates the bulk of its profits in the country. Some analysts and investors had speculated that Rio Tinto would try to attract an executive from rival miners, while others had suggested the miner should look outside of the resources industry for its next leader.

Mr. Stausholm, who joined Rio Tinto in 2018, has shown he can build effective relationships and has a strong, personal commitment to sustainable development, Rio Tinto Chairman Simon Thompson said.

“His blend of strategic and commercial expertise, strong values and a collaborative leadership style are the ideal qualities for our next chief executive,” said Mr. Thompson.

RBC Capital Markets called the appointment a clear positive, saying that Mr. Stausholm’s firsthand knowledge of the company would help management navigate a difficult phase.

“We think his understanding of what’s come before and especially of what needs to happen following the last six months will help Rio to re-emerge,” it said.

Rio Tinto also highlighted Mr. Stausholm’s central role in strengthening the miner’s balance sheet and boosting returns to shareholders. Mr. Stausholm—a former finance chief at A.P. Moeller-Maersk A/S who also worked at Royal Dutch Shell PLC for two decades—will take the reins at Rio Tinto at a time when prices for iron ore are booming on roaring Chinese demand. Rio Tinto is one of the world’s biggest sellers of that commodity, alongside Brazil’s Vale SA .

Prices at a roughly eight-year high are expected to boost profits for the company, whose Australian iron-ore operations typically record margins of more than 60%.

“Rio Tinto’s purpose is to produce the materials essential to human progress and I remain deeply committed to this after the difficult times we have faced during 2020,” said Mr. Stausholm.

Write to Rhiannon Hoyle at [email protected]

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This post first appeared on wsj.com

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