Simon Trott’s appointment as CEO of Rio Tinto is signalling a vote of confidence in the company’s existing trajectory, with an openness to large-scale mergers and acquisitions (M&A), analysts said on Wednesday.

Trott, currently head of Rio Tinto’s iron-ore business, will step into the top job on August 25 replacing Jakob Stausholm after nearly five years at the helm.

Reacting to the announcement, analysts at CreditSights said that the internal appointment suggests that the board believes the company’s challenges can be addressed without bringing in an external leader to drive a strategic reset.

“The decision to appoint an internal candidate appears to be a safe choice, indicating that a major strategic shift is unlikely in the near term,” CreditSights analysts wrote in a note. “That said, we believe the choice of Trott does signal a somewhat increased willingness to pursue M&A compared to the previous leadership.”

Trott is expected to execute on the vision of chairperson Dominic Barton, whose aim is to streamline Rio’s structure and expand its exposure to future-facing commodities like copper and lithium.

CreditSights analysts note that Barton offered a more softened stance on M&A on a conference call on Tuesday, saying that while Rio remains open to potential deals, “the current focus is on strategic growth projects and increasing operational efficiency”.

"Simon is an outstanding leader with a deep understanding of mining and a track record of delivering operational excellence and creating value across our business. Simon and the board are aligned that Rio Tinto’s next phase is about unlocking significant value for shareholders from our portfolio, driven by operational performance, and cost and financial discipline,” said Barton.

Trott, for his part, emphasised continuity and discipline in his first public remarks. “The progress we have made over recent years gives us a foundation to build on with discipline and focus to deliver improved performance,” he said in the company’s statement.

Trott is credited with stabilising Rio’s iron-ore business during a period of cultural and operational upheaval, and has led efforts to reset relationships in the Pilbara following reputational damage from the Juukan Gorge incident in 2020. Under his leadership, iron-ore operations became a centre of innovation.

“Simon came into our iron-ore business at a time of significant challenges and has been instrumental in rebuilding culture, strengthening external relationships and setting us on a pathway for growth. Under his leadership, iron-ore has become a centre of innovation for the group, driving operational excellence, technology and operating model optimisation – levers Simon can now bring to Rio Tinto at scale,” stated Barton.

“The appointment is credit negative,” the CreditSights note said, “but less so than if the company had hired someone from outside, which could have indicated greater risk or a more significant strategic overhaul.”