Rio, FMG aim to boost local suppliers

Iron ore miners Rio Tinto and Fortescue Metals Group have announced initiatives designed to assist local suppliers, with Rio establishing a dedicated procurement team and FMG shortening payment terms.

Under Rio’s new local procurement program, the miner will seek to establish better links with Western Australian suppliers.

This will include a series of procurement workshops in the Pilbara and Perth, where information on the company’s forward procurement plans will be shared.

The new procurement team will also establish a web portal to provide improved visibility of upcoming contracts.

In addition, they will partner with existing suppliers to help identify local businesses that may be able to supply them, and help smaller firms build their internal capacity by linking them with business development specialists.

Rio’s Pilbara iron ore business has more than 1,200 WA suppliers, but iron ore chief executive Chris Salisbury said the company wanted to do more.

“Our new procurement program will make it easier for WA businesses to compete for contracts with Rio Tinto Iron Ore,” Mr Salisbury said in a statement.

“What we’re announcing today will grow over time, but I have a firm expectation that we will be able to assist more WA and Pilbara Aboriginal businesses obtain work with Rio Tinto straight away.”

Premier Mark McGowan congratulated Rio and sought to take some of the credit.

“It’s great to see companies following the McGowan government’s lead and working to create opportunities for local businesses to work on big projects,” Mr McGowan said.

“We’ve made it clear that Western Australians must get a fairer share of this work and Rio Tinto has recognised that. 

“I would encourage more companies to provide further opportunities for Western Australian businesses.”

Meanwhile, Fortescue announced yesterday that Pilbara small businesses and Aboriginal businesses nationally will be able to apply for 14-day payment terms under new guidelines aimed at improving operational cash flow for suppliers.

The company said traditional payment terms of 30 days or more have long been flagged as a key barrier to building sustainable businesses.

To be eligible to apply, small businesses must satisfy classification criteria, including fewer than 20 employees, annual turnover of less than $20 million per annum, as well as annual Fortescue spend under $10 million per annum.

Chief executive Nev Power said the new payment terms were the result of discussions initiated by Fortescue’s procurement and Aboriginal business development team on how to improve processes to ease the pressure on suppliers.

“Ensuring these businesses have the option to apply for favourable payment terms aligns with our broader community vision to build capacity and strengthen communities in the Pilbara,” he said.

Since 2011, 240 contracts and sub-contracts worth $1.85 billion have been awarded by Fortescue to 103 Aboriginal-owned businesses and joint ventures.

The Chamber of Minerals and Energy of Western Australia highlighted the contribution of mining companies.

It said a survey of 46 resources companies in 2015-16 showed that the industry’s spending contributed $32 billion to the WA economy, with $7.9 billion paid in wages and salaries and $19.8 billion paid in purchases of goods and services from just under 7,000 local businesses.