Rio pays $125m over royalties dispute

Mining giant Rio Tinto has paid $125 million to a major Aboriginal group in the Pilbara and is likely to contribute more in future after underpaying royalties over many years.

The windfall payment has been made to The General Gumala Foundation, a charitable trust representing three traditional owner groups in the eastern Pilbara.

It comes more than three years after Rio admitted to some “discrepancies” in royalty payments under its Yandi land use agreement, which commenced in 1997.

It has since acknowledged there have been underpayments.

The $125 million contribution provides the first concrete indication of how large the underpayments have been.

It has previously been speculated the underpayments could be as much as $400 million.

The $125 million was paid in December 2022 but has not been announced by either party, despite Business News requesting updates during 2023 on their negotiations.

Instead it was disclosed in the Gumala foundation’s recently published annual report, which implied that further payments were expected.

“The (foundation) notes that the final amount remains unresolved,” it stated.

“Gumala is committed to resolving the matter and negotiating to modernise the Yandi Land Use Agreement.”

A Rio Tinto spokesperson confirmed today that $125 million was paid “to address a payment discrepancy” under the Yandi agreement.

"We are continuing to engage with our Traditional Owner partners in the Pilbara to both modernise our existing agreements and discuss new protocols for the co-design of future operations on their country," they added.

The negotiations with Rio have led to a spike in legal costs for two related entities – Gumala Aboriginal Corporation (GAC) and trustee company Gumala Investments.

GAC’s annual report shows it incurred legal costs of $1.06 million in the arbitration of the Rio Tinto dispute in the year to June 2023.

The payment to the Gumala Foundation occurred only after considerable agitation.

Writing in the 2022 annual report, Gumala Investments’ chairman Ian McPherson expressed frustration with the lack of progress.

“We still await Rio Tinto to approach the progress of the YLUA modernisation discussions with GAC seriously,” he wrote at the time.

Meanwhile, the foundation’s 2023 annual report highlighted the volatility in royalty payments under the Yandi agreement, which is based on the amount of ground disturbance at the Yandicoogina iron ore mine.

The foundation has been trying for more than six years to update the agreement because the current formula results in a large degree of volatility in royalty payments.

Rio paid a total of $22.4 million in FY23, down 31 per cent from the prior year.

On a quarterly basis, the payments ranged from nearly $8 million in the December quarter to less than $1 million in the June quarter.

The foundation distributes surplus funds to GAC, which uses it for the benefit of the Banjima, Yinhawangka and Nyiyaparli traditional owners.

Rio’s payment to the Gumala Foundation represents another step in the miner’s efforts to improve its standing with Aboriginal groups in the Pilbara, after it destroyed the Juukan Gorge rock shelters in 2020.

It is seeking to finalise a co-management agreement with the PKKP Aboriginal Corporation, which represents the Puutu Kunti Kurrama and Pinikura peoples, who are the traditional owners of the Juukan Gorge land.

Rio has made more tangible progress with other groups.

It finalised an updated land use agreement with Yindjibarndi Aboriginal Corporation last year, including a doubling in ‘rail tariffs’ paid to YAC and a tripling in commercial opportunities.

Another change that has never been formally announced but is arguably more significant was Rio’s decision to start paying royalties on production from three big mines – Tom Price, Marandoo and Brockman 2 – that pre-dated the Native Title Act.

The Eastern Guruma people, represented by Wintawari Guruma Aboriginal Corporation, had repeatedly asked Rio to make this change.

It finally occurred after the Juukan Gorge controversy.  

As a result of this policy change, royalty payments to the Eastern Guruma Charitable Trust No 2 more than doubled in FY22 to $58.1 million.