A Rio Tinto mine in Australia © Press Association Images
A Rio Tinto mine in Australia © Press Association Images

Rio Tinto's supplier payment terms should be referred to watchdog

Adam Leach is a freelance business journalist
13 April 2016

Mining major Rio Tinto’s move to double its payment period for suppliers to 90 days should be investigated by the competition watchdog, a politician has claimed.

Following the revelation that the embattled miner’s CEO Sam Walsh had written to suppliers to inform that the extension would be effective immediately and was being done to protect its cash flow, the company has come under increasing criticism for inflicting further stress on its already struggling supply base.

Weighing into the matter, Brendan Grylls, a state member for the Western Australian Nationals, has called on the prime minister to launch an Australian Competition and Consumer Commission (ACCC) investigation into the matter.

“I would be hoping Malcolm Turnbull would be asking the ACCC to take a very close look at it,” said Grylls.

In addition to the national enquiry, he is also considering a state level enquiry where suppliers will be able to give evidence anonymously to overcome fears of reprisal. “If you’re a supplier to a mining site, there are only a few big shows in town and you’re on a hiding to nothing if you complain about it,” said Grylls.

The decision by Rio Tinto, which extended terms from 30 days to 45 last year, applies to all contracts valued at AUS$4 million, while those valued below this figure will be extended to 60 days. In response to the criticism, the company has stated that it is working with its lenders to establish a supply chain financing programme to try and alleviate the pressure placed on its suppliers.

Fellow Australian mining major BHP Biliton has stated that it currently has no “immediate plans” to extend its payment terms beyond the current 60 days but that it will continue to look at ways to optimise its supply processes.

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