Rio Tinto has fended off an activist investor’s bid to strong-arm the miner into commissioning a review of its dual-listing structure, with a shareholder vote ending a year-long campaign.
London-based hedge fund Palliser Capital had urged shareholders to back a probe into the merits of unifying the miner under a single listing in Australia by collapsing a structure it deemed “archaic”.
Dominic Barton, chairman of Rio Tinto Group, at the company’s annual meeting in Perth.Credit: Bloomberg
But 19.35 per cent of the miner’s shareholders threw their support behind the proposal to review – which had been staunchly opposed by its board – just shy of the 20 per cent required to trigger a requirement for further consultation under UK corporate governance rules.
The $160 billion global miner has had dual listings on the London and Australian stock exchanges for more than 30 years.
Palliser, which holds a $250 million stake in the miner, had claimed the structure had prevented Rio from acting on acquisitions and flagged concerns about tax breaks that had allowed the miner’s Australian shares to trade at an 18 per cent premium.
During the miner’s annual meeting in Perth on Thursday, Rio Tinto chair Dominic Barton insisted the board was “agnostic” about where Rio was listed, but opposed the move on the basis it would be “value destructive”, “duplicative”, “unnecessary” and would be a strain on company resources.
Barton said the miner had already assessed the plan with independent experts, rejecting assertions Rio had underperformed rival BHP since it consolidated its sharemarket listings in 2022 and claiming the miner had outperformed its peer by 7 per cent from a market capitalisation perspective.
The company’s board insisted the costs outweighed the benefits, pointing to an EY review that found taxes associated with the proposal could be “in the mid-single digit billions of dollars US”.
Palliser founder James Smith questioned the assumptions underpinning Rio’s assessment and told the meeting there was value in an independent review into the merits of collapsing the structure.
In a statement released a short time later, Smith accused the miner of spearheading a fierce campaign aimed at shielding its internal analysis from scrutiny and said the backing of trusted investors sent a strong message irrespective of the result.
“While they told shareholders a robust review would divert significant resources, they likely spent more time, money and effort opposing the resolution than complying with it,” Smith said.
“Notwithstanding the voting results, the board has been given a clear message from the most trusted voices in the investment community – ISS and Glass Lewis.
“They assessed the facts presented by Rio Tinto and Palliser with an independent lens and concluded that a reasonable board would not and should not resist an independent and transparent review on this critical matter.”
The miner used the meeting to spruik plans to inject more than $20 billion into its Pilbara operations within the next three years, with new mines, a plant and equipment earmarked for the region.
Rio Tinto chief Jakob Stausholm after the annual meeting in Perth.Credit: Trevor Collens
Barton said the company was also poring over plans for Rhodes Ridge, which the company intends to develop alongside Japanese trading house Mitsui and believes could one day house the nation’s largest iron ore mine — capable of producing more than 100 million tonnes a year.
The miner’s board were grilled by traditional owners from the Robe River Kuruma native title area about compensation and the area’s rapidly declining groundwater levels.
Rio Tinto has come under fire after extracting up to 7 gigalitres of water annually from the Bungaroo Valley to supply its mining operations — a figure well within the parameters of the miner’s licence but an amount more than double that deemed sustainable.
Chief executive Jakob Stausholm acknowledged the impact of mining and the drying climate on water reserves, and reiterated the Dampier desalination plant under construction would soon ease demand.
Barton expressed concerns about the impact of the federal government’s industrial relations laws, which have allowed a union push into WA’s mining heartland for the first time in decades.
But Stausholm was more measured in his comments.
“I think a lot of it is down to us as leaders — we need to engage directly with our workforce, and I’m sure our great people will come to the right conclusions,” he told the media in a post-meeting press conference.
Shareholders also probed the climate action plan endorsed at its meeting, including its long-term reliance on carbon credits to meet its emissions reduction targets.
Rio Tinto’s shares were down 1 per cent on Thursday to trade at $115.90.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.