An activist investor in resources giant Rio Tinto is urging the miner to give up its dual listing on the London and Australian stock exchanges, saying it has wiped out $78 billion in shareholder value.
London hedge fund Palliser Capital, which holds a stake worth around $250 million in Rio, challenged the metals and minerals producer to unify under a single listing in Australia, and follow rival BHP which consolidated its sharemarket listings in 2022.
Autonomous haul trucks travel along a road at Rio Tinto’s Gudai-Darri iron ore mine.Credit: Bloomberg
Rio Tinto shares would still trade in London under Palliser’s plans as part of a secondary listing, the firm said in a letter to Rio’s board, which called the dual structure “outdated” and an “unmitigated failure for shareholders” that requires “urgent unification”.
It estimates the miner has lost about $56 billion in book value because its dual listing hinders its ability to move on mergers and acquisitions. About $22 billion in value is being lost through franking credits, which has led to Rio’s Australian shares trading at a significant 18 per cent premium to its London shares.
“Every day that this archaic structure remains in place, shareholder losses continue to mount,” Palliser claims. Having just a single listing will add about $43 billion to Rio’s value, the hedge fund says.
A local fund manager, Blackwattle Investment Partners, is also demanding Rio to consolidate in Australia. Blackwattle wrote to Rio chairman Dominic Barton and chief executive Jakob Stausholm in May saying Rio’s structure is “antiquated” and inefficient.
Rio has resisted calls to unify, arguing that the availability of fully franked dividends in Australia justified its price on the ASX.
Stausholm told analysts at the company’s investment day in London that he would meet with Palliser to discuss the proposal, but said Rio had examined every aspect of unifying its structure with the help of advisors and decided its “fairly unique” arrangement preserved the value of the company.
Any unification would cost billions of dollars, he argued: “It just does not make any economic sense.”
Palliser disagrees, arguing that since BHP’s unification, its total shareholder returns have consistently outperformed Rio’s. “As was the case when BHP unified, we firmly believe that the share price of a unified Rio Tinto would trade up to, and ultimately surpass, the current price,” it said.
The fresh demands came as Stausholm flagged Rio’s iron ore production would remain between 323 and 338 million tonnes for 2025 and copper output from the Oyu Tolgoi mine in Mongolia would rise by more than 50 per cent next year. The company has a clear pathway to deliver greater returns through growth and decarbonisation, he said.
“As we ramp up the Oyu Tolgoi underground copper mine, deliver the Simandou high-grade iron ore project in Guinea, and build out our lithium business through the proposed acquisition of Arcadium, we are underwriting a decade of profitable growth,” Stausholm said.
Earlier this week, Rio sold a 30 per cent stake in its Winu copper-gold project in Australia to Japan’s Sumitomo Metal Mining for $US399 million ($620 million).
Sumitomo will pay $US195 million upfront and $US204 million in deferred payments contingent on development progress, Rio said in a statement. The miner added that the companies would explore additional partnerships across copper, other base metals and lithium.
“This is a unique opportunity to derisk our investment,” Rio’s chief executive of copper, Katie Jackson, said. “We look forward to working more broadly as strategic partners to find new ways to deliver value across the metals and minerals supply chain.”
The Winu copper-gold deposit in the remote Great Sandy Desert region of Western Australia was discovered by Rio in 2017 and is yet to be developed. A pre-feasibility study into building a mine will be released in 2025.
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