By Rhiannon Hoyle and Adam Whittaker

First BHP Group ended its primary listing in London. Then Glencore said it is studying a move elsewhere. Now, Rio Tinto shareholders will decide whether to step up pressure on the mining giant to junk its decades-old dual listing in London and Sydney.

Thursday's vote in London at Rio Tinto's annual shareholder meeting will test support for a change that has been championed by Palliser Capital, an activist investor. Palliser argues the status quo drags on Rio Tinto's value by restricting the miner's ability to pursue stock-based deals and fully utilize its Australian tax credits, which the miner denies.

Palliser wants Rio Tinto to become a wholly Australian company with a primary listing on Australia's stock exchange. It is asking shareholders in London and Sydney to vote their holdings in favor of an independent review of the corporate structure. Rio Tinto's equity holders in Australia will get their say on May 1 at which point the vote outcome will become known.

Already the campaign is dividing shareholders and Palliser's resolution needs 75% to pass. Among those supporting Rio Tinto's position is Norges Bank Investment Management, the manager of Norway's sovereign-wealth fund, which owns around 2% of the miner's stock. California Public Employees' Retirement System, or Calpers, has a different view and is keen on a review.

A big uncertainty is whether Rio Tinto can resist a review should the resolution garner significant support--even if it fails to pass.

Barclays identifies key thresholds to watch. Support for a review from 20%-50% of shareholders would prompt Rio Tinto's board to engage more, but isn't likely to shift its opposition to another review after it did its own study a year ago, it says. More than that, however, and Rio Tinto might feel obliged to accede to Palliser's request.

Rio Tinto is made up of two companies: Rio Tinto PLC in the U.K. and Rio Tinto Ltd. in Australia. They are separate legal entities but share a common board and single management team. The London stock accounts for about 77% of shareholders, but the company today makes most of its money running mines in Australia.

Rio Tinto is valued at roughly $100 billion, and produces commodities ranging from copper and iron ore--which dominates its profits--to lesser-known critical minerals including tellurium, used to make solar panels. It recently became one of the world's top lithium producers through the $6.7 billion acquisition of Arcadium Lithium.

"All we are asking is for Rio to conduct a transparent review on unification and publicly disclose those findings so that shareholders can make an informed decision on the merits of unification," Palliser founder and Chief Investment Officer James Smith said.

Palliser's campaign is backed by shareholder advisors Glass Lewis and Institutional Shareholder Services, or ISS. Passive investors typically vote in line with proxy advisors' recommendations.

In a letter to shareholders last month, Rio Tinto Chairman Dominic Barton said the miner strongly disagrees with ISS's reasoning for its support of a review. That included a reliance on the precedent set by BHP that he said fails to recognize their differences.

"At the time of BHP's unification and associated petroleum division spin-off, only approximately 5% of its earnings were contributed by its PLC company," Barton said. "In contrast, almost all of Rio Tinto's non-Australian assets, including major growth projects, are held under its PLC company."

The Australian Council of Superannuation Investors, which represents several large pension funds, argues there is currently no compelling reason to vote for an independent review.

Key parts of the debate include which structure works better for so-called franking credits, a peculiarity of Australian investing, and whether unification would boost value for shareholders in London, where the stock trades at a persistent discount primarily because of those tax credits afforded to Australian investors.

"We acknowledge that the structure is not ideal but believe Rio Tinto is at an exciting strategic point and want to see the management team focused on operational delivery," said George Cheveley, a portfolio manager at Ninety One, which has a roughly $120 million stake in the miner.

Some investors even don't mind if Rio Tinto's structure limits its deal-making ability. Global miners have regained an appetite for mergers and acquisitions, but big deals often require big premiums--as BHP found when it unsuccessfully pursued a $50 billion bid for Anglo American last year.

"As shareholders, we like the DLC as it makes large-scale, scrip-based M&A--as per the recent [proposed] BHP and Anglo deal--harder to undertake," said Stephen Butel, a Sydney-based portfolio manager at Platypus Asset Management. It hasn't fixed on which way it will vote.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com and Adam Whittaker at adam.whittaker@wsj.com

(END) Dow Jones Newswires

April 01, 2025 23:03 ET (03:03 GMT)

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