Rio Tinto (ASX: RIO) is one of the world’s largest mining companies, with operations spanning iron ore, copper, and other key resources. It operates under a dual-listed company structure in London and Australia, allowing it to access both capital markets while maintaining a unified management.
Rio Tinto is facing mounting pressure from activist investor Palliser Capital to reconsider its long-standing dual-listing structure. The London-based hedge fund has reignited debate around the potential unification of Rio Tinto’s Australian and British listings, arguing that a single listing could unlock significant shareholder value and improve corporate governance transparency. This development has set the stage for a contentious shareholder vote and renewed scrutiny over the miner’s governance strategy and capital allocation.
The Case for Unification
Palliser Capital has proposed a non-binding resolution urging Rio Tinto to conduct a transparent, comprehensive, and independent review of its dual-listed company (DLC) structure. Currently, Rio Tinto operates through two separate legal entities: Rio Tinto plc, which is listed on the London Stock Exchange, and Rio Tinto Limited, which is listed on the Australian Securities Exchange. Despite being legally distinct, the two entities operate as a unified economic group with a single board and management team. This DLC arrangement, which dates to 1995, has faced periodic scrutiny due to its complexity and perceived inefficiencies.
The activist fund believes the existing structure may be suppressing shareholder value and complicating efforts to enhance corporate accountability. Palliser’s position is that the current model creates governance ambiguity and restricts Rio Tinto’s flexibility in capital management. Moreover, the hedge fund estimates that simplifying the structure could lead to a significant re-rating of the stock, bringing it closer in line with peers who operate under single listings. Palliser is not alone in these concerns, as other institutional investors have historically raised similar questions, although none have previously succeeded in pushing for structural change.
Rio Tinto’s Rebuttal
Despite these assertions, Rio Tinto’s board remains firmly opposed to the proposal. In a letter to shareholders, the company argued that the potential costs of unifying the two listings far outweigh the projected benefits. Rio cited legal complexities, potential tax consequences, and the risk of disadvantaging certain shareholder groups—especially in Australia—as key reasons for rejecting the motion. The board also highlighted that a unification could reduce the company’s flexibility to manage dividends, raise capital, and pursue growth projects in key markets.
The Australian company directors further emphasised that the DLC structure continues to serve its purpose effectively, enabling Rio Tinto to tap into both Australian and British capital markets while retaining a strong governance framework. The miner has previously conducted reviews of its structure and concluded that maintaining the status quo is in the best interest of shareholders. However, this latest campaign by Palliser has reinvigorated public and investor interest in the topic, especially as the broader mining sector faces growing demands for simplification and transparency.
What Palliser Wants
Palliser has requested that Rio Tinto commit to reporting back to investors by the end of 2025 on the findings of any review, ensuring that shareholders are given a clear picture of the board’s rationale. The fund is not calling for an immediate unification, but rather a fair and thorough evaluation of the current setup. The proposal will be presented at Rio Tinto’s upcoming annual general meetings in both Australia and the UK. The resolution is non-binding, meaning the board is not obligated to act even if it receives majority support, but the outcome could signal broader investor sentiment and potentially influence future strategic decisions.
A Company Under Pressure
This debate is occurring at a time when Rio Tinto is already facing pressure on multiple fronts, including concerns over its environmental record, Indigenous relations, and capital project management. The mining giant is attempting to recover from the reputational damage of the Juukan Gorge incident in 2020, where it destroyed ancient Aboriginal heritage sites in Western Australia. That controversy led to a major leadership overhaul and calls for deeper cultural change within the company.
Implications for the Industry
In this broader context, Palliser’s resolution adds another layer to the governance challenges Rio Tinto must navigate. While the company continues to post strong financial results due to robust demand for iron ore, copper, and other critical minerals, shareholder activism is clearly on the rise. The dual-listing debate could also have implications beyond Rio Tinto, potentially influencing how other multinational resource firms assess their own governance structures in the face of shifting investor expectations.
