In a robust defense of its corporate structure, Rio Tinto, the world’s largest iron ore miner, has reaffirmed its commitment to maintaining its dual listing model despite calls for change from activist investors. On March 19, 2025, the company announced that it had conducted a thorough review of its dual-listed company (DLC) framework and engaged with a variety of stakeholders, including Palliser Capital, an activist hedge fund that has gained traction among shareholders.
Rio Tinto’s board articulated its stance that unifying the dual listings in London and Sydney into a single Australian holding company would not only be unnecessary for strategic flexibility but also “value-destructive” for the company and its shareholders. "A unification of the dual-listed company structure is not needed to provide the group with strategic flexibility," a spokesperson for Rio Tinto stated, confirming the company’s position that the current model serves its operational needs well.
The upcoming annual shareholder meetings scheduled for April 3 in London and May 1 in Perth are critical moments for Rio Tinto as it navigates these pressures. During these forums, stakeholders will vote on a resolution initially proposed by Palliser, which argues that the dual listing has effectively cost shareholders billions in potential valuation and has resulted in the company's stock trading at a discount relative to its competitors.
Palliser Capital’s arguments have gained further legitimacy with the backing of Institutional Shareholder Services (ISS), a well-known proxy advisory firm. ISS has publicly recommended that shareholders back Palliser’s proposal, citing potential advantages such as reduced complexity in corporate governance and a minimization of conflict risks. According to the ISS report, "The unification seems to offer several benefits, such as reduced complexity and a lower risk of conflicts, strategic flexibility, and... closing the valuation discount for Plc shareholders." Such endorsements from influential advisory companies can significantly sway shareholder sentiments and voting outcomes, particularly on contentious issues.
Moreover, the support of another advisory firm, Glass Lewis, strengthens Palliser’s position, as both advisory firms are recommending that shareholders approve the review of Rio Tinto's dual-listed structure. These recommendations are significant as they often influence corporate elections and the direction of board governance in publicly traded companies.
However, not all shareholders agree with Palliser’s position. Many Australian investors express concerns that monetizing a dual listing might undermine their investment’s value. These differing perspectives highlight the broader complexities facing corporate governance in today’s dynamic market environment.
While battling these challenges, Rio Tinto is also attracting positive attention from financial analysts. J.P. Morgan has recently reinitiated coverage on Rio Tinto stock with an "overweight" rating and set a price target of 59.20 pounds—approximately a 20% upside from current levels. Analysts cite strong copper production prospects as a primary driver for their optimistic outlook, predicting that Rio Tinto’s attributable copper production could increase by 32% between 2024 and 2028, setting it apart from competitors such as Anglo American and BHP.
This anticipated rise in copper output is expected to bolster the company’s free cash flows and overall profitability, which is crucial, especially following its $6.7 billion acquisition of Arcadium Lithium. While the acquisition is projected to contribute modestly to the company’s EBITDA in the short term, analysts suggest that the shift towards lithium and related products aligns with broader industry trends toward sustainable energy solutions.
As the dual-listed status of Rio Tinto remains a focal point of contention among stakeholders, the forthcoming shareholder meetings will serve as a pivotal juncture. With activist investors like Palliser bolstering their positions through significant proposals, coupled with recommendations from influential advisory firms, the outcome may significantly influence Rio Tinto's corporate strategy and structure going forward. The stakes are high not only for the company and its shareholders but also for the broader mining industry as it grapples with the evolving landscape of corporate governance and shareholder relations.
