Should Rio Tinto be a sole ASX listing?

Rio Tinto is facing increasing pressure to simplify its corporate structure by unifying under a single ASX listing.

One of the key arguments for unification is the potential for a “considerable increase in valuation” and “significant corporate governance improvements”, as outlined by Palliser Capital.

Currently, Rio’s London-listed shares trade at an 18 per cent discount to its ASX shares due to differences in tax treatment on dividends. By unifying under a single structure, Rio could eliminate this gap.

BHP’s decision to simplify its corporate structure to one legal structure and a single share register in January 2022 was strongly supported by its shareholders at the time.

It ended a two-decade arrangement and saw the company become the largest company on the ASX until late last year. The company currently sits in second place.

The one-off $715 million cost to make the change could be a potential hurdle for Rio Tinto, but Palliser released a report commissioned from Grant Thornton that believes unification would offset this.

“77 per cent of Rio Tinto’s issued share capital in the form of Rio Tinto Plc shares being exchanged for Rio Tinto Limited shares, should not adversely impact trading in Ltd share price in the long term,” the report said.

“Their analysis of the shareholder registers suggests significant overlapping ownership between the shareholders of Ltd and Plc with the shareholders of recently unified DLCs – indicating potential for broad-based support for Rio Tinto’s unification.”

The report also highlighted “the significant strategic flexibility that unification would bring to Rio Tinto – particularly at a time of rising capital intensity for new mine development and increasing consolidation in the industry”.

The company recently finalised its $US6.7 billion ($10.5 billion) acquisition of Arcadium Lithium, positioning the company as a leading lithium supplier.

Following approval from the Royal Court of Jersey, Rio Tinto is now the parent company of Arcadium, which will be renamed to Rio Tinto Lithium.

Rio Tinto Lithium’s key development asset is the Rincon project, located in the heart of the ‘lithium triangle’ in Argentina, which has the potential to produce 60,000 tonnes of battery grade lithium carbonate per year.

It could be a prime time to invest in Rio Tinto before a potential change is made, with shareholders to benefit from an optimised structure and the potential for long-term value.

Moving to a sole ASX listing would simplify operations, unlock trapped value and position Rio Tinto for a stronger future.