Rio Tinto's annual share buyback battle

Company News

by Glenn Dyer

For yet another annual meeting, Rio Tinto’s biggest investor - Chinalco of China voted against a resolution at the miner’s London arm’s annual meeting on Thursday that gave the company approval to run share buybacks.

Each AGM the London listed (so-called plc) side of Rio asks shareholders for approval to buyback its shares - it is approved but not without the continuing opposition from Chinalco because its shareholding of 14.59% is close to the 14.99% level agreed to with the Australian government.

Chinalco opened talks with the Australian government back in 2019 - before the Pandemic - about resolving limits on its shareholding, but that went nowhere.

The limit was put in place in early 2009 as Rio Tinto was battered by the fallout of the badly timed and over priced takeover of Canadian aluminium group, Alcan.

Chinalco (and the then Chinese government) saw an opportunity to get a foothold on a major global commodity group and the company invested $US19.5 billion in Rio and to stabilise the company’s market position and end uncertainty.

That deal helped end an all paper takeover bid from BHP Billiton (as BHP was then called) that was valued at $US127 billion.

Rio Tinto has said since 2019 that Chinalco’s opposition will not stop the company from doing buybacks.

At Thursday’s annual meeting, Rio said it noted that the resolution (Number 25) giving the company the authority to purchase Rio Tinto plc shares "was passed with less than 80% of votes in favour (the vote in favour was 79.59%).

"Shining Prospect (a subsidiary of the Aluminium Corporation of China “Chinalco”) voted against Resolution 25. Chinalco has not sold any of its shares in Rio Tinto plc and now has a holding of over 14% given its non-participation in the Company’s significant share buyback programmes.

"This places Chinalco close to the 14.99% holding threshold agreed with the Australian Government at the time of its original investment in Rio Tinto,“ Rio stated.

The Rio Tinto Ltd (the Australian company) holds its AGM in Brisbane next month.

The issue wasn’t mentioned in the speeches to the London meeting by the chair, Dominic Barton and CEO of Rio, Jakob Stausholm. 

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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