Rio Tinto Group’s logo atop the Central Park Tower, which serves as the company’s offices, in Perth, Australia, Friday, January 17, 2025.
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The mining industry looks set for a wild year of trading following speculation about a potential tie-up between industry giants Rio Tinto and Glencore.
This follows Bloomberg News report Anglo-Australian multinationals Rio Tinto and Switzerland’s Glencore were in early merger talks on Thursday, but it was unclear whether discussions were still ongoing.
In addition, Reuters report Glencore approached Rio Tinto late last year about the possibility of merging its businesses, a person familiar with the matter said on Friday. The talks were said to be brief but are no longer believed to be active, the news agency reported.
Rio Tinto and Glencore declined to comment when contacted by CNBC.
The expected merger between Rio Tinto, the world’s second-largest miner, and Glencore, one of the world’s largest coal companies, would be the mining industry’s biggest ever deal.
The combined market value of the two companies would be approximately $150 billion, eclipsing the long-time industry leader BHP Billitonworth approximately US$127 billion.
Analysts have generally expressed skepticism about the merits of a merger between Rio Tinto and Glencore, pointing out that synergies are limited and Rio Tinto’s complex binary structure Differences in strategy between coal and corporate culture are factors that pose a challenge to reaching an agreement.
“I think everyone is a little bit surprised,” Oddo BHF equity analyst Maxime Kogge told CNBC by phone.
“Honestly, their overlapping assets are limited. Only in copper do there are some synergies and opportunities to add assets to form a larger group,” Koger said.
Global mining giants have been considering the benefits of mega-mergers to strengthen their positions in the mining industry energy transitionespecially the demand for metals such as copper expected to surge in the coming years.
Copper is a highly conductive metal that is expected to face shortages as it is used to power applications such as electric vehicles, wind turbines, solar panels and energy storage systems.
Oddo BHF’s Kogge said it was “very tricky” for major miners to bring new projects online at the moment, citing Rio Tinto’s long delays and controversial The Resolution Copper Mine in the United States is one example.
“It’s a very promising copper project, it’s probably one of the largest copper projects in the world, but it’s fraught with problems, and acquiring another company in some way is one way to really accelerate the expansion of the copper business,” said Co. Ge said.
“For me, trading is not that attractive,” he added. “It goes against what all these groups have tried to do before.”
Last year, BHP spent $49 billion to acquire smaller rivals Anglo Americana proposal ultimately failed Due to transaction structure issues.
Some analysts, including JPMorgan Chase & Co., expect Anglo American to make another unsolicited takeover bid in 2025.
Mergers and Acquisitions Parlor Game
Analysts led by JPMorgan’s Dominic O’Kane said the bank was “highly confident that 2025 will be defined by mergers and acquisitions (M&A)”, particularly among UK-listed miners and global copper companies. , this view has become a reality just two weeks after its launch in 2025.
The Wall Street bank said its analysis of the mining industry found that the current economic and risk management environment means mergers and acquisitions may be favored over building organic projects.
Analysts at JPMorgan predict the latest speculation will soon bring Anglo American back into the spotlight, “particularly the merits and likelihood of another merger proposal from BHP Billiton.”
Before acquiring Anglo American, BHP Billiton completely Acquisition of OZ Minerals in 2023 to strengthen its copper and nickel product portfolio.
The company’s logo adorns the side of BHP Billiton’s global headquarters in Melbourne on February 21, 2023. % – which reached $6.46 billion in the six months ended December 31.
William West | AFP | Getty Images
Analysts led by RBC Capital Markets’ Ben Davis said it was unclear whether talks between Rio Tinto and Glencore would leading to a simple merger, or the need to separate parts of both companies.
Regardless, they say the M&A game that has emerged following merger talks between BHP Billiton and Anglo American will undoubtedly “restart in earnest”.
“Although Glencore approached Rio Tinto’s major shareholder Chinalco in July 2014 about a potential merger, this is still a surprise,” analysts at RBC Capital Markets said in a research note released on Thursday. “
Analysts said BHP’s move to acquire Anglo American may have spurred talks between Rio Tinto, which may seek to acquire more of its copper business, and Glencore, which seeks an exit strategy for its major shareholder.
They added: “We do not expect an outright merger to occur as we believe Rio Tinto shareholders would view a merger as beneficial to Glencore, but there is the potential for a deal structure that would satisfy both shareholders and management.”
Copper, coal and culture
Analysts at CreditSights, led by Wen Li, said speculation about a merger between Rio Tinto and Glencore raised questions about strategic adjustments and corporate culture.
CreditSights analysts said in a research note released on Friday: “Strategically, Rio Tinto may be interested in Glencore’s copper assets, consistent with its focus on sustainable, future-proof metals. In addition, Glencore’s marketing operations could provide synergies and expand Rio Tinto’s reach.
They added: “However, Rio Tinto’s lack of interest in coal assets due to recent divestments suggests that any merger would need to be carefully designed to avoid unnecessary overlap of assets.”
On October 16, 2024, a mining truck was loaded with coal at the Tweifontein Coal Mine operated by Glencore Plc in Mpumalanga Province, South Africa.
By Anders Pettersson | Getty Images News | Getty Images
Analysts at CreditSights said that from a cultural perspective, Rio Tinto is known for its conservative approach and focus on stability, while Glencore has a reputation for “constantly pushing the envelope of its business”.
“This cultural difference could create integration and decision-making challenges if the merger were to go ahead,” analysts at CreditSights said.
They added: “If this materializes, it could have wider implications for large deals in the metals (and) mining sector, potentially bringing BHP/Anglo American back into play.”
—CNBC’s Ganesh Rao contributed to this report.
