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The Rio Tinto Group logo atop the Central Park tower, which houses the company’s offices, in Perth, Australia, Friday, January 17, 2025.
Bloomberg | Bloomberg | fake images
The mining sector looks set for a frenetic year of negotiations, following market speculation about a possible alliance between industry giants. Rio Tinto and Glencore.
Coming after Bloomberg News reported On Thursday, British-Australian multinational Rio Tinto and Switzerland-based Glencore were in initial talks to merge, although it was unclear whether talks were still alive.
Separately, Reuters reported Glencore on Friday approached Rio Tinto late last year about the possibility of combining their businesses, citing a source familiar with the matter. The talks, which were said to be brief, were no longer thought to be active, the news agency reported.
Rio Tinto and Glencore declined to comment when contacted by CNBC.
A possible merger between Rio Tinto, the world’s second-largest miner, and Glencore, one of the world’s largest coal companies, would be considered the largest deal ever made by the mining industry.
Combined, the two companies would have a market value of approximately $150 billion, surpassing the long-time industry leader. BHPwhich is worth around 127 billion dollars.
Analysts were generally skeptical about the merits of a Rio Tinto-Glencore merger, pointing to limited synergies, the complex dual structure and strategic divergences on coal and corporate culture as factors that pose a challenge to closing a deal.
“I think everyone is a little surprised,” Maxime Kogge, an equity analyst at Oddo BHF, told CNBC by phone.
“Honestly, they have limited overlapping assets. It’s only copper where there are really some synergies and opportunities to add assets to form a larger group,” Kogge said.
Global mining giants have been reflecting on the benefits of mega-mergers to shore up their position in the energy transitionparticularly with the demand for metals such as copper. expected to fire over the next few years.
Copper, a highly conductive metal, is expected to face shortages due to its use to power electric vehicles, wind turbines, solar panels and energy storage systems, among other applications.
Oddo BHF’s Kogge said it is currently “really complicated” for large mining companies to get new projects online, citing the long-delayed and controversial The resolution copper mine in the United States is an example.
“It is a very promising copper project, it could be one of the largest in the world, but it is plagued with problems and in some ways acquiring another company is a way to really accelerate the expansion of copper,” Kogge said.
“For me, an agreement is not that attractive,” he added. “It goes against what all of these groups have tried to do before.”
Last year, BHP made a $49 billion bid for a smaller rival. Anglo-Americana proposal that finally failed due to problems with the structure of the agreement.
Some analysts, including those at JPMorgan, expect another unsolicited offer for Anglo American to materialize in 2025.
Mergers and acquisitions parlor games
Analysts led by JPMorgan’s Dominic O’Kane said the bank’s “high conviction view” that 2025 would be defined by mergers and acquisitions (M&A), particularly among UK-listed miners and global copper companies , was coming to fruition just two weeks after the start of the process. year.
The Wall Street bank said its own analysis of the mining sector found that the current economic and risk management environment meant that mergers and acquisitions were likely preferred to building organic projects.
JPMorgan analysts predicted that the latest speculation would soon return Anglo American to the spotlight, “specifically the merits and likelihood of another proposed BHP combination.”
Before joining Anglo American, BHP finished an acquisition of OZ Minerals in 2023, strengthening its copper and nickel portfolio.
The company logo adorns the side of BHP’s global headquarters in Melbourne on February 21, 2023. – The Australian multinational, a major producer of metallurgical coal, iron ore, nickel, copper and potash, said its net profit fell 32 percent year-on-year. year to 6.46 billion US dollars in the six months to December 31. (Photo by William WEST/AFP) (Photo by WILLIAM WEST/AFP via Getty Images)
William West | afp | fake images
Analysts led by Ben Davis of RBC Capital Markets said it is not yet clear whether talks between Rio Tinto and Glencore could result in a simple merger or require the splitting of certain parts of each company.
Regardless, they said the M&A parlor games that emerged following merger talks between BHP and Anglo American will no doubt “start again in earnest.”
“Although Glencore once approached Rio Tinto’s key shareholder Chinalco in July 2014 about a potential merger, it is still a surprise,” RBC Capital Markets analysts said in a research note published Thursday.
BHP’s decision to acquire Anglo American may have catalyzed talks between Rio Tinto and Glencore, analysts said, with the former potentially looking to gain more exposure to copper and the latter seeking an exit strategy for its large shareholders.
“We would not expect a direct merger to occur, as we believe Rio shareholders would see it as favoring Glencore, but (it is) possible that there is a deal structure that could keep both sets of shareholders and management happy,” they added.
Copper, coal and culture
Analysts led by Wen Li at CreditSights said speculation about a Rio Tinto-Glencore merger raises questions about strategic alignment and corporate culture.
“Strategically, Rio Tinto could be interested in Glencore’s copper assets, aligning with its focus on sustainable and forward-looking metals. Additionally, Glencore’s marketing business could offer synergies and expand Rio Tinto’s reach,” they said. CreditSights analysts in a research note published Friday. .
“However, Rio Tinto’s lack of interest in coal assets, due to recent divestments, suggests that any merger would need careful structuring to avoid overlaps of unwanted assets,” they added.
A mining truck transports a full load of coal at the Tweefontein coal mine operated by Glencore Plc on October 16, 2024 in Tweefontein, Mpumalanga province, South Africa.
Per-anders Pettersson | Getty Images News | fake images
From a cultural perspective, CreditSights analysts said Rio Tinto was known for its conservative approach and focus on stability, while Glencore had earned a reputation for “constantly pushing the boundaries in its operations.”
“This cultural divide could pose integration and decision-making challenges if a merger were to occur,” CreditSights analysts said.
“If this materialises, it could have wider implications for mega deals in the metals (and) mining sector, which could put BHP/Anglo American back in play,” they added.
— CNBC’s Ganesh Rao contributed to this report.
