Rio Tinto and Glencore in Early Talks for Record-Breaking Merger
Two of the world’s largest mining companies, Rio Tinto and Glencore, are reportedly in early-stage discussions about a potential merger valued at an estimated £130 billion. If successful, the deal would create the world’s largest mining company, surpassing current leader BHP, which is valued at approximately $126 billion (£103 billion).
The merger would combine Rio Tinto, valued at $103 billion, and Glencore, worth $55 billion, into a mining powerhouse with an expected market capitalization of $158 billion. Both companies declined to comment on the speculation.
The proposed merger is seen as a move to capitalize on the growing demand for commodities critical to the global net-zero transition, including copper for electrical conduction and lithium for batteries. Developing new mines to extract these materials is costly and requires significant financial resources, which a combined entity could better achieve.
Rio Tinto’s recent strategic moves include initiating underground copper production at the Oyu Tolgoi mine in Mongolia, projected to produce 500,000 tonnes of copper annually between 2028 and 2036. A merger with Glencore would also give Rio Tinto access to Glencore’s 44% share in the Collahuasi mine in Chile, one of the world’s largest copper reserves.
The deal could help Rio Tinto diversify its operations and reduce its dependency on iron ore, a sector vulnerable to economic shifts in China. The prolonged property crisis in China and potential challenges from Donald Trump’s presidency are expected to impact the country’s economy, adding urgency to Rio Tinto’s diversification efforts.
The merger would require the support of key stakeholders, including Ivan Glasenberg, Glencore’s former CEO, who holds a 10% stake in the company. Glasenberg previously led an unsuccessful attempt to merge with Rio Tinto in 2014. Other significant shareholders include Qatar’s sovereign wealth fund, which owns an 8.5% stake in Glencore, and Chinalco, China’s state-owned aluminum company, the largest investor in Rio Tinto.
Glencore’s recent performance, affected by depressed copper and coal prices, adds complexity to the negotiations. However, analysts remain optimistic about the long-term outlook for copper, driven by its essential role in electric vehicles and renewable energy infrastructure. The potential deal follows a similar attempt by BHP to acquire Anglo American for £38 billion, which fell apart due to disagreements over regulatory risks and Anglo’s South African operations.
A successful merger could have implications for the London Stock Exchange (LSE), as both companies are principally listed there. The LSE has faced challenges recently, with 88 companies delisting or moving to rival exchanges in 2024, marking its largest exodus since the financial crisis.
If completed, the merger would represent the largest deal in the mining industry’s history and solidify the combined company’s position as a leader in the global commodities market.
