Mining giants Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) and Glencore (LSE:GLEN,OTC Pink:GLCNF) have been making headlines this week following news that they were previously in merger discussions.
In a January 18 article, Reuters said the companies reportedly had “brief” conversations late last year; however, a source told the news outlet that these talks ultimately led nowhere and are no longer active.
A source with direct knowledge of the situation told the news outlet Rio Tinto had questions about how much money it would have to spend, as well as about cultural compatibility with Glencore, which is a Swiss firm.
‘Glencore is a trader … and their operating assets are nothing but a captive source of material for them to trade against. The clash culture would be quite something … but any deal can be done at the right price,’ Abel Martins Alexandre, previously a Rio Tinto treasurer and a former managing director at Lloyds Bank, commented.
Speaking to CNBC, Maxime Kogge, equity analyst at Oddo BHF, said the companies “have limited overlapping assets.” In her view, copper is the only place where Rio Tinto and Glencore have synergies.
Both Rio Tinto and Glencore had not released any statements regarding the matter at the time of this writing.
Glencore previously offered to merge with Rio Tinto in 2014, but Rio Tinto rejected the idea.
A major transaction occurred between the two firms years later, with Glencore announcing plans to acquire Rio Tinto’s 82 percent interest in the Hail Creek coal mine and adjacent coal resources in 2018. The deal was for total cash consideration of US$1.7 billion, and included a 71.2 percent interest in the Valeria coal resource in Central Queensland.
Last year, both companies made significant partnerships with other notable mining companies.
This past December, Rio Tinto signed a term sheet with Sumitomo Metal Mining (TSE:5713) through which they will advance the Winu copper-gold project in Western Australia in a joint venture. In October, the company said it would acquire Arcadium Lithium (NYSE:ALTM,ASX:LTM) in a bid to meet growing demand for lithium in electric vehicle production.
Meanwhile, Glencore, closed its acquisition of a 77 percent interest in Elk Valley Resources from Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK)in July 2024.
Major mining sector deals in 2024
Last year, a mix of successful and failed mergers and acquisitions were made in the mining industry.
Among the biggest was BHP’s (ASX:BHP,LSE:BHP,NYSE:BHP) attempt to acquire Anglo American (LSE:AAL,OTCQX:AAUKF), which eventually ended in May with a rejection.
The six week pursuit reached a total of three offers, with Anglo saying that the deal did not meet its expectations.
In October, media outlets reported that BHP “has moved on” from Anglo. The mining giant later released a statement on the matter, explaining, ‘The UK Takeover Panel Executive has confirmed that the comments made will not be treated as a statement of intention not to make an offer in respect of Anglo American.’
BHP was successful in a separate transaction this past July, when it agreed to acquire 100 percent of Filo with Lundin Mining (TSX:LUN,OTC Pink:LUNMF). The US$6.7 billion transaction recently closed.
Toward the end of the year, Northern Star Resources (ASX:NST,OTC Pink:NESRF) entered into a binding scheme implementation deed to acquire De Grey Mining ( ASX:DEG,OTC Pink:DGMLF) and its Hemi gold project.
Under the deal, the total equity value for De Grey is approximately AU$5 billion on a fully diluted basis.
Implementation of the acquisition scheme is expected between April and May 2025.
Securities Disclosure: I, Gabrielle de la Cruz, hold no direct investment interest in any company mentioned in this article.
