Once again, and for now at least, discussions between the pair have failed to gather steam.
The conversations took place at the end of 2024 and were, Fastmarkets understands, relatively short-lived.
It’s the second time in under two years that Glencore’s attempts at a deal with a diversified mining company have been made public. The last – its approach to buy Teck Resources – was firmly rebuffed by the Canadian company in April 2023.
A combination of Glencore and Rio Tinto would have created the mining industry’s largest company by far, eclipsing BHP, which currently holds that title with a market capitalization of $126 billion. Glencore is by far the smaller company by market cap, being valued at around $56 billion versus Rio Tinto’s roughly $99 billion valuation.
It was a bold move, to say the least; but fortune favors the brave, as the proverb goes.
The details of the discussions are unclear – both Rio Tinto and Glencore declined to comment. Valuations alone suggest Glencore would either have to significantly pay up for Rio Tinto or be the acquired, not the acquirer, which doesn’t really seem its style.
The approach also demonstrates the jostling among miners to be positioned in core minerals at a time when long-term demand prospects are strong and future supply outlooks are tight.
Mining companies are always on the lookout for deals, and talks between the majors are no exception. Last year, BHP tried but failed in a near-$40 billion bid to take over its UK rival Anglo American, while Glencore’s rejected approach to Teck led to many private conversations between miners about possible combinations within the sector.
The failed 2014 proposal to buy Rio Tinto was the brainchild of Ivan Glasenberg, Glencore’s former chief executive officer.
Although he has since retired from Glencore, Glasenberg is still the company’s majority shareholder and would have been consulted on the latest move, at the very least.
Assets
Current Glencore CEO Gary Nagle is clearly looking for growth, particularly in copper. The company’s proposed deal with Canada’s Teck Resources left it with the latter’s coal operations, but not the copper that it was eyeing.
For Rio Tinto, copper is a jewel within its portfolio. Oyu Tolgoi in Mongolia, Escondida in Chile, Kennecott in the US – the miner has stakes in or manages some of the world’s most lucrative and largest copper producing assets.
Data released this week shows that Rio Tinto’s 2024 mined copper production was 697,000 tonnes, up 13% from the prior year, while its refined production was 248,300 tonnes, significantly higher than in 2023 due to the rebuild of the Kennecott smelter and refinery.
Rio Tinto is also a major producer of iron ore, aluminium and now lithium, through its recent acquisition of Arcadium – all areas in which Glencore does not have a large industrial presence.
Glencore’s diversified metals and mining portfolio includes copper, cobalt, zinc, lead, nickel and ferro-alloys, along with coal. The Switzerland-based company has doubled-down on coal in recent years, buying up assets from its peers and creating a significant position in the industrial sector.
It’s an area that Rio Tinto exited back in 2018 and has no desire to return to.
Marketing, coal and culture
Then there’s marketing, which has always been core to Glencore’s activities. According to its website, the company markets over three times more copper than it produces, comprising its own products as well as material sourced from third parties.
The company’s marketing team is deemed to be among the best in the world. Its entrepreneurial approach, combined with deep, on the ground intelligence of markets, logistics, geopolitics and regulations is the envy of many – difficult to replicate at its mining peers and giving the company an edge. Marketing is also the part of Glencore’s business that investors and analysts have found difficult to value, a situation that formed a key part of the rationale for taking the company public in May 2011.
Given Glencore’s relative valuation to its peers, perhaps its marketing business is either still seriously misunderstood or deemed less important than the Swiss company would like to believe.
Or it could be that coal – which accounts for a sizeable portion of Glencore’s earnings at a time when it is working to achieve net-zero carbon emissions by 2050 – is too much of a sticking point for some investors to surmount.
While valuations and positions in markets matter, so too does culture.
Two companies couldn’t be more different, and while both companies have faced governance challenges, independent compliance monitors have only just finished a second review of Glencore as part of a deal with the US Department of Justice.
Miners – and their bankers – are always on the lookout for potential deals, and similar merger and acquisition conversations go under the radar all the time.
The fact that the Glencore-Rio Tinto discussions took place without resulting in a deal shouldn’t be a surprise – several similar conversations have probably already taken place between mining companies since, and there will likely be many more in 2025. Buckle up, the sector is in for a ride.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.
