Twenty years after Rio Tinto’s disastrous $44bn takeover of Alcan, the miner is pursuing another deal that would set records: a $260bn megamerger with rival Glencore.
The revival of talks to create the world’s largest mining group — which is already being dubbed “GlenTinto” — a year after a previous attempt faltered comes despite Rio’s new boss, Simon Trott, signalling that he wanted to make the London-headquartered miner more productive.
Behind the scenes, he was rekindling talks with Glencore as majors worldwide race to secure copper assets in a new era of dealmaking where bigger is seen as better.
The discussions, revealed by the FT, are at a “preliminary” stage, the companies confirmed on Thursday. They could result in parts of the companies merging, but they could also result in an all-share merger between Rio Tinto and Glencore. A merged entity would have a combined enterprise value of $260bn, according to data from Refinitiv before Thursday’s news, with Rio the larger of the two.
Since previous deal talks between the two collapsed last year, “everything has changed, and nothing’s changed”, said Tony White, from MKI Global Partners. The businesses are the same, but Trott now leads Rio, and the sector is digesting the copper megadeal forged last year between Anglo American and Teck Resources.
“Everybody has got to think about what Anglo Teck means for them,” and might now be more willing to be “flexible and not hunt the perfect deal”, said White.
Analysts and investors agree that a potential Rio Glencore tie-up would centre on copper, which has reached a record of more than $13,000 per tonne this month driven by concerns about looming shortages. The metal is key to the transition to net zero and is a vital component of electric vehicles.
“We think the mining sector would benefit from greater consolidation,” said Ben Shrewsbury, a manager at Aberdeen Investments, a shareholder in Rio Tinto. “The industry is becoming structurally more capital-intensive and complex. Bigger balance sheets and broader, more diversified asset bases matter far more than they did a decade ago in terms of funding growth and absorbing risk.”
Meanwhile, Australian mining company BHP — which recently twice failed to take over Anglo American — is a potential interloper that could upend a deal.
“This was probably the worst possible news that [BHP CEO] Mike Henry could imagine this morning,” said RBC analyst Ben Davis.
With details still thin on the ground, slides in Rio’s Australian and London-listed shares point to an initial nervousness about the potential deal.
John Ayoub, portfolio manager at Wilson Asset Management, which holds shares in Rio Tinto in both London and Sydney, stressed that the major must not overpay for Glencore.
“We can understand the strategic rationale but we have the best company in the world [Rio] and we’re not giving that away,” he said. The tie-up was “sensible at the right price” and this was Trott’s “first opportunity to show he’s disciplined”, he added.
Key to the deal will be whether it is a straight merger or if the companies will take steps to split out Glencore’s coal and trading businesses.
Glencore, the world’s sixth-largest copper producer, is also the largest listed coal producer, while Rio left the coal business years ago. The question for Rio shareholders now is whether they will accept paying up for Glencore’s coal and trading businesses in order to get its copper.
Those are segments that “no one has really shown a desire to have,” said RBC’s Davis. “If this was a straightforward merger it would be a lot easier for people to get their heads around.”
Rio has placed an emphasis on the commodities of the future, from battery metal lithium to copper, and its operations are focused in OECD countries. As well as Glencore’s large coal and iron ore businesses, it operates in some higher-risk jurisdictions including the Democratic Republic of Congo.
One top 20 Glencore shareholder said the two businesses “are perceived, rightly or wrongly, as being quite culturally different”.
Andy Forster, senior investment manager at Rio shareholder Argo Investments, said Glencore had some “decent assets” but he was “not sure the fit is that compelling” given the trading group’s sprawling array of businesses including coal.
Analysts said Rio could acquire everything and later sell the segments it does not want, rather than impose complex rules about what it is prepared to take on to get a deal done. A similar set of demands by BHP on Anglo American was one reason its attempted takeover in 2024 fell apart.
Another option would be for Glencore to split, analysts said, with Rio taking over its copper, lithium and aluminium arms and the remainder of the group to be privatised or spun out and run by existing Glencore management.
Ultimately, for Rio shareholders, “it’s going to come down to how much are you paying for the bits that you want?” said White.
There is consensus that Glencore’s copper assets would be a prize for Rio, which has more challenging longer-term growth prospects for the critical industrial metal — including the huge proposed Resolution mine that has been stuck in the US court system for years.
Rio shareholders would be “all too aware” of the need to find copper growth, and that its existing pipeline was challenging compared to “Glencore’s copper Everest,” said Davis. If Rio wants to grow its copper business, acquiring Glencore is “by far the easiest way to do it”, he said.
George Cheveley, portfolio manager at Ninety One, a Glencore shareholder, said Rio’s owners should view the merger as positive in the long term since “it does solve a major strategic problem” for them in copper.
A final wild card is whether an interloper might derail talks. Just before the Canadian government cleared Anglo Teck, BHP made a brief final approach for Anglo in November before walking away a second time.
Analysts agreed that BHP would be paying close attention to the Rio Glencore talks and considering its options. These could include bidding for Glencore or even biding its time and eventually trying to buy Anglo Teck after that deal closes.
But they said there were few other obvious interlopers: US copper major Freeport-McMoRan has signalled little interest in dealmaking and is tied up with a disaster at its huge Indonesian copper complex.
Cheveley said the revival of “GlenTinto” talks amid heightened awareness of the need for copper meant that a deal was likely. “I think the fact that they’re talking again suggests it should be likely . . . It would be surprising if they don’t manage to do a deal,” he said.
Jon Christian Evensen, at Glencore shareholder Eucalyptus Resources, said the deal would benefit both companies. “Hopefully ego and soft issues don’t get in the way this time,” he added, referring to the previous collapse.
Glencore has made “many moves over the past couple of years flagging they’re willing sellers,” said Davis. The Rio shareholders, he added, “will be the ones who need a bit more convincing”.