Rio Tinto and Glencore Explore £130bn Merger to Capitalize on Net Zero Commodities Boom

Rio Tinto and Glencore

Prime Highlights:

Rio Tinto and Glencore are in early discussions about a potential £130bn merger, which would create the world’s largest mining company, surpassing BHP.

The merger would allow Rio Tinto to access Glencore’s 44% stake in the Collahuasi copper mine in Chile, bolstering its position in the copper sector amid rising demand for electric vehicles and renewable energy.

The deal is driven by the growing global demand for commodities like copper and lithium, essential for the transition to net-zero carbon emissions.

Key Background:

Two of the world’s largest mining companies, Rio Tinto and Glencore, are reportedly in the early stages of discussions regarding a potential £130 billion merger. If successful, the deal would create the largest mining entity globally, surpassing BHP, the current leader in the sector.

According to sources familiar with the matter, this transaction would combine Rio Tinto’s valuation of approximately $103 billion with Glencore’s $55 billion, resulting in a combined company worth an estimated $158 billion. Although both companies have declined to comment on the rumors, the merger could significantly reshape the mining industry.

Central to the negotiations is the support of key stakeholders, including Ivan Glasenberg, the former CEO of Glencore, who remains a significant shareholder with a 10% stake. Glasenberg had previously attempted to merge with Rio Tinto in 2014, but the deal was unsuccessful. The backing of large investors like Qatar, which holds an 8.5% share in Glencore, and China’s state-owned Chinalco, which is Rio Tinto’s largest investor, will also be crucial.

The motivation for the potential merger stems from the global push towards net-zero carbon emissions, which is expected to drive demand for key commodities such as copper and lithium. These materials are essential for renewable energy infrastructure and electric vehicles, and both Rio Tinto and Glencore are well-positioned to capitalize on this growing market. Rio Tinto’s investments, such as the underground copper production at its Oyu Tolgoi mine in Mongolia, further strengthen its strategy to dominate the copper sector.

A merger would also grant Rio Tinto access to Glencore’s significant stake in the Collahuasi copper mine in Chile, one of the world’s largest copper reserves. Additionally, the merger could provide Rio Tinto with the necessary diversification to reduce its reliance on iron ore, particularly as the Chinese economy faces challenges. Despite recent struggles in Glencore’s share price due to falling copper and coal prices, analysts expect long-term growth in copper prices due to the limited supply and surging demand driven by the transition to renewable energy.

This development follows BHP’s failed attempt to acquire Anglo American last year and signals continued consolidation within the mining industry, particularly as companies strive to meet the demands of the net-zero transition. However, the merger could raise concerns about the shrinking number of companies listed on the London Stock Exchange, which has seen a significant decline in listings over the past year.