Mining Mega-Deals: Rio Tinto and Glencore Engage in Exploratory Discussions
Background
A decade ago, Glencore Plc's merger proposal with Rio Tinto Group was promptly rejected. However, recent news that the two companies engaged in extensive negotiations last year reveals a significant shift in the industry landscape.
Rio's Change in Stance
In 2014, Rio's immediate dismissal of the potential deal, which would have been the largest in mining history, sparked a public feud that exposed significant cultural differences between the companies. This time, Rio was receptive to Glencore's overtures, signaling a change in attitude.
Extended Discussions
According to sources, exploratory talks between top executives began in the autumn and continued for several months. The discussions were highly confidential, involving Rio CEO Jakob Stausholm, Glencore CEO Gary Nagle, and Rio Chairman Dominic Barton.
Current Status
Although the discussions are currently inactive, it remains unclear whether they could be revived. Neither company has publicly commented on the matter. Sources indicate that Glencore sought a substantial premium, even as its share price declined.
Industry Drivers
The discussions stem from BHP Group's failed acquisition attempt of Anglo American Plc last year, which triggered a flurry of conversations among mining giants seeking to consolidate and secure access to energy transition metals like copper and lithium.
BHP's Role
BHP's move catalyzed the discussions between Rio and Glencore, highlighting the increasing pressure to bulk up and diversify amid a global shift towards decarbonization.
Rio's Evolution
Rio has overcome its reluctance towards large-scale deals, driven by Chairman Barton's insistence on a more open-minded approach.
Glencore's Transformation
Glencore has evolved into a more traditional mining company, moving away from its commodity trading roots. It has also signaled its willingness to separate its coal business, previously seen as an obstacle to a deal with rivals like Rio.
Potential for Spin-Off
The discussions included the potential spin-off of Glencore's coal unit, making the company a more attractive acquisition target.
Rio's Interest in Collahuasi
Rio has long coveted Collahuasi, the major copper mine in Chile in which Glencore holds a 44% stake.
Market Anticipation
The news of the discussions has heightened anticipation of a wave of mega-deals in the mining sector. Anglo American's share price rose significantly in response to the news.