Both companies are reportedly in talks to merge their businesses. Collahuasi, Lomas Bayas, and Escondida are among their assets in Chile.
By Patricia Marchetti
A potential merger between Rio Tinto and Glencore could not only result in the largest deal in mining history but also create a “multi-metal giant” even bigger than BHP (valued at $126 billion) and dethrone Codelco as the world’s largest copper producer.
Top executives of both miners were reportedly engaged in negotiations for several months during 2024, according to Bloomberg, although these talks are currently on hold.
Nonetheless, these discussions reflect the sector’s appetite for deals to secure the production of strategic minerals. “These talks, along with BHP’s bid for Anglo American in 2024, mark a turning point in mining mergers and acquisitions.
After a decade of caution due to poor operational outcomes, some companies now have strong solvency and liquidity levels to pursue such deals,” commented Álvaro Merino, Executive Director of Núcleo Minero. Rio Tinto, the world’s second-largest miner with a market value of $103 billion, is a leading iron ore producer. It also mines silver, molybdenum, gold, other metals, and lithium following its acquisition of Arcadium. The Swiss-based Glencore, valued at $55 billion, produces coal, cobalt, zinc, lead, nickel, gold, silver, ferrochrome, and oil.
Chilean Assets
Both companies produce copper. Glencore is the third-largest producer after Codelco and Freeport, while Rio ranks eighth. According to data from Plusmining, in 2023, their copper output reached 1,010,000 and 521,000 metric tons of refined copper, respectively. That same year, Chile’s state-owned Codelco produced 1,424,000 metric tons.
Analysts consider the most likely scenario to be Rio absorbing Glencore, which would give it access to Glencore’s Chilean assets: the Alto Norte smelter, its 44% stake in Collahuasi, and its 100% ownership of the Lomas Bayas operation assets that account for 35% of Glencore’s copper output.
Rio already holds a 30% stake in Escondida, which represents 56% of its global red metal production. Gustavo Lagos, a mining expert and academic at the Pontifical Catholic University of Chile, stated, “With such a merger, Rio Tinto would become a major player in Chile, which would be positive as both companies are very interesting. Additionally, Rio has significant expertise in smelting, which would bring positive changes to the local market.” “This would be a multi-metal merger and should not be viewed solely from the copper perspective. Obviously, for Codelco, it would not be a positive development as it would lose its position as the leading producer. However, from other perspectives, it could be a beneficial change for the country’s copper industry,” he added.
Regarding the potential impact on Chile, Juan Carlos Guajardo, Director of Plusmining, agreed that “larger companies create synergies, which lead to greater capabilities and potential improvements in competitiveness. Increased production weight also translates into greater influence compared to other market players. All factors must be carefully weighed.”
However, he pointed out that deals of this scale are “highly complex” and that “cultural differences between companies could undermine the expected advantages of mergers and acquisitions. Thus, they must be studied and implemented with extreme caution.”
In this regard, Merino added that “Rio divested its coal mines, while Glencore is a major player in the coal market. Therefore, a potential merger would require a thorough restructuring.” He noted that Rio’s corporate culture is more conservative, whereas Glencore’s is more audacious. Another challenge would involve meeting the United Kingdom’s acquisition regulations and antitrust scrutiny.
In 2014, Rio rejected a bid from Glencore to merge their businesses. Last year, BHP attempted to acquire Anglo American for $49 billion, which appears to have reignited interest in Rio considering a merger with the Swiss company.
Source: Diario Financiero