According to media reports citing insiders, Rio Tinto and Glencore are discussing a business merger, which could result in the largest merger and acquisition (M&A) deal in the mining industry's history. Informed sources indicated that the two companies have recently conducted preliminary negotiations regarding the merger, but did not disclose further details. It is currently unclear whether the negotiations are still ongoing. Rio Tinto is the world's second-largest mining company, with a market capitalization of approximately 103 billion as of Thursday's London stock marketclose. Glencore, with a market capitalization of about55 billion, would, if merged with Rio Tinto, potentially surpass the current mining industry leader BHP Group, which has a market capitalization of approximately $126 billion.
In recent years, the mining industry has witnessed a wave of M&A activities, primarily driven by large producers seeking to expand their copper mining operations. Copper, a key metal for decarbonization, is widely used in various fields such as cables, electric vehicles, and construction. Despite the mining industry's positive outlook for copper's future development, industry giants prefer to increase market share through M&As rather than investing in new mines. The reasons for this include the increasing difficulty of finding high-quality mines, the dwindling funds of small exploration companies, rising resistance from society and environmental protection efforts, and soaring costs of labor, equipment, and raw materials.
Last year, BHP Group attempted to acquire Anglo American plc with a maximum bid of $49 billion but was rejected. Both Rio Tinto and Glencore possess some of the world's highest-quality copper mines. Glencore previously proposed a merger with Rio Tinto in 2014 but failed to succeed. Glencore has been active in M&A activities in the mining sector and attempted to acquire Teck Resources Ltd. in 2023, ultimately acquiring only its coal division. Acquiring Glencore would give Rio Tinto a stake in the Collahuasi copper mine in Chile, one of the world's most fertile copper mines, which Rio Tinto has long coveted.
However, there may be certain conflicts in the future strategic directions of the two companies. Rio Tinto exited the coal business several years ago, while Glencore is one of the world's largest thermal coal shippers and a major producer of coking coal. Under pressure to achieve carbon neutrality, Glencore announced a plan in November 2023 to divest its coal business by merging it with the coal business of Teck Resources after acquiring the latter's coal division. However, due to opposition from the majority of shareholders, Glencore announced in August last year that it was abandoning the coal divestiture plan.