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Global resources business Glencore said it is open to value-adding mergers and acquisitions and while talks with Rio Tinto are apparently inactive, there may be further M&A shakes this year as rival mining major BHP also looks to further increase its exposure to copper.
Rio Tinto (ASX : RIO) execs may be starting to reconsider the company’s stance against large merger deals, ever since it got burnt for US$25 billion in writedowns on the back of its failed purchase of Canadian miner Alcan and cost then-CEO Tom Albanese his job.
From commodity trading to mining, Glencore has a strong reach across base metals, nickel, coal, oil and copper.
“As we have always said, M&A is something we are good at and we are always open to do transactions that are value-accretive for the company,” a Glencore spokesperson said.
It’s the miner’s copper projects – which span across four continents – that are currently putting it in the shop window.
Especially its South American footprint, which includes the 44%-owned giant high-grade Collahuasi copper mine in Chile and its Mara and El Pachon developments in Argentina.
Conversely, its Glencore’s coal operations – a large chunk of which are on the east coast of Australia – which make it unattractive, as investors sentiment is against exposure to fossil fuels.
Bad with the good?
Recent news of a Rio Tinto (ASX : RIO) and Glencore merger that would usurp BHP (ASX : BHP) to become the world’s biggest mining company raised questions about the former’s investment goals.
That is because Rio recently spent years divesting its coal assets, citing a pivot towards cleaner energy production and Glencore has a deep exposure to the fossil fuel across three continents.
Yet the world’s second biggest miner has long-coveted Glencore’s Collahuasi and a merger would appease mining executives and shareholders who are on board with decarbonisation and diversification away from reliance on the slowing iron ore industry.
The pair tested entering a partnership back in 2014, yet Rio rejected an approach through key shareholder Chinalco at the time.
BHP’s M&A approach to purchase Anglo American of US$49 billion last year fell through too, so the Big Aussie instead accrued and is eyeing a number of copper projects in South America which could increase its global copper output to 540,000tpa.
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