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It seems like the mining sector is following in the footsteps of oil and gas with the era of the megamerger in full swing. There is great speculation about the potential merger between industry giants Rio Tinto and Glencore and expectations for more mergers across the board. Last week, it was widely reported that the British-Australian multinational Rio Tinto and Switzerland-based Glencore were in discussions over a potential merger. Rio Tinto is the world’s second-largest mining company, and Glencore is a major coal and copper miner, meaning that if a deal is made it could be the largest seen by the industry to date. The combined market value of the two firms is around $150 billion, so if they were to merge the company would overtake $127 billion BHP as the global industry leader.
According to one Bloomberg article, “The discussions took place as recently as late last year but are not currently active.” However, neither company has publicly commented on the potential merger. Glencore previously proposed a merger with Rio Tinto in 2014. The purchase of Glencore would provide Rio with a stake in the Collahuasi mine in Chile, one of the largest copper reserves on the planet.
Rio has pivoted away from fossil fuels to focus on critical mineral mining, while Glencore continues to rely heavily on coal mining for its revenue. In 2023, Glencore made a bid to purchase Teck Resources Ltd. but when that was unsuccessful it agreed to buy the smaller company’s coal unit.
However, many in the sector do not understand the purpose of the potential merger. Maxime Kogge, an equity analyst at Oddo BHF, stated, “I think everyone’s a bit surprised.” Kogge added, “Honestly, they have limited overlapping assets. It’s only copper where there is really some synergies and opportunity to add assets to make a bigger group.”
With the mineral mining industry set to boom, more companies will likely seek to merge their assets to strengthen their position in global mining. Investment in critical minerals mining grew by around 30 percent in 2022 and 10 percent in 2023. Meanwhile, the demand for lithium rose by 30 percent in 2023, and for nickel, cobalt, and graphite by between 8 and 10 percent. The demand for critical minerals is expected to double by 2040, and the market value is expected to also double, from $325 billion in 2023 to around $770 billion in 2040.
In July 2024, Russ Mould, the investment director at investment firm AJ Bell, explained, “Mergers and acquisitions are one quick way to boost scale and grow output, and if shareholders in the target are prepared to accept stock rather than cash then all the better, as this avoids the need to add fresh debt to a carefully repaired balance sheet.”
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Last year, Rio Tinto considered taking over Anglo American, after a $39 billion bid by BHP for Anglo fell through. However, in August, Rio Tinto’s CEO Jakob Stausholm said that mergers and acquisitions could “derail the whole company” after the firm had repaired its balance sheet and restored its reputation. Stausholm went on to say, “That doesn’t mean I’m ruling out big M&A, not at all.” He talked about the copper market, “It’s not an easy market to buy into.” And in reference to lithium Stausholm stated, ““Could we add more [lithium projects]? Absolutely… But obviously, I don’t want to add more assets than what my team are able to develop.”
This month, BHP and Lundin Mining Corp. completed the joint purchase of the Toronto-listed copper exploration firm Filo Corp. for $2.78 billion. The 50/50 joint arrangement, known as Vicuña Corp., will allow BHP and Lundin to develop an emerging copper district with significant export potential.
Jack Lundin, the President and CEO of Lundin Mining, stated, “Vicuña is targeting a mineral resource estimate for both the Filo del Sol and Josemaria deposits within the first half of 2025. This resource estimate will form the basis of an integrated technical report which will outline the development plan for the phased construction of the district.” Lundin added, “The district represents an opportunity to deliver on the world’s growing copper needs in a meaningful way, both in terms of scale and operational excellence. The Joint Arrangement is committed to applying international industry standards to each facet of the business, from innovation in technology to the commitment of sustainability and capacity building.”
Although there is no great certainty around the Rio Tinto-Glencore merger, mining experts expect there to be several mergers across the sector as companies look to boost their capabilities to position themselves well in the rapidly growing global mining industry. As the demand for critical minerals sends the value of the industry soaring over the coming decades, companies from all areas of the world will be hoping to get a piece of the action.
By Felicity Bradstock for Oilprice.com
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