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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.”