Rio, Glencore talks signal pressure in securing metal supply

MERGER discussions between Glencore and Rio Tinto which are said to have taken place last year was a sign of how mining companies were looking to secure metals for the energy transition but analysts were lukewarm on the idea, which would face multiple hurdles.According to Bloomberg News, the discussions are no longer active. The two companies have declined to comment. Were it to have happened, however, it would have created the world’s largest copper producer.Yet multiple hurdles exist ranging from a clash of company cultures and how combining the two would sit with Rio’s strategy of not wanting exposure to thermal coal which Glencore produces in abundance, said analysts.Matthew Haupt, a portfolio manager at Wilson Asset Management, which owns shares in Rio, told the Financial Times the deal “didn’t make a lot of sense” given Rio’s efforts to get out of coal and invest in renewable energy to power its operations.While Glencore’s coal assets could be spun out as a separate company as part of any agreement there was little overlap between the two companies meaning there were few synergy benefits, said Glyn Lawcock, an analyst with investment bank Barrenjoey.The deal would need to be justified by asset diversification and creating more scale, he added in an interview with the Financial Times.Rio Tinto CEO Jakob Stausholm has also voiced his wariness of getting involved in mega-deals. He previously commented that BHP’s $39bn bid for Anglo American last year would potentially ruin his company.A full-blown merger between Rio and Glencore — which have market capitalisations of $103bn and $55bn, respectively — would rank among the largest-ever transactions in the mining industry.Having said that Glencore owns stakes in two significant copper mines — Collahuasi in Chile and Antamina in Peru — which would boost Rio Tinto’s production of the metal by almost one million tons a year and offer substantial expansion capacity, according to analysts.Rio last year announced a $7bn deal to acquire Arcadium Lithium to increases its presence in metals used in batteries for electric vehicles. People close to the company said it was still digesting that transaction, the Financial Times said.Rio previously rejected a takeover bid by Glencore in 2014.“It’s funny how history repeats itself,” RBC Capital Markets analyst Ben Davis told Bloomberg News. “Especially since they’ve gone on very different paths since then.”“It’s not obvious what the motivation for Rio is at this point given the strategic divergence between the two companies,” said Davis. “For Glencore it potentially gives their big shareholders an exit route.”The post Rio, Glencore talks signal pressure in securing metal supply appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com