Merger talks between Rio Tinto and Glencore have sparked speculation that a frantic year of dealmaking could take place in the mining sector.
A tie-up would have created a nearly £130billion behemoth that would have toppled BHP from its top spot as the world’s biggest miner.
Although the discussions came to nothing – at least for now – industry experts believe 2025 will be a year of mergers and acquisitions (M&A) in the sector.
There is even speculation that BHP could have another go at buying Anglo American after walking away from a £39billion bid last year.
Mining firms are looking to bolster their copper assets as the metal is seen as crucial to the green energy transition. Rio Tinto and Glencore – which are valued at £84billion and £45billion respectively – held early-stage talks over a potential merger as recently as October. A deal to combine the two heavyweights would have been the largest ever in the mining industry.
It is not the first time the pair have discussed a merger. In 2014, Rio Tinto rejected an offer from Glencore, saying that it was not in the best interests of shareholders. But last year Rio Tinto chief Jakob Stausholm refused to rule out large deals in the copper sector.
However, he warned that major M&A can present a ‘big risk’ that could ‘derail the whole company’.
Digging deep: Mining firms are looking to bolster their copper assets as the metal is seen as crucial to the green energy transition
Rio Tinto is the world’s largest producer of iron ore and relies on the mineral to drive its profits at a time when the market looks set for an extended period of weakness.
Demand in China – the world’s largest consumer of the commodity – has tumbled amid a slowdown in the property sector.
Maurizio Carulli, energy and materials analyst at Quilter Cheviot, said: ‘The mining sector is experiencing softer demand for commodities from China due to its slowing economic growth. Historically, China has represented the lion’s share of global commodities demand.
‘Consequently, mining companies are likely to pursue more mergers and acquisitions in 2025 to achieve synergies and cost savings.’
Dan Coatsworth, an analyst at broker AJ Bell, added: ‘By combining forces, the hope is that the enlarged company will profit big time when there’s the next upcycle in commodity prices.’
Last year, Rio Tinto bought US lithium producer Arcadium for £5.5billion. Glencore bought Teck Resources’ steelmaking coal unit last year for £5.6billion.
The anticipated wave of dealmaking follows BHP’s failed attempt to buy Anglo American last year. But the six-month ban on BHP making another approach ended in November, fuelling speculation that a new deal could be in the works.
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