Glencore's share price rises as Rio Tinto and Glencore merge to create the world's largest miner

Glencore shares jumped almost?9% Friday after news that it was in talks with Rio Tinto over a 'potential takeover, which would create the largest mining group in the world valued at nearly $207 billion.

While Glencore shares rose, Rio Tinto's fell as much as 3 percent, reflecting investor concerns about a potential deal.

Both companies have previously discussed merging their operations. In 2014, Rio Tinto refused a Glencore merger offer, claiming it was not in its shareholders' best interest.

The merger talks that took place in 2024 ended similarly.

RACE FOR COPPER AND OTHER STRATEGIC MENERALS

Rio Tinto appointed a new CEO since then and the competition has intensified for metal reserves, including copper. Copper is needed for energy transition and artificial intelligent.

Rio Tinto and Glencore announced late Thursday that they were expecting to buy "all or part" of Glencore from the Financial Times.

Few details have been made public.

According to UK takeover regulations, Rio Tinto must make a formal bid for Glencore by February 5, or it can say that it won't proceed.

Richard Hatch said that a merger made sense, and was based on successful mergers such as the one between Anglo American Resources and Teck Resources. The rationale behind this deal was to gain access to copper.

Rio is in need of more copper because "the market views iron ore (rightly or incorrectly) as a commodity that faces a price decline," said he, adding that it's better to purchase producing assets than to wait to construct new mines.

QUESTION FROM SOME RIO SHAREHOLDERS - THE LOGIC

Rio's shareholders aren't all convinced.

The share market will tell you everything you need to know. Hugh Dive is chief investment officer of Atlas Funds Management and Rio Tinto shareholder, said that investors are unhappy with the situation.

"I like going copper but the record is terrible for the majors who make acquisitions or mergers. He said that we've seen many of these large mergers happen at the top of the market and end up diluting over time.

Rio Tinto is the world's largest iron ore mining company, with a capitalisation of around $142 billion. Glencore, a world-leading producer of base metals, is worth $65 billion.

RBC analyst Kaan Pker said that China, as the largest buyer of industrial metals in the world and a shareholder in Rio through its state-owned Chinalco would most likely face antitrust issues.

The combined company will surpass Australia's BHP group, which is currently the largest miner in terms of market capitalisation with $161 billion. BHP shares ended 0.8% higher Friday.

(source: Reuters)