Rio Tinto and Glencore abandon plans to create the world's largest mining company

Rio Tinto has ended takeover negotiations with Glencore after months of talks over a tie up that would have reshaped global mining. The merger was first announced in January and would have created a global mining giant with a value of more than $200 billion. Rio announced on Thursday that it was unable to reach a deal with the two companies that would have provided shareholders with enough value.

This is the third round of failed talks in total, after an earlier attempt by Glencore late in 2024. According to a source familiar with the situation, Glencore also started discussions late last year. BHP's $49 billion mining deal and other ambitious deals have failed. Anglo American's $49 billion bid fell apart over concerns with the structure of the deal, even as the metals sector tries to consolidate due to the rising demand. Only one deal is still in the works: a merger of London-listed Anglo American with Canada's Teck Resources for $53 billion, all stock and no premium. This would make Anglo American the fifth largest copper producer in world.

Glencore shares ended 7% lower, at 467 pence. Rio Tinto shares listed in London were down 2.6% to 6,820 pence

Rio will likely be left alone, said Jefferies analyst Christopher LaFemina.

He said that while there are many ways to unlock value for Glencore, a merger with a company which could be the "go to" stock of the sector and a company which is able to offer a higher share price would have been a simple way to do so.

Not only Copper

Rio rejected a Glencore merger proposal in 2014 as it did not serve the interests of its shareholders.

The latest round of talks marked a departure in comparison to previous efforts. Source: "This is the first time that there's been a rigorous, serious due diligence process".

Rio Tinto wanted to buy Glencore as a whole, including all its assets, marketing and coal.

Glencore issued a statement saying that "we concluded that the proposed purchase...doesn't reflect our view of long-term relative value through the cycle, including not appropriately valuing our Copper business and its leading growth pipe."

Analysts at HSBC estimated an average premium of 30%. This would mean that Rio's offer was 535 pence a share. Glencore shareholders would then have received 38% in the combined company.

According to another source, Glencore wants its shareholders to own 40% of the company.

This source stated that "Just?wasn't enough premium for Glencore."

A third source said that the management was looking for a 40% premium over the 530 pence price per share of Glencore's IPO in 2011.

The terms that were rejected by the companies are not known. Glencore highlighted its copper assets in a December investor day, where it stated that it would reach 1.6 millions metric tons of copper by 2035, up from 852,000 tonnes last year, through new and restarted mining operations and streamlined processes.

The energy transition and demand for artificial intelligence are expected to boost global copper demand by 50% by 2040.

(source: Reuters)