Newscasts - Rio Tinto’s path to M&A glory

Formation Metals

22/01/2026 06:46

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Description: A boom for copper and slow-going organic expansion makes the miner’s mulled $215 bln tie-up with Glencore look tempting. In this Viewsroom debate, Breakingviews columnists discuss whether it, and other similar deals, will happen.

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Video Transcript:

The views expressed on this podcast are those of the participants, not of Reuters News.

Mining M&A is back in vogue in 2026. Earlier this month, $143 billion Australian miner Rio Tinto said it is in early talks to buy Swiss rival Glencore. This deal would create a mining behemoth, as the combined company’s market worth could top $200 billion. The big question is, will this be a case of third time lucky for this pair who have tried repeatedly to combine but faced many obstacles? Can they agree on previous sticking points? What does it mean for precious metals more generally? And what will their rivals do to make sure they’re not left behind? All of this and more is in this week’s Viewsroom. It’s Aimee.

And it’s Jonathan, and this is the Viewsroom, the weekly podcast that takes you into the biggest stories in business and finance. So, Aimee, as you said, we’ve definitely looked at big mining M&A before, right? And every time it seems like someone is just close to striking that rich deposit of M&A goodness right below the surface, the whole thing falls apart, everybody calls it off, and they all down tools and go home. We’ve seen this, as you said, with this pair before, we’ve seen it with, you know, kind of other pairings in the industry that have been raised and then kind of cast aside. However, we’re in 2026 now. It seems like now is the time that something might actually happen. And there are some important new ingredients in the market that are pushing that, right?

Yes, that’s very true. And I think this will only be fun if we try and fill this podcast with as many mining puns as we possibly can. So, let’s see how much we can do. Well, first of all, there is obviously a changing of the guard, right. So, Rio has a new CEO, Simon Trott, who took the helm last August. There’s also a bit of a powerful force of FOMO. So, fear of missing out. So, there was this, there was a $54 billion tie-up with Anglo American and Teck Resources last year. And that has ramped up, I guess, a sort of feeling of others wanting to be in on this consolidation for, I guess, fear that they would be left behind. But thankfully, we have two experts, and it’s quite interesting, every time these deals get announced, Karen Kwok and George Hay are the people to talk to, and they know all the bankers. They know all of the very interesting people. So, we’re very happy to be joined, George Hay, our EMEA Editor at Breakingviews and Karen Kwok, who covers mining among other many things. So, George and Karen, you are very welcome.

Hi there.

Hi there.

So, George, mining, as we said, is back in vogue. Can you talk us through, I guess, the thinking of these CEOs? Why is there, why are we seeing so much activity, whether it actually comes to fruition or not? What is the reasoning behind this?

You’re implying that mining was sometimes not in vogue. I mean, permanently in vogue.

There's never been a lull in M&A.

Such a cool sector, full of cool dudes.

Yes.

Yes, well, you touched on some of the, there is a FOMO element here, which we can come back to, based off Anglo and Teck, because unlike the various ones you listed earlier, that is actually going ahead. The shareholders voted for it. And that is kind of motoring on. More broadly, people in mining tend to look at it as this distinction between buy and build. Build just means what you might expect miners to do, which is just do a load of mining projects. But in order to do that, it’s become increasingly hard for these big companies to make the kind of returns that they would want and you need the copper price to be, I mean if it’s copper it could be other things, but a lot of the focus is on copper. You need the copper price to really be quite high for these big companies to get excited and even though it is quite high at the moment, even then they still quite a concern about screwing up because an important piece of context here is about 15 years ago, there was a flurry of activity in the sector and a lot of those deals went really badly wrong and people got fired and humiliated. So, there’s quite a kind of strong impetus to not have a repeat of that. But where we are at the moment is because build is quite difficult to do, people are coming back to, maybe we can do deals. And that’s where we’ve, that’s really why BHP, the biggest mining company in the world, tried to buy Anglo American in 2024. That didn’t work. At the end of last year, they actually tried to come back and buy it again. That didn’t work again. But in amongst that, Anglo American and Teck have teamed up. And the interesting thing about that deal is that there are a lot of cost synergies coming from it, but the main thing that makes the finances of the deal really fly is that the two companies have copper projects in Chile, which are right next door to each other. So, making those synergies is much easier to do. So that’s where we are, but we can go on to talk about Glencore and Rio.

Right. Yes because, like you say, there are, seems like there’s some low hanging fruit, so like some key opportunities you can kind of pick up there if, you know, like you said, build is too expensive, so you turn to buy. Karen, I’m curious, that simplistic formulation doesn’t really work out a lot of the time, right? Like George says, there’s the memories of past humiliations, but surely if there’s a bunch of these easy wins to get, these folks like should all be consolidating at the moment, right?

Yes, I think George also touched a little bit already, like, because in this deal between Teck and Anglo American is this Chile mine that makes the difference because they’re next to each other. These guys can like, you know, ship things together in order to cut some costs so that when you buy it, when you buy the other company, it will help you to justify the deal a little bit. And the other elements of it is also like if you look at all these deals that’s happening and being talked about, be it Rio, Anglo American, BHP, Teck, they’re all kind of like a group of called diversified miners. So, they don’t only have copper, they also have like iron ore, they have like nickel, and you have to have those metals prices to be like all going up in order to justify the companies to buy the other ones. Like you can’t just have like, oh, I have copper price going higher up. And then my iron ore is performing really badly. And then that makes it very hard for the buyer to go and buy something because their share price of the buyer company might not be high enough in order to justify to use the shares to buy the target basically. So there’s a lot of these elements to come into play as well.

Right.

But yes, I mean, a key thing here, which is, I mean, it’s important with any deal, but it’s probably especially important in mining is the synergies and, and the synergies like, the point is on Anglo and Teck, the reason why both those companies’ shares went up when, on the day the deal was announced, and people passed the deal and like it, is because they can see the synergies there. It’s very clearly and clear and obvious why you’re going to get synergies from it. And therefore, you know, two plus two equals five and it’s worth doing. The trouble is, we can come on to talk about this, but the trouble is with the some of the other combinations, because they don’t have very simply two mines right next door to each other, getting those synergies is going to be a little bit harder.

Yes, and so a piece of that is, it’s probably really difficult to have everything moving in the same direction and crucially moving your way at the same time, right? Because I imagine, like, copper is super important for the energy transition as everything electrifies. And then you’ve got coal, which is kind of a divestment story in established markets. Maybe you’re hitting a China peak or whatever. So, I’m presuming you’re always going to have like this two pieces kind of like moving, not in tandem, which makes this more complicated. I think, Karen, you’ve kind of written before about possible ways in which you can chop up and repackage these companies in ways that kind of get around that, right?

Yes, so the upcoming deal that is still being discussed, Glencore, for example, that is a very interesting one, because they have like a huge coal business, like with, I think is the world’s, one of the world biggest ones. And then and then also they have, like the little copper bits that’s, so there’s, there’s a bunch of like, copper-only companies that’s listed in the US that they are really trading at really high valuation multiple right, like probably like seven times eight times, and they’re often like double the ones that have, owns copper and a bunch of other stuff too. So obviously, if you are a CEO, like you’re probably want to get your company trading as high as possible like the copper guys, so it makes more sense for them to think about, what about like I buy you and then I would divide it into two company. One is pure copper and one is pure coal, so that I can get this piece of copper business trading more like the pure copper, so that I can get more shareholder support from that. And I think that’s the incentive in terms of like buying out and then like getting more, what do you say, value out of it for the shareholders, I suppose.

So what companies are we talking about here, Karen? Who are the ones that can sort of separate, slice off these different parts of the business and why has that not worked up until this point?

Well, I think the obvious one currently is definitely Glencore. They have positioned themselves for a very long time that we are good to be bought because they are trading often at a discount, like four times. But they also have a big problem because they have a trading business, which is very volatile, create volatile revenue and so on, so very hard to predict what’s the valuation and also the coal business I talk about. Because even we are still using coal these days, and ESG is still a big problem and a lot of people are still concerned about how long can it be run. And that kind of affects the valuation as well. I think that’s one of them. Do you have another one that you, that you can think of, George?

Yes, well, I mean, as Karen says, Glencore is often seen as a target because it’s relatively undervalued and it has some interesting copper assets. But I mean BHP is still waiting around without a partner. And it’s not obvious what their next move is. But the actual matter at hand at the moment is a combination between Glencore and Rio Tinto which is like the world’s second biggest miner. Now that kind of makes sense in that Glencore has basically quite a few interesting near-term copper project prospects but it doesn’t have a particularly strong balance sheet, whereas Rio Tinto does, and if you’re Rio and BHP, the biggest miners in the world, what you really want to do is kind of move towards, more towards the transition metals such as copper, such as nickel, but copper in particular. What they currently have instead is a load of iron ore, which throws off a lot of cash when the price is quite good, but it’s not something that excites investors in the way that copper does. That’s why Rio and Glencore are thinking about tying up. And that’s the kind of, there are a number of reasons why it should go through.

Can I ask as well, George, you mentioned obviously the humiliated CEOs in certain cases when the deals just didn’t come about. Do you think that the sort of, I guess the chemistry or the CEOs that are now in charge of these companies, does that make it more likely that this will happen?

Yes, I think so. I mean, as we mentioned before, Rio has a new CEO, Simon Trott. He was an internal appointment, but it is a kind of, it is a new face and, you know, someone coming in wants to make their mark. That makes it more likely. Gary Nagle, who runs Glencore has, as we were talking about, has a kind of, it’s clearly something he wants to do, to try and sell the company via a good deal. I mean, there, if we talk about kind of personalities and psychology a bit there, the really interesting one is Mike Henry at BHP, because he was the one who tried to buy Anglo American in 2024 and he came up with a kind of quite elaborate plan to do it, whereby Anglo would kind of get rid of various other things first, and then BHP would deign to buy it. And perhaps unsurprisingly, Anglo went, do one, basically, you’re not buying us. And they didn’t. But, there’s a speculation about him leaving this year. He’s been CEO for some time. And it’s quite possible that he, certainly at the end of the last year this second approach they did to come and try and buy Anglo, we were quite scathing about that because it just seemed like it seemed like a rather random thing to do, rather rushed, and they clearly didn’t bid a particularly competitive price, but if you’re him, you would really love to just do a really big transformative deal which went well, and then everyone would remember you as the guy who did that deal, rather than someone who tried to do a load of deals and didn’t.

Sorry, I just want to add one line. Well, but I kind of wonder like whether or not he will just leave it like this, this time though, because like, as you said, right, like before he actually failed a couple of times. So, if they want, if he wants to do another deal to go after Glencore this time, he needs to make sure that this is perfect, or like that he will for sure get the deal, right. And then the other thing is that because he has been with BHP for so many years. If he really goes for Glencore, he will need to stay for like at least four or five years in order to get the deal done, to see it through.

I can’t quite see that.

Yes, exactly. So that might be a tough, tough decision for him for sure, right?

Yes, well, this is why our colleague Antony Currie is of the opinion that what will probably happen is that BHP will sit this one out, hope the copper price falls in the next couple of years, and hopefully therefore the valuations of some of the things it could conceivably buy, they fall as well. And then they come back, perhaps under a new CEO, and try their luck again. But you know, as Karen says, the only thing more embarrassing than trying to do a big deal and goofing it up twice is doing it three times. if I was him, that would be a kind of quite strong disincentive to entertaining that idea.

Right, and I want to satisfy Aimee’s desire for mining metaphors here. So what we have is the rich ore of abundant potential here in the combination of the companies. The narrative makes sense. It’s riddled with the impurities of executive pride and historical preponderance of evidence that things can go awry.

You are the Alan Partridge of mining analysis.

But I want to take it one step further, George. I want to refine this down to the cold gleaming bullion of financial analysis.

We’re going for it, gentlemen.

Karen, like if you have run the numbers on these deals, right, setting everything else aside on a spreadsheet, do they make sense?

Yes, so if you look at, okay, obviously there can be loads of combination, but if you just look at Glencore and Rio Tinto, if Rio Tinto offers say $20, $26 premium and then adjusting with like $1 billion of like cost saving, because they have overlapped London head office, then Rio Tinto can pretty much get a pretty good return, like a justifiable, not very good, as in like a fair return for itself by buying Glencore, but then they also can create more value by just breaking them after they acquire Glencore and then breaking themselves up, as I was mentioning before and list the copper bit in London and then coal bit in Australia and the iron ore bit in Australia, in order to extract value, and that will create a substantial level of upside for shareholders basically.

Yes, but one thing that’s important, though, is we don’t, there seems to be quite a lot of differences of opinion of what kind of synergies, going back to the synergies point we were talking about earlier, it really is, this is a takeover, this not a kind of, likely to be a merger, it’s like a takeover by Rio of Glencore. And there seems to be difference of opinion on how big the synergies actually are, whether they’re $1 billion annual, $2 billion, more or less, and it does, needless to say, it kind of closely affects the size of the premium that Rio can offer and therefore the attractiveness of, how attractive they can make this for Glencore. So given we don’t quite know what the right level for synergies is, it’s quite difficult to kind of be more specific, but it might kind of, as a lot of these things do, it’ll kind of boil down to, you know, how much does Glencore, how desperate is Glencore basically, to get to get sold, and how desperate is Rio, but when we know more about synergies it will become more obvious the kind of premium they could offer.

So, you’ve got a new CEO, and you have certainly a lot of interest in this, in certainly M&A happening. So, I would imagine we will know, I think it’s Karen, it’s like February 5, right?

Yes.

Before they have to make an offer. So we will be in the next few weeks, we will see what happens. But Karen, George, for now, very nice having you on.

Thanks for having me.

Cheers.

Thanks for tuning in. This podcast was produced by Sheryl Peña in New York and Gregory Garner in Toronto. You can listen to a new episode of the Viewsroom every Thursday on the Reuters app or your favorite platform. And don’t forget to tune in to our sister podcast, The Big View, every Tuesday, as well as the other great podcasts from the Reuters team. If you like what you heard, please follow the Viewsroom and let us know what you thought. We have a new e-mail address where you can send feedback, which is breakingviews-podcasts@tr.com. And check out our views on the biggest stories in business and finance every day on Breakingviews.com and on Reuters.com.