Rio Tinto and Glencore Reported to be in Merger Talks

Two of London’s FTSE 100 heavyweight miners are reported to be in early stage talks about a merger that would create a commodities giant worth around $158 billion.

The potential merger between Rio Tinto and Glencore, two iron ore mining heavyweights, would be the industry’s largest ever and would surpass BHP’s $126 billion stock market value.

Both Rio Tinto, which has a market capitalisation of £80 billion, and Glencore, with a value of £45 billion, declined to comment on the Bloomberg report.

It would not be the first time the two companies have been in talks over a deal. In 2014, Rio Tinto rejected a merger offer from Glencore.

The latest discussions come as iron ore demand in China, the world’s largest consumer of the commodity, takes a hit from a slowdown in the country’s debt-laden property sector.

Consolidation has picked up in the mining industry as companies race to secure supplies of metals essential for electric-vehicle batteries and the clean energy transition.

Last year Rio Tinto agreed to buy Arcadium, the US listed lithium producer, for $6.7 billion as the world’s largest producer of iron ore sought to transform itself into a processor of high-end, low-carbon raw materials.

Rio Tinto faces challenges with depleting primary mines and is resorting to increased production of lower-grade iron ore to maintain output levels.

These challenges have hit Rio Tinto’s performance, with the company this week reporting its lowest annual iron ore shipments in two years.

Last May, BHP walked away from a $49 billion bid to acquire Anglo American after it was rebuffed three times. The six-month freeze on BHP making another approach under UK takeover rules expired in late November and has raised speculation that a new deal may be under consideration.