Quick Bites | Diversified Mining Giants Trying to Get Together

Mining mergers are back in style. Rio Tinto, the global mining industry’s fourth-most valuable company, has confirmed it is in talks to acquire Glencore, a Swiss competitor, and thus create the world’s biggest miner, worth around $220bn at current valuations. About 18 months ago, BHP looked at a tie up with Anglo American, a South African/British miner, but was thwarted in its attempt, and Anglo ended up dealing with Teck Resources, a Canadian firm. The total value of tie-ups among miners last year reached $94bn, the most in a decade.

Source: The Economist

Investors’ reactions to news of the Rio-Glencore deal have been mixed. Glencore’s share price rose by 10% after the announcement on January 8th, and has continued to climb. Rio’s fell by 3%, though it has since recovered. That reaction partly reflects questions over what Rio would do with Glencore’s coal assets (Rio stopped mining coal in 2018) or its trading business. But it also highlights investors’ continued wariness over wasteful spending by miners at the top of the cycle.

Shareholders have not forgotten the industry’s write-downs of more than $50bn in 2015, when a slowdown in China brought the last commodity supercycle to an end. Yet for miners with the right assets, the good times seem set to continue.

The latest wave of mining mergers comes amid a race to secure access to the critical minerals and rare earths needed for technologies powering the energy transition and the AI revolution (e.g. from wind turbines, electric vehicles and batteries to the data centres that power artificial-intelligence models).

In the past year China has wielded its control over rare earths to force America into a trade truce, prompting Western policymakers to make greater efforts to break its chokehold. Indeed, it could be argued that President Trump’s geopolitical ventures are related to resource riches (e.g. Venezuela and Greenland).

Yet it is copper, that has drawn the most interest from miners. Its price has risen by nearly 50% over the past year. The shares of miners that focus mostly on the metal—including Antofagasta, Freeport-McMoRan and Southern Copper—have outperformed those of diversified giants including BHP and Rio.

Source: Economist

The rise in copper’s price shows no sign of slowing. S&P Global reckons that demand will increase from 28m tonnes in 2025 to 42m tonnes in 2040. At the same time supply is constrained. Existing copper mines are ageing, making it harder (and costlier) to get copper ore out of the ground.

In South America, source of most of the world’s copper, every 100 tonnes of raw ore yielded about 1.3 tonnes of copper two decades ago—a “head grade” of 1.3%. That has since fallen to 0.7%. Building a new mine can take 10 to 15 years. Activist strikes, seismic activity and mudslides have also disrupted production.

Analysts at Deutsche Bank estimate that supply from mines, which fell in 2025, will be roughly flat this year. The supply issue has no quick fix, meaning that long term productive high grade producers have become vastly more valuable.

That is why miners are turning to acquisitions to secure copper, the production of which remains highly fragmented. A combined Rio-Glencore would dig up about 1.6m tonnes of the metal a year, more than any other company but still only about 7% of total mine output.

Source: Rio Tinto

In 2024 Anglo sped up efforts to rid itself of diamond, platinum and other assets as part of its defence against an unfriendly takeover attempt by BHP. Its merger with Teck, which sold its coal assets to Glencore in 2024, is intended to create a leading global copper producer.

Whether these deals result in an increase in total copper production is another matter. “The size of the pie doesn’t change, only the slice,” says Tristan Pascall, boss of First Quantum Minerals, another copper miner, adding that fresh investment is still needed.

Rio argues the case and sets out its credentials.

The Economist concludes:

“By consolidating, companies may obtain the financial firepower they need to expand existing mines and develop new ones. Yet there is a risk that they must first spend years digesting their acquisitions. Permit delays and other red tape will also slow down new supply. Even if governments simplify approvals, as is happening in America, bottlenecks in processing and refining copper—a dirty, energy-intensive process that is even less popular than mining—will remain. Buyers of the metal should not expect relief from rising prices soon.”