Rio Tinto is advocating for its chair and CEO to retain their positions in the event of a merger with competitor Glencore, as significant disagreements persist ahead of a critical deadline for their $260 billion deal.
Important negotiations aimed at forming the world’s biggest mining company are ongoing as the deadline approaches. By Thursday, Rio must declare its clear intent to bid for Glencore or withdraw unless an agreement to extend discussions is reached.
Glencore, in contrast, is aiming for a high premium in this potential deal, according to sources familiar with the negotiations.
While it’s expected that talks may continue beyond Thursday’s deadline, insiders warn that the considerable differences between the two companies put the deal at risk.
Both Rio and Glencore are still at odds over company valuation and governance matters, making it unclear if a resolution can be achieved.
Neither company has commented publicly about the merger discussions.
After more than a year of intermittent talks, discussions were reignited late last year when Simon Trott took over as Rio’s CEO. Dominic Barton has chaired the company since 2022.
Rio, which primarily profits from iron ore sales, seeks to expand its copper offerings. Acquiring Glencore, a leading copper miner with ambitious growth plans, would support this goal.
Recent meetings in Zurich between the two companies have not progressed towards agreement.
A key issue is valuation. Fluctuations in commodity prices over the past two years have altered how the companies are valued. While Glencore has seen its stock suffer due to low coal prices, Rio’s shares have been buoyed by rising copper and iron ore prices in recent months.
Glencore recently improved its standing by announcing a nonbinding deal to sell a 40% interest in its major copper-cobalt mines in the Democratic Republic of Congo to Orion Critical Minerals Consortium, backed by the U.S. government. This deal suggests an enterprise value of $9 billion for these assets, significantly higher than most forecasts.
Glencore’s considerable presence in the DRC, where it is the largest Western mining firm, has been viewed as a potential risk that Rio is hesitant to navigate.
Analysts suggest that a deal could involve a 28% premium over Glencore’s standard share price, which translates to an approximate bid of 582p per share. Glencore shares closed at 511p in London on Wednesday, with a market cap of around £60 billion.
One analyst pointed out that despite potential valuation challenges, the merger remains a strategic opportunity for Rio to enhance its copper portfolio, indicating motivation from both parties to finalize the deal.
Glencore is hopeful for a bid that meets or exceeds the price at which it went public in 2011, set at 530p.
Recently, new documents from the U.S. Department of Justice regarding Jeffrey Epstein revealed that Lord Peter Mandelson had discussions with Glencore’s former CEO about potentially becoming the company’s chair before its IPO. Mandelson, facing his own controversies, was ultimately not appointed, with businessman Simon Murray stepping into the role instead.
Glencore has not commented on these developments.