Gardner said that scale afforded the companies an extra layer of security against an increasingly uncertain geopolitical moment.
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“When you’ve got [Donald] Trump versus Xi [Jinping] and those geopolitical divides getting broader over time, that consolidation gives them a lot more stability in a lot more countries,” he said.
But MST Financial senior energy analyst Saul Kavonic questioned whether the two companies would be a good fit for each other.
“Any deal is likely to be bad for Rio Tinto shareholders. Glencore simply don’t do bad deals, while Rio Tinto has a long history of value-destructive deals,” he said.
“The large company and British mindset of Rio Tinto is a complete contrast to Glencore’s trading culture.”
Kavonic also said that Rio’s future moving offshore was not good for Australia. The company is dual-listed on the ASX and the London Stock Exchange, which is home to about three-quarters of its shares.
“It’s another wake-up call that Australia can’t take its resource-driven economic engine for granted,” he said.
Rio’s ASX-listed shares fell by 6.2 per cent on Friday to $143.17 after trading at record highs. Glencore shares, meanwhile, rose as much as 7.7 per cent.
The tie-up with Glencore, the world’s largest listed coal company, could also represent a strategic pivot for Rio, which divested from coal in 2018. But analysts suggested that it could spin off its coal assets as part of a prospective deal, a move that has already been floated recently.
“When you buy something big, it’s always going to come with some things you don’t want, and you deal with that,” Barrenjoey founding partner and head of resources research Glyn Lawcock said.
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After failing to reach an agreement in 2024, Glencore continued to work behind the scenes with its bankers on what a potential deal with Rio could look like, Bloomberg reported.
Management has taken steps to prime Glencore to be able to move quickly, and Glencore chief executive Gary Nagle has repeated in private conversations that it’s a deal that should get done – describing a Rio-Glencore tie-up as the most obvious deal in the industry.
When a similar merger plan between the two mining giants was floated a year ago last January, analysts warned that the deal could face regulatory challenges and scrutiny from environmentally conscious investors.
Since the previous talks collapsed – primarily because of valuation – Rio has replaced its chief executive, with Simon Trott succeeding Jakob Stausholm. Glencore, meanwhile, has sought to convince investors – and potential buyers – of its plans to grow its copper business.
Under London Stock Exchange regulations, Rio Tinto has until February 5 to announce whether it intends to make an offer for Glencore.
With Bloomberg
