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Merger talks between Rio Tinto and Glencore have sparked speculation that a frenetic year of deals could take place in the mining sector.
An alliance would have created a nearly £130bn giant that would have unseated BHP from its top spot as the world’s largest miner.
Although the discussions came to nothing – at least for now –, industry experts believe that 2025 will be a year of mergers and acquisitions (M&A) in the sector.
There is even speculation that BHP could try again to buy Anglo American after abandoning a £39bn bid last year.
Mining companies are looking to bolster their copper assets as the metal is seen as crucial to the transition to green energy. Rio Tinto and Glencore – which are valued at £84bn and £45bn respectively – held initial talks about a possible merger in October. A deal to combine the two heavyweights would have been the largest ever reached in the mining industry.
This is not the first time the couple has talked about a merger. In 2014, Rio Tinto rejected an offer from Glencore, saying it was not in the best interests of shareholders. But last year, Rio Tinto boss Jakob Stausholm refused to rule out big copper deals.
However, he warned that large mergers and acquisitions can present a “huge risk” that could “derail the entire company.”
Digging deeper: Mining companies are looking to bolster their copper assets as the metal is seen as crucial to the transition to green energy.
Rio Tinto is the world’s largest producer of iron ore and relies on the mineral to boost its profits at a time when the market appears headed for a long period of weakness.
Demand in China – the world’s largest consumer of the commodity – has fallen amid a slowdown in the real estate sector.
Maurizio Carulli, energy and materials analyst at Quilter Cheviot, said: ‘The mining sector is experiencing weaker demand for raw materials from China due to its slowing economic growth. Historically, China has accounted for the majority of global demand for raw materials.
“Consequently, mining companies are likely to pursue more mergers and acquisitions in 2025 to achieve synergies and cost savings.”
Dan Coatsworth, an analyst at brokerage AJ Bell, added: “By combining forces, the hope is that the enlarged company will make big profits when the next bullish cycle in commodity prices hits.”
Last year, Rio Tinto bought US lithium producer Arcadium for £5.5bn. Glencore bought Teck Resources’ steelmaking coal unit last year for £5.6bn.
The expected wave of deals follows BHP’s failed attempt to buy Anglo American last year. But a six-month ban on BHP making another approach ended in November, fueling speculation that a new deal could be in the works.
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