Glencore CEO Says Miners Must Do Deals After Rio Talks Fail
(Bloomberg) — Glencore Plc boss Gary Nagle said the world’s top miners must get bigger in order to make their voices heard, as the metals and commodities they produce become increasingly political.
“As an industry we need to be more relevant. Relevance and size is important,” Chief Executive Officer Nagle said as the firm announced full-year results. “All the companies are a little bit irrelevant.”
Nagle’s comments come less than two weeks after talks between Rio Tinto Group and Glencore failed, ending for now a deal that would have created the world’s biggest miner. The negotiations collapsed after the two sides could not find common ground on how big a premium Rio should pay.
Executives at the biggest mining companies, including BHP Group and Rio, have grown increasingly concerned that stagnant market valuations have left the industry increasingly on the sidelines when it comes to investors and politicians. Both have tried to buy smaller rivals in the past two years.
No. 1 miner BHP was once one of the world’s most valuable companies, but today its $188 billion market value is dwarfed by the biggest tech firms. Nagle said it’s much harder for the mining industry to be heard in Washington, when compared with companies like Tesla Inc. and Nvidia Corp.
“Being seen as a central player by this administration would be easier,” according to the CEO of Glencore, which has a market value of about $80 billion, less than a 50th the size of Nvidia.
Metals and mining has become a political flashpoint in recent years as successive US administrations seek to wrest back some control from China, which dominates the processing and refining of most metals.
While ending US reliance on China has long been a goal for Washington, it became more urgent last year after Beijing announced export restrictions on so-called rare earths.
Earlier this month, President Donald Trump announced plans to launch a $12 billion critical minerals stockpile called Project Vault. Nagle said Wednesday that Glencore would be involved in the project, without giving more details.
The mining industry has been swept by takeover fever in the past few years as the biggest producers seek to bulk up on copper — a crucial metal for the energy transition that’s trading near record highs. Still, with the exception of a tie up between Anglo American Plc and Teck Resources Ltd., the biggest companies have so far failed to strike a deal.
Rio and Glencore started talks in mid December, but the discussions collapsed on Feb. 5 after the two sides failed to agree on valuation. Glencore was seeking a share-exchange ratio that would have given its own investors about 40% of the combined company, people familiar with the matter said at the time. Rio walked away after it was unable to justify the premium that implied.
Nagle said that for big deals to work in the mining space, compromises needed to be made on both sides. He also said that investors should be more vocal if they want deals to happen.
Glencore earlier Wednesday reported a slight fall in full-year profits after record copper prices failed to offset declining earnings from the commodity trader-cum-miner’s sprawling coal operations.
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