Rio and Glencore Set to Extend Deadline for Talks on Mega Deal

(Bloomberg) — Rio Tinto Group and Glencore Plc are poised to seek more time to work on a deal to create the world’s biggest miner as they wrangle over the premium that Rio would need to pay, people familiar with the matter said.

The two sides have been in talks since at least the start of this month to form a behemoth that would be among the world’s largest copper producers. While both remain keen on a deal, more time will likely be needed to hash out a valuation — requiring the UK’s Takeover Panel to extend a deadline for talks — according to the people, who asked not to be identified as the negotiations are private.

The potential combination is the latest in a series of attempted mega mergers between the top miners as executives look to bulk up in copper and grow in size to gain more relevance with global investors. With Rio and its smaller rival Glencore having a combined market valuation of about $235 billion, a tie-up would represent the industry’s largest-ever deal.

For Rio, the attraction is clear. It would get to roughly double its existing copper output at a time when prices of the metal that’s crucial metal for the energy transition are near a record high. It would also add about 1 million tons of future copper growth into its portfolio. Mining bosses have long warned that future supplies will be tight as demand is forecast to grow amid a dearth of new mines.

There are also wider appeals. Glencore’s sprawling coal business — until recently a taboo commodity for most major miners — adds huge cashflows, while its marketing business will help Rio become more commercially minded, a key ambition for Rio Chairman Dominic Barton.

Any deal faces potential hurdles from Rio’s shareholders, who want it to remain disciplined in M&A, while Glencore is pushing for a premium that reflects it being bought by a bigger peer, some of the people said.

Rio and Glencore declined to comment.

Copper Business

A particular concern for Rio is how to value Glencore’s copper business, the people said. The part of the company has underperformed, with output falling for four straight years amid a series of missed goals and operational setbacks.

Glencore in December outlined plans to almost double copper output over the next decade though expanding existing mines and a new project in Argentina. Investors seemed to buy into that narrative, and combined with a surge in the copper price, that sparked fresh interest from Rio. The two also held discussions in 2024, but they were abandoned after failing to agree on valuation.

Copper’s surge continued this week, topping a record $14,500 a ton on Thursday on the back of a wave of buying from Chinese investors. Prices pulled back on Friday, but are still up about 45% over the past year.

Glencore has yet to appoint a bank to help with the deal but is talking with advisers, the people said. Potential advisers have met with the Swiss firm this week, according to some of the people.

Rio is working with Evercore Inc., JPMorgan Chase & Co. and Macquarie Group Ltd., Bloomberg has reported.

Clock Ticking

The talks became public in early January, and UK takeover rules mean Rio has until Feb. 5 to confirm it will make an offer or walk away for six months — unless Glencore requests an extension. People close to the deal see an extension request as highly likely. However, the situation remains fluid and could still change, the people said.

A key priority for Rio is keeping its Australian shareholders — who own almost a fifth of the company — onside, some of the people said. They’re seen by the Rio as being more conservative than its other investors when it comes to deals.

Another important issue is whether both firms can demonstrate synergies to justify the size of the premium.

While people familiar with the matter said a combination of two huge companies is attractive to many senior people at Rio on a macro level, there are fewer direct synergies that normally make paying a takeover premium appealing to investors. For example, they have few operational overlaps — where neighboring mines can share infrastructure, logistics or combine ore bodies — the sort of factors that often drive deals.

Instead, people close to the talks see Rio trying to build a case for broader synergies, including operating Glencore’s mines more efficiently and better developing growth projects. Rio also sees synergies from leveraging Glencore’s marketing business, the people said.

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