Miner and commodity trader Glencore has announced its openness to mergers and acquisitions (M&A) that create value for shareholders.
A Glencore spokesperson stated: “As we have always said, M&A is something we are good at and we are always open to do transactions that are value-accretive for the company,” according to a report by Reuters.
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Potential M&A deals were a focal point for investors in the mining sector last year.
Mining companies are striving to increase copper output as demand rises for energy transition applications such as solar panels, electric cars and data centres for AI.
Despite this, major producers are cautious about paying high premiums that could strain their balance sheets and dissatisfy shareholders.
BHP’s unsuccessful $49bn (A$78.61bn) bid for Anglo American in May 2024 highlighted the challenges of combining diversified producers.
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By GlobalDataGlencore had approached Rio Tinto late last year with a merger proposal, but discussions did not advance.
A merger with Glencore could enhance Rio Tinto’s copper production. However, questions about expenditure and cultural compatibility with the Swiss company have been raised.
Glencore produces more than one million tonnes of copper annually, surpassing Rio’s output by up to 40%.
The company’s coal operations are perceived as a “poison pill” for other companies’ shareholders, according to Abel Martins Alexandre, a former Rio Tinto treasurer.
While many Western miners have divested from carbon-intensive fossil fuels, Glencore has continued to accumulate them.
Glencore’s 2023 failed attempt to acquire Teck Resources for $23bn (SFr20.93bn) resulted in it acquiring 77% of the steelmaking coal assets that the Canadian miner planned to spin off.
Some institutional shareholders expressed “they would be happy” for companies like Glencore or Anglo American to be acquired by larger miners for premiums exceeding 30%.
They see potential synergies in overhead reduction or shared infrastructure at adjacent mines.
Glencore had been considering a potential combination with Anglo American after BHP’s approach became known.
The company remains hopeful that talks with Rio Tinto may resume, sources close the matter said.
However, other shareholders remain sceptical of large M&A in the mining sector, with executives unlikely to “push the boundary” as no portfolios are perfect and some assets are more desirable than others, a mining banker noted.
Analysts note that Glencore’s valuation is low compared to peers, with its share price dropping 25% in 2024.
In contrast, BHP and Rio Tinto’s London shares fell 21% and 19%, respectively, while Anglo’s shares increased by 20%.
