Glencore’s Canadian Copper Refinery (CCR) in Montreal in March, 2025.Bernard Brault/Reuters
Mining executives have become fixated on hitting home-run deals.
Last week, Rio Tinto Group swung-and-missed on a US$75-billion takeover of Glencore PLC, an acquisition meant to create the world’s largest miner.
Last fall, BHP Group – the big dog in the yard – struck out twice on US$30-billion-plus offers for Anglo American PLC. BHP’s bid was meant to foil the deal that spurred the industry’s focus on consolidation – Anglo’s US$20-billion merger with Vancouver-based Teck Resources Ltd., announced last September and expected to close later this year.
To steal a strategy from last season’s overachieving Toronto Blue Jays and the analytics-driven world of baseball, mining CEOs may be better off zeroing in on on hitting singles and doubles, rather than playing for home runs.
Partnerships on mining projects and asset sales are far easier to achieve than complex, costly and often controversial takeovers.
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Teck fell into Anglo’s arms in part because the company wanted a partner on its Quebrada Blanca Phase 2, or QB2, copper mine in Chile, a US$8.7-billion project that ran massively over budget. Combining QB2 with Anglo’s nearby Collahuasi mine is expected to boost returns from both properties by US$1.4-billion a year
Glencore had a similar motivation in its latest negotiations with Rio Tinto. (The two companies have now held four rounds of takeover talks in the past decade without reaching a deal.)
Swiss-based Glencore has two major copper projects under way in the Argentinian mountains, the US$9.5-billion El Pachón mine and US$4-billion Agua Rica development. Along with technical challenges, the country comes with significant political risks.
Argentina’s leaders are prone to treating foreign capital the way a croupier treats chips when the roulette ball lands on zero – they periodically sweep everything into their own coffers.
Rio Tinto has deep pockets and Argentinian relationships built on its lithium operations in the country. In a report published Friday, a team lead by RBC Capital Markets analyst Ben Davis said the two executive teams should set aside any ill will generated by the failed deal and team up on projects such as El Pachón.
“The big deal was fallen away, but the prize for Rio Tinto is still Glencore’s copper,” said Mr. Davis. “Glencore can approach Rio Tinto to partner up on the asset level, which makes the project pipeline more realistic.”
Last week, shortly before Rio Tinto called off takeover talks, Glencore played small ball. It announced the U.S. government-backed Orion Critical Mineral Consortium would acquire 40 per cent of its operations in the Democratic Republic of Congo.
The investment valued the properties at US$9-billion, above analysts’ US$8-billion consensus estimate of their worth. Mr. Davis said bringing Orion into the fold “values a hard-to-value asset for investors” and decreased Glencore’s exposure to the DRC, which would be a positive for the company.
For Glencore chief executive Gary Nagle, selling minority stakes in Argentinian and African mines lacks the drama of tying the knot with Rio Tinto. But these multibillion-dollar transactions are straightforward and shareholder friendly.
The same is true for Rio Tinto CEO Simon Trott, who took the top job in July. He announced up to US$10-billion in asset sales, including exiting titanium and boron mining, prior to getting caught up in talks with Glencore. Finishing those tasks will impress investors who currently value BHP at a premium to Rio Tinto.
The current round of home-run deals may not be finished. Glencore’s willingness to listen to overtures may attract another suitor.
“There is a chance BHP now steps up,” said RBC’s Mr. Davis. He said the Melbourne-based miner covets copper properties such as Glencore’s 44-per-cent take in the Collahuasi mine.
“The challenge will be explaining to value conscious Australian investors how they see the value in Glencore when Rio Tinto didn’t,” said Mr. Davis.
The last round of consolidation among global miners, which peaked in 2007, saw a series of takeovers remake the industry. The majority of these deals ended poorly for the buyers: Glencore, Rio Tinto and Brazil’s Vale SA took significant write downs on Canadian acquisitions.
If this round of merger mania starts and ends with Teck and Anglo American joining forces, that could be a long-term win for investors. Consistently hitting singles and doubles in mining – for example, by partnering on expensive new mines – is shareholder friendly.
Swinging for the fences with massive takeovers, which come with big price tags and heightened regulatory scrutiny, has never been a winning strategy for miners.