• Connect with us
    • Information
      • About Us
      • Contact Us
      • Careers
      • Partnerships
      • Advertise With Us
      • Authors
      • Browse Topics
      • Events
      • Disclaimer
      • Privacy Policy
    • NORTH AMERICA EDITION
      Australia
      North America
      World
    Login
    Investing News NetworkYour trusted source for investing success
    • NORTH AMERICA EDITION
      North America
      Australia
      World
    • My INN
    Videos
    Companies
    Press Releases
    Private Placements
    SUBSCRIBE
    • Reports & Guides
      • Market Outlook Reports
      • Investing Guides
    • Button
    Resource
    • Precious Metals
    • Battery Metals
    • Base Metals
    • Energy
    • Critical Metals
    Tech
    Life Science
    Base Metals Market
    Base Metals News
    Base Metals Stocks
    • Base Metals Market
    • Base Metals News
    • Base Metals Stocks
    iron investing

    Glencore Eyes Rio Tinto Acquisition; Largest Integrated Mining Company Ahead?

    Vivien Diniz
    Oct. 06, 2014 04:09PM PST
    Base Metals Investing

    Rumor has it that commodities giant, Glencore is honing in on is next acquisition target: Rio Tinto.

    Just a few short years after the Glencore/Xstrata merger, rumor has it that commodities giant, Glencore (LSE:GLEN) is honing in on is next acquisition target: Rio Tinto (NYSE:RIO). News of the potential merger circulated on Monday with word that the commodities trader reached out to Chinalco, China’s state-backed aluminum company and Rio’s largest shareholder, to gauge interest in the deal. Already the fourth largest commodity trader in the world, a merger between Glencore and Rio would create the world’s largest integrated mining and commodities company.

    Though no offer has been officially made, Bloomberg reported that Rio executives are “well aware” of Glencore’s CEO, Ivan Grasberg’s interest in a deal.

    What does Glencore have to gain?

    As mentioned, a merger between the two companies would create the largest mining company in the world, pitting the company directly against BHP Billiton (NYSE:BHP, ASX:BHP).

    In a note following the possible takeover news, Bank of America Merrill Lynch analyst Jake Greenberg noted that “Glencore has been clear that their M&A focus is on small bolt-on deals in upstream oil and agri,” adding that “This would be a major shift in their strategy, and I think it is unlikely that the company is really prepared to launch a bid for Rio any time soon.”

    So what makes Rio an attractive acquisition for the commodities heavy weight? The answer is simple: iron ore.

    Indeed, Glencore has exposure to copper, coal, nickel, and zinc, the commodities trader is lacking in its exposure to iron ore. Rio Tinto, on the other hand, is the largest shipper of seaborne iron ore and the biggest iron producer in Australia.

    Strike while the iron is cold 

    Bloomberg noted, “persistent weakness in the market for iron, which accounts for almost half of Rio’s revenue, and is weighing on its share price” adds some weight to now being the right time for the Glencore to pursue Rio.

    “Iron ore is a great commodity for traders when the market is tight because there are quality and geographic arbs.” Greenberg noted, adding that of the flip side, “When the price is low and the market is over-supplied with high quality ore, it is debateable how much value a trader can add.”

    And Rio has felt first hand the effects of the depressed iron ore market. “Due in large part to the price of iron ore, Rio’s shares have declined 12 percent this year in London, giving the company a market value of about 56 billion pounds ($90 billion).” Consequently, as Bloomberg highlights, this brings Rio “within striking distance of Glencore’s 45-billion-pound market capitalization, which has risen almost 12 percent in 2014.”

    Should the merger go through, the combined company would be worth $185 billion.

    Even though all sides have remained rather tightlipped about the proposed merger, the Financial Review speculated that “Rio’s managers were not implacably opposed to a tie-up with Glencore,” underlining, however, that the depressed iron’ ore price puts the company at a disadvantage in negotiations. The being said, the publication noted that the first response would likely be a rejection.

    Still, only time will tell which way the deal will go. However, one thing is for certain, continued weakness in the iron market does bode well for Glencore making a play for Rio.

     

    Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned. 

     

    iron investingbank of america merrill lynchaustraliachinabank of americairon market
    The Conversation (0)

    Go Deeper

    AI Powered
    Copper Investing

    Nicola Mining: $51 Million Invested in 4 Assets, Market Cap $6 Million, Cash Flow Next Year

    SNL Report Shows Global Mine Financing Down in Q1 2015

    Latest News

    Prismo Metals Announces Closing of Oversubscribed Private Placement

    OTCQB Venture Virtual Investor Conference: Presentations Now Available for Online Viewing

    Forte Minerals Engages Strategic Advisors, Expands Capital Markets Team, and Launches AI-Powered Investor Tool

    Questcorp Mining and Riverside Resources Announce Commencement of Maiden Drilling Program at the La Union Gold & Silver Project in Mexico

    Gold Project Acquisition, Placement and MD appointment

    More News

    Outlook Reports

    Resource
    • Precious Metals
      • Gold
      • Silver
    • Battery Metals
      • Lithium
      • Cobalt
      • Graphite
    • Energy
      • Uranium
      • Oil and Gas
    • Base Metals
      • Copper
      • Nickel
      • Zinc
    • Critical Metals
      • Rare Earths
    • Industrial Metals
    • Agriculture
    Tech
      • Artificial Intelligence
      • Cybersecurity
      • Gaming
      • Cleantech
      • Emerging Tech
    Life Science
      • Biotech
      • Cannabis
      • Psychedelics
      • Pharmaceuticals

    Featured Base Metals Investing Stocks

    More featured stocks

    Browse Companies

    Resource
    • Precious Metals
    • Battery Metals
    • Energy
    • Base Metals
    • Critical Metals
    Tech
    Life Science
    MARKETS
    COMMODITIES
    CURRENCIES
    ×