Mining M&A Heats Up as Rio Tinto and BHP Seek New Opportunities

Major mining companies are intensifying their search for new deals and projects.

Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) and BHP (ASX:BHP,LSE:BHP,NYSE:BHP) are both reportedly exploring potential acquisitions to expand their portfolios, people familiar with the companies said last week.

Sky News said on July 12 that the former is currently evaluating a list of potential takeover targets, including Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK). Rio Tinto has reportedly approached banks for financing options.

Teck is a Canadian mining company that recently sold its steelmaking coal unit to Glencore (LSE:GLEN,OTC Pink:GLCNF), another mining behemoth, for US$6.9 billion; Teck is valued at nearly C$35 billion.

Meanwhile, BHP, in the wake of its failed US$49 billion acquisition of rival Anglo American (LSE:AAL,OTCQX:AAUKF), is exploring a joint bid with Lundin Mining (TSX:LUN,OTC Pink:LUNMF) for copper miner Filo (TSX:FIL,OTCQX:FLMMF).

Reuters states that discussions are at an early stage, and there is no guarantee the companies will proceed with a bid.

Filo's market cap stands at US$2.52 billion. A potential merger between Lundin's Josemaria project and Filo's Filo del Sol project is under consideration, with the cost of combining infrastructure estimated at US$5 billion to US$8 billion.

Through its unsuccessful bid for Anglo American, BHP was aiming to secure the company's copper assets in Latin America. Copper is key metal for the global shift toward clean energy and electric vehicles.

The deal collapsed due to structural complexities and regulatory risks, particularly in South Africa. BHP's offer required Anglo American to divest its South African platinum and iron ore businesses, which the latter deemed too risky.

This M&A activity highlights the growing preference among major miners to acquire rather than develop new assets.

Lundin's possible collaboration with BHP also reflects the growing copper sector crunch as miners seek to secure supply amid reports of an impending shortage of the red metal through 2050.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.