Analysis-Glencore to focus on short-term disposals as Rio deal remains elusive

By Clara Denina

LONDON, Feb 6 (Reuters) – Glencore’s failed merger talks with Rio Tinto have left the Swiss-based mining group likely to focus on asset sales as it works to strengthen its copper portfolio.

Talks to forge a $240 billion global mining giant were called off this week over disagreements on valuation and ownership, marking the third failed tie-up attempt by the two companies, after earlier merger discussions in 2014 and 2024.

As part of its portfolio reshaping, Glencore is expected to announce the sale of its 70% stake in Kazzinc, its zinc, lead and gold producer in Kazakhstan, in the coming weeks, a source close to the matter told Reuters. 

Analysts value the asset at around $5 billion.

Glencore CEO Gary Nagle has repeatedly spoken in favour of industry consolidation and bigger scale, arguing that the mining sector is not big enough to attract broad investor interest and that bringing assets together creates value.

Meanwhile, the company said it aims to reach copper output of 1.6 million metric tons by 2035 through new and restarted mines and streamlined operations, from 852,000 tons in 2025.

Investors think Glencore, which has a stock market value of $75 billion, will focus in the near term on disposals.

“The next step may be to sell off assets individually … to create a more concentrated copper and trading business that could attract a higher multiple,” said Iain Pyle, investment manager at Aberdeen.

Glencore is in talks to sell 40% of its copper and cobalt business in the Democratic Republic of Congo to U.S.-backed Orion Critical Minerals Consortium.

It is also working with Brazil’s Vale on a nickel venture to jointly evaluate a brownfield copper development at their adjacent assets in Canada.

“They (Glencore) can continue to tidy up their portfolio and release value,” said George Cheveley, portfolio manager at Ninety One, which holds shares in Glencore and Rio. 

Glencore’s shares, which fell more than 10% after the Rio Tinto deal talks collapsed on Thursday, have underperformed many of its competitors in recent years, but they have risen 19% since the start of the year.

Its adjusted EBITDA core profit fell by about 16% in 2024 and by 14% in the first half of last year. It is due to report 2025 results on Feb 18. 

Glencore had already been working on deals before the Rio Tinto talks as it looks to focus on copper, cobalt and nickel, all metals which are tied to the energy transition. It also has coal assets, which it decided against spinning off in 2024 after consulting shareholders. 

COAL SPINOFF DEBATE

Glencore is one of the world’s largest producers of thermal coal and with prices recovering, investors see a chance for the company to unlock value while cleaning up its portfolio.

“They probably would like to see a recovery in coal prices, which appears to be happening, but that cash from the coal business is still very valuable to them,” Cheveley said.

Analysts say a partial listing of coal assets could re-rate Glencore’s shares, freeing up capital to grow its copper portfolio in Africa and South America amid surging demand from electric vehicles, AI data centres and grid expansion.

Glencore said it would only reconsider a spinoff of the coal assets if shareholders asked for it. 

RIO TINTO REVISITED?

Jefferies analysts said that while a renewed round of talks with Rio Tinto cannot be ruled out, they see it as unlikely and expect Rio Tinto to pursue its own strategy independently.

Under British law, Rio Tinto cannot restart talks with Glencore for six months.

Rio Tinto had rejected Glencore’s push to retain around 40% of the combined group, sources said, a demand some investors viewed as too ambitious. The offer was more in the region of a 62-38 ratio, which would have given Glencore’s shareholders a 30% premium, the sources said.

“The strategic logic was always apparent, but perhaps finding a shared view on valuation was always going to be challenging,” said Aberdeen’s Pyle.

When Rio Tinto and Glencore announced their latest talks last month, some analysts speculated that the world’s largest miner, BHP, might step in. 

However, the Australian miner ruled out a counterbid, sources familiar with the matter said at the time. The same sources said a renewed approach remains unlikely. 

BHP declined to comment. 

(Reporting by Clara Denina; editing by Jason Neely and Alexander Smith)