One of the most consequential potential mergers in mining history is edging closer to a defining moment, as Rio Tinto and Glencore press on with talks under a looming regulatory deadline.
After confirming merger discussions on January 8 this year, the mining giants have until 5.00pm UK time on February 5 (4.00am AEDT, February 6) to either announce a firm intention to proceed or withdraw under British takeover law, which UK law requires within 28 days of discussions being identified.
The Financial Times reports that talks are “expected to be extended”; however, any extension must be approved by Britain’s Panel on Takeovers and Mergers.
Rio Tinto remains committed to chief executive officer Simon Trott and chairman Dominic Barton helming the newly formed mega company, which would be valued at approximately $317 billion, sources indicate. Negotiations are now focusing on the “control premium” sought by Glencore shareholders to offset the shift in boardroom power.
Governance issues also remain a sticking point, but Glencore has made headway in addressing this hurdle, notably through the sale of its assets in the Democratic Republic of the Congo (DRC) to the Orion Critical Mineral Consortium.
That Glencore–Orion deal inspired market confidence in the Rio–Glencore merger, whose consummation would rival the historic 2001 BHP–Billiton merger. As a result, Rio Tinto shares climbed four per cent.
Glencore sells up in Africa: Copper, cobalt and “ensuring peace”
Glencore signed a memorandum of understanding to sell a 40 per cent stake in its Congolese copper and cobalt operations to the US-backed Orion Critical Mineral Consortium.
“Through this partnership, we would be able to support the ambitions of the US Government and private sector with the supply of two critical minerals,” Glencore chief executive officer Gary Nagle said.
The deal, which values the assets at approximately $US9 billion, includes the Mutanda and Kamoto mines, located near Kolwezi in the Democratic Republic of the Congo. This strategic partnership aims to secure critical mineral supplies for the United States and its allies.
“The United States government is fully committed to the Washington Accords and ensuring peace, stability and prosperity throughout the entire Great Lakes region,” US Deputy Secretary of State Christopher Landau said.
The Washington Accords for Peace and Prosperity are a series of high-level diplomatic and economic agreements between the DRC and Rwanda, brokered by the US last year. Both the DRC and Rwanda are located in the African Great Lakes region.
It has been speculated that the sale, made in the hours before the initial February 5 deadline for Rio Tinto–Glencore merger talks, was intended to ease Rio Tinto’s reservations about sovereign risk and compliance in the African Great Lakes region.
