Because the mega-merger craze has come to the fore in the mining industry

The mining sector looks set for a frenetic year of deals, following market speculation about a potential tie-up between the industry giants. Rio Tinto and Glencore.

It comes after Bloomberg News reported British-Australian multinational Rio Tinto and Switzerland-based Glencore were in early merger talks on Thursday, although it was unclear whether the talks were still alive.

Separately, Reuters reported Friday that Glencore approached Rio Tinto at the end of last year about the possibility of combining their activities, citing a source familiar with the matter. The talks, which were said to be brief, were thought to be no longer active, the news agency said.

Rio Tinto and Glencore declined to comment when contacted by CNBC.

A prospective merger between Rio Tinto, the world’s second-largest miner, and Glencore, one of the world’s largest coal companies, would be the biggest deal in the mining industry.

Combined, the two companies would have a market value of about $150 billion, surpassing a longtime industry leader. BHPwhich is worth about $127 billion.

Analysts were largely skeptical about the merits of a Rio Tinto-Glencore merger, pointing to limited synergies, Rio Tinto’s complex. dual structure and strategic divergences on carbon and corporate culture as factors that pose a challenge to concluding an agreement.

“I think everyone is a little surprised,” Maxime Kogge, equity analyst at Oddo BHF, told CNBC by phone.

“Honestly, they have limited overlapping assets. That’s the only branch where there’s really some synergy and opportunity to add assets to make a bigger group,” Kogge said.

Global mining giants have been considering the benefits of mega-mergers to strengthen their position in the world energy transitionespecially with the demand for metals like copper he expected to jump over the coming years.

A highly conductive metal, copper is projected to face shortages due to its use in powering electric vehicles, wind turbines, solar panels and energy storage systems, among other applications.

Oddo BHF’s Kogge said it is currently “really complicated” for major mining companies to bring new projects online, citing the long-delayed Rio Tinto. controversial Copper mining resolution in the United States as an example.

“It’s a very promising branch project, it could be one of the biggest in the world, but it’s full of problems and somehow acquiring another company is a way to really accelerate the expansion in the branch,” said Kogge.

“For me, a deal is not that attractive,” he added. “It goes against what all these groups have tried to do before.”

Last year, BHP made a $49 billion bid for a smaller rival American Englisha proposal that ultimately failed due to problems with the business structure.

Some analysts, including those at JPMorgan, expect another unsolicited bid for Anglo American to materialize in 2025.

Before pursuing Anglo American, BHP carry out an acquisition of OZ Minerals in 2023, strengthening its copper and nickel portfolio.

Analysts led by Ben Davis at RBC Capital Markets said it is unclear whether the talks between Rio Tinto and Glencore could result in a simple merger or require the break-up of certain parts of each company instead.

Regardless, they said the M&A parlor games that arose after the merger talks between BHP and Anglo American would undoubtedly be “seriously restarted”.

“Despite Glencore once approaching Rio Tinto’s key shareholder Chinalco in July 2014 for a potential merger, it is still a surprise,” RBC Capital Markets analysts said in a research note published on Thursday.

BHP’s move to acquire Anglo American may have catalyzed talks between Rio Tinto and Glencore, analysts said, with the former potentially looking to gain more exposure to copper and the latter seeking an exit strategy for its major shareholders.

“We don’t expect an outright merger because I believe Rio’s shareholders will see it as favoring Glencore, but (it’s) possible that there will be a deal structure that could keep both groups of shareholders and management happy,” they added.