Is Glencore’s $22B asset shift a prep for Rio merger?

Glencore (LSE: GLEN) has transferred almost $22 billion in foreign assets into its Australian subsidiary in a sweeping global restructuring that could lay the groundwork for a future merger with a rival mining heavyweight.

The move, reported by the Australian Financial Review, means the total assets held by Glencore’s Australian entity have doubled to $42 billion. The changes were quietly disclosed to the Australian Securities and Investments Commission on April 30, though the company said the transaction took place in December, according to AFR. 

The strategic transfer of assets to Glencore’s Australian entity signals more than just operational streamlining, the Review notes. By centralizing key assets in a single jurisdiction, which is close to Asian markets, Glencore creates a more attractive and simplified structure for would-be partners or a mega-merger, investors say.

Potential tie-up partners like Rio Tinto (ASX, LSE: RIO), which has held months of behind-the-scenes discussions with Glencore, do not want to own coal mines, AFR says. 

Rio, the second-largest miner by market capitalization, has a stock market valuation of A$160 billion (US$103 billion) while Glencore is ranked around 10th at £33.6 billion (US45.4 billion). The merged company would become the world’s largest diversified mining and commodity trading firm, overtaking BHP (NYSE, LSE, ASX: BHP) in total revenues and assets. But it would face hurdles in regulatory scrutiny and probably business philosophy; Rio is considered conservative in its approach. 

Consolidation 

Glencore asset shift required $3.8 billion in internal cash transfers and $614 million in intra-company share issuances to facilitate the asset migration. The restructure consolidates coal mines in Canada, South Africa and Colombia, a major copper project in Argentina, and South African manganese, chrome and vanadium operations under Glencore Investment Pty, the company’s Australia-based entity

Market observers noted the asset realignment marked a dramatic shift in tone from earlier failed merger efforts. In 2014, Rio rejected a proposal outright, sparking a very public standoff between then-CEO Ivan Glasenberg and Rio’s leadership.

But Glencore’s 2024 outreach met a warmer reception. Outgoing Rio chief Jakob Stausholm remained hesitant, though several senior executives – one of whom AFR says may succeed him – were reportedly more receptive to the idea.

Coal division

After shelving plans to spin off the company’s coal division, which delivered 38% of Glencore’s earnings last year, CEO Gary Nagle has centralized all coal operations within the Australian unit. They include Canadian subsidiary Elk Valley Resources, which operates four steelmaking coal mines in British Columbia: Elkview, Fording River, Greenhills, and Line Creek. EVR also holds a 46% stake in Neptune Terminals, a key bulk export facility.

In Colombia, Glencore owns the Cerrejón open-pit coal mine. In South Africa, it controls the Impunzi thermal coal complex and holds stakes in the Mokala manganese mine, the Glencore–Merafe Chrome Venture and the Rhovan-Bakwena Vanadium Venture. Joining the list of transferred assets is the MARA copper project in Argentina, which the company acquired from Pan American in 2023.

The Australian arm also holds the company’s thermal and metallurgical coal assets in New South Wales and Queensland.

Critical minerals

As merger speculation simmers, Glencore is also deepening its presence in Australia’s critical minerals sector. The Swiss miner and commodities trader has inked a three-year supply agreement with Cobalt Blue (ASX: COB) to provide cobalt hydroxide feedstock for the Kwinana refinery in Western Australia, which is set to become the country’s first cobalt refinery.

The deal will see Glencore supply up to 50% of the refinery’s cobalt input, starting once the facility begins commercial operations. It guarantees a minimum of 3,750 tonnes of cobalt hydroxide over the contract period, with 750 tonnes in the first year and 1,500 tonnes annually in the second and third years. The feedstock will come from Glencore’s operations in the Democratic Republic of Congo, specifically Kamoto Copper, in which it holds a 75% stake, and Mutanda Mining.

The assets shift and cobalt supply deal show Glencore positioning itself for consolidation and growth, with Australia at the heart of its strategy.