ALEX BRUMMER: Natural resources encourage a brutish, competitive spirit

Donald Trump, with his eyes on Greenland and his hands on Venezuela, is not the only dealmaker embracing natural resources.

For the third time in a decade, Britain's grand old mining champion Rio Tinto, with a heritage dating back to 1873, is seeking to do a deal with upstart Glencore to create a near-£200billion mining and metal trading giant.

Big mergers rarely deliver as hoped and the cultures of the two companies are very different. Glencore's origins are in trading and deal making and Rio is much more of a pure-play miner. A deal, if it could be done, would create a commodities behemoth.

But in a world where the biggest users of copper and rare metals are the new-wave electric vehicle makers Tesla and China's BYD, and electronic giants such as Nvidia, all with vast valuations, the coming together of Rio and Glencore doesn't sound so outrageous.

Copper is on a tear on the London Metal Exchange, where the price of the metal topped $13,300 a ton earlier this week in the wake of the surge in gold and silver.

The big difference is that Glencore, after its contested takeover of Xstrata in 2013, has among the most attractive copper assets in the world, with rich mines in Chile, Peru and Argentina. As a bonus, it also owns cobalt facilities in the Democratic Republic of Congo.

Digging deep: Glencore's origins are in trading and deal making and Rio Tinto is much more of a pure-play miner

Rio's wealth is based on its vast iron ore deposits in Australia. In 2020 it found itself in the doghouse after the wanton destruction of a sacred First Nation site at Juukan Gorge in Western Australia, which led to the departure of its top executive team.

The group is highly dependent on the Chinese market. State-owned Chinalco owns a 14.33 per cent stake, making it Rio's biggest shareholder. In much the same way as Trump covets Greenland's rare metals, one imagines that Beijing, even if there were dilution, would quite fancy a share of the copper spoils.

There are obvious questions as to how the establishment reputation of Rio and the entrepreneurial, risk-taking values of Glencore would mix and how management would line-up.

Rio's newish chief executive Simon Trott and oil trader Gary Nagle, who heads Glencore, are not a bespoke combination.

Rio recently disposed of its carbon-rich coal operations, while Glencore shareholders doubled down.

Once the investment bankers are fully engaged, the opportunities for a spin-off of coal and maybe even oil might be on the table. Glencore's trading operations based in Switzerland have had their regulatory challenges, but Rio might welcome sharper market skills.

BlackRock, through a variety of funds, speaks for some 14 per cent of shares in both companies. It will have a big say. This time around, all the signs are that Glencore is keen to get a deal over the line.

It might finally give founding shareholders, including Ivan Glasenberg, who still owns 10 per cent, a chance to diversify his wealth, even if it is largely a paper deal.

Mining transactions face tough political and regulatory scrutiny, as Anglo-American and Canada's Teck Resources are finding. But in market share terms, it is not a deal that should trouble the scorers.

If the share quotation for the combined group remains in London it shouldn't be a devastating blow.

Whether ambitious Sydney-based BHP boss Mike Henry, a loser in the battle for Anglo-American, will be tempted to gatecrash is a known unknown. Natural resources encourage a brutish, competitive spirit.

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