Rio Tinto may keep Glencore coal

Rio Tinto could retain Glencore’s coal business if ongoing merger talks succeed, marking a notable reversal from Rio’s 2018 exit from coal.

According to reports from Bloomberg, the move removes a major obstacle to a potential deal, allowing negotiations to focus “more squarely on valuation, deal structure and governance of a combined entity”.

One scenario reportedly under consideration would see Rio Tinto acquire Glencore in its entirety, including its coal assets, with the option to divest the coal business at a later date if deemed strategically or politically necessary.

BMI, a FitchSolutions Company, said the development reflects a clear change in approach.

“While this development does not imply that a transaction is imminent or inevitable, it does signal a more pragmatic approach from Rio Tinto’s new management team,” the firm said.

“Compared with prior leadership, the current regime appears more flexible and deal-oriented, suggesting a stronger willingness to compromise in order to get a transformational transaction across the finish line.”

The report also pointed to a broader reassessment of coal and environmental, social and governance (ESG) across the mining sector.

“Management teams across the sector have increasingly deprioritised net-zero carbon targets set far into the future, particularly as returns on ESG-related capex [capital expenditure] have often fallen short of expectations,” BMI said.

“Investor sentiment has also matured; there is growing acceptance that large, diversified and highly scrutinised operators such as Glencore are arguably better stewards of coal assets than smaller, less transparent companies that face weaker oversight and fewer ESG constraints.”

From a credit perspective, retaining coal could strengthen the balance sheet. Glencore’s coal business generated about $US4.7 billion ($7 billion) of earnings before interest, taxes, depreciation and amortisation (EBITDA) against $US2.9 ($4.32 billion) billion of capex in the year to June 2025.