By Peter Ker
A major Rio Tinto shareholder says it wants the world’s second-largest miner to explain how a merger with Glencore would provide immediate value to the group, rather than promoting the copper projects that may take decades to deliver.
Australian Foundation Investment Company chief executive Mark Freeman said Rio also needed to explain why a Glencore merger would fare better than the company’s failed acquisitions of aluminium company Alcan and coal miner Riversdale.
“We’ve seen some of these transactions before over time, and not with a great deal of success. We think Rio’s assets are great, so we are keen to understand from the company why they think this time it is different,” he said.
AFIC is Australia’s biggest listed investment company with $9.9 billion of assets under management. It owned more than $273 million worth of Rio shares at December 31, and was listed by Rio as the eighth-biggest holder of its Australian shares last year.
Rio and Glencore confirmed merger discussions on January 8, and will provide an update on those talks by February 5.
Analysts say a merger would give Rio more medium-term and longer-term copper options; Glencore owns undeveloped projects in challenging locations such as El Pachon in Argentina.
Freeman said he was keener for Rio to explain how a deal would add shareholder value, not merely long-term projects.
“They can always explain it in terms of growth in copper long term, but if the financial metrics in the deal don’t add up, it can destroy shareholder value to us Rio shareholders, so these are the sort of things we want to understand from the company,” he said.
“What we want to understand is how it adds valuation; has it increased the NPV [net present value] to us as shareholders.”
AFIC portfolio manager Brett McNeill added that he was generally sceptical about the big miner’s track record on acquisitions, and he preferred the small target strategy that new Rio boss Simon Trott outlined at his first major investor briefing in December.
“We really liked the idea that Rio presented at their recent capital markets day of having a simpler company focused on better operational performance and cost control and being invested in, you know, what they think of the best commodities long term,” he said.
Rio and Glencore are yet to agree on a deal structure or price, but many Australian investors have privately expressed caution in the belief that Rio has the superior assets, and on fears the copper options spruiked by Glencore may prove hard to develop.
WAM Leaders portfolio manager Matthew Haupt was more upbeat about the prospect of the merger and said Glencore’s copper assets “look good”.
“The logic is sound for a Rio Tinto-Glencore merger. The question everyone is grappling with is the financial metrics as with all deals like this,” he said.
“We ultimately believe medium to longer-term holders will be rewarded.”
The shareholder reaction came as Rio Tinto’s Australian iron ore division shipped a record volume over the past three months. But the miner has warned that stockpiles at Chinese ports are rising fast.
Data published by Rio Tinto on Wednesday showed total stockpiles at Chinese ports rose 15 per cent over the past three months. At least 166 million tonnes of ore is now piled up at ports in China, with that tally rising by 21 million tonnes in the quarter to December 31.
The amount of Rio’s ore stored at Chinese ports doubled to 6.4 million tonnes over the past three months.
The rise in stockpiles was partly caused by Rio’s improved output in Western Australia’s Pilbara region. The 91.2 million tonnes shipped between October 1 and December 31 was a record for a three-month period.
The strong finish to 2025 enabled Rio to achieve its goal of shipping at least 323 million tonnes of Australian ore in the year.
The rise in stockpiles is also believed to be caused by tactical Chinese buying ahead of the imposition of tariffs by the United States. If this is true, demand for iron ore and other commodities could soften once the tariffs are introduced and steel mills work through the large cache sitting at the ports.
“Prices are expected to fall modestly through to the end of 2027, both because of weak steel demand and higher iron ore supply,” the Australian government’s Department of Industry said in an analysis published in December.
BHP disclosed on Tuesday that tensions with the central purchasing agency that represents big Chinese steel mills were now affecting revenue. The company has responded to pressure from China by “optimising distribution channels”, which is understood to be code for changing its mix of customers and the specific iron ore products it chooses to ship from Western Australia.
Rio’s full-year iron ore export was 1 per cent lower than in 2024 because multiple storms disrupted its work in early 2025.
Iron ore sales to China by the major miners – Rio, BHP, Vale and Fortescue – were flat in 2025 compared to 2024. But Rio said smaller miners had increased shipments by 10 per cent.
Rio Tinto made no comment on Wednesday about its ongoing merger talks with Glencore.
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