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WSJ: Diverging metal prices could reignite Glencore’s interest in Rio Tinto

Apr. 06, 2015 12:45 PM ETGlencore plc (GLCNF) StockRIO, GLCNF, GLNCYBy: Carl Surran, SA News Editor1 Comment
  • A six-month moratorium on merger talks between miners Glencore (OTCPK:GLCNF, OTCPK:GLNCY) and Rio Tinto (NYSE:RIO) ends tomorrow, and WSJ reports that the divergence between prices for copper and iron ore are giving deal supporters fresh hope.
  • Glencore shares have climbed more than 15% since mid-January while Rio’s have dipped 3%, as iron ore prices recently hit 10-year lows below $50/ton in a long decline from highs of $190/ton reached in 2011; copper prices, meanwhile, have rebounded by ~5% to slightly more than $6K/ton in the past month.
  • "Sooner or later either [Rio is] going to have to back away from the volume growth strategy, or they’re going to have to face the prospect that their earnings are going to fall through the floor,” says Sanford C. Bernstein analyst Paul Gait, adding that If Rio’s earnings keep falling and its share price suffers, “they’re going to be vulnerable to Glencore."
  • As recently as February, Rio CEO Sam Walsh said he was not interested in a deal with Glencore.
  • Another take: Glencore held back from Rio by value after takeover rule expires

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