With mining major Glencore having confirmed it is in talks with fellow major miner Rio Tinto to effect a merger that could create the world’s largest mining company at a combined market value of $207-billion, market research firm CreditSights maintains its “outperform” rating for Glencore.

In turn, the firm maintains its “market perform” expectation for Rio Tinto, meaning their bonds or credit will deliver excess returns roughly in line with their sector or peer group.

The outperform rating means Glencore is expected to deliver excess returns greater than its sector or a defined peer group, while Rio Tinto has a high credit level for its bonds, reflecting the company’s strong financial standing and low probability of default.

CreditSights says the buyout talks between the two companies is not unexpected given that similar discussions took place in 2024 and the current circumstances offer a stronger rationale for such a merger – including Rio Tinto’s new and likely more acquisitive CEO, Glencore’s consolidation rhetoric and the restructuring of Glencore’s coal business.

The prior discussions between Glencore and Rio Tinto reportedly stalled over valuation gaps, leadership and Glencore’s coal exposure.

At this stage, CreditSights says deal contours remain highly uncertain with key open items being governance, valuation, leadership and whether Glencore’s marketing and trading division will be included in any combination.

The firm adds that the pending merger of Anglo American and Teck Resources has intensified competitive pressure for other companies to scale and strategise, especially given copper’s growing importance globally.

“Rio Tinto’s appointment of CEO Simon Trott likely signals a more proactive stance toward portfolio actions and mergers and acquisitions, while Glencore’s CEO has argued that consolidation can deliver material synergies, stronger capital discipline and better access to talent and long-term capital,” CreditSights states.

Should Glencore restructure its coal business into a subsidiary, it could reduce one of the obstacles to a tie-up with Rio Tinto and, as such, CreditSights sees a higher probability of an all-share merger between the two mining companies proceeding.