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The recently proposed US$53 billion nil premium merger between international mining giant, London-listed Anglo American, and the largest listed Canadian base metals company, Teck Resources Ltd. (TSX: TECK.B), is a sign of growing activity in the base metals sector as a result of growing global demand for strategic metals like copper. Copper has advanced 27% year to date, and that has triggered intense interest in merger and acquisition activity.
This Anglo-Teck merger would be the first test of Canadian government policy implemented in 2024 under which acquisitions would be approved only in “the most exceptional of circumstances.” Teck CEO Jonathon Price pointed to the fact that the merged company’s global headquarters, CEO, deputy CEO, and Chief Financial Officer will all be based in Vancouver, although the company will be domiciled in the UK.
The new company would remain listed on the TSX as well as on the London and South African exchanges. In other words, Anglo Teck would still be a Canadian company. BC Premier David Eby also supports the deal.
This is certainly a defensible view, but the fact remains that Anglo American shareholders will own 62.4% of the merged company against Teck’s 37.6% stake. The retention of a Canadian listing means Canadian shareholders can defer any capital gains for up to 15 years.
To get the deal done, Anglo has committed to maintaining the current level of Teck employees in Canada and investing at least $4.5 billion over the next five years in Canada. This will include expanding Teck’s Highland Valley copper mine in BC and improving critical minerals processing capacity at its Trail lead/zinc complex.
With the need for government review, which took eight months when Glencore bought Teck’s coal operations last year, and the absence of a premium, other mining majors may choose to enter the fray. Australia’s BHP, Swiss-headquartered Glencore, and Brazil’s Antofagasta group all may be interested in offering a sufficient premium to break up the deal.
Driving all these corporate maneuvers is the role that copper is expected to play in the demand from the electric vehicle market and the Artificial Intelligence (AI) revolution, as well as the need to upgrade and expand the electrical grid to supply all these new sources of demand. Given that a new mine could take at least five years from inception to production – and usually double that time – a supply deficit of copper seems a certainty.
Anglo may well need to sweeten the deal to gain approval. In the meantime, another bidder such as BHP or Glencore may choose to come back for Anglo or Teck, having already made bids in the last two years. The deal, which at US$20 billion is the largest in the mining sector for over a decade, shows that corporates are willing to commit capital to gaining more exposure to strategic minerals, which not only includes copper but also such other critical minerals as zinc, cobalt, and lithium.
With Teck potentially being taken over, it makes sense to look at other diversified miners with a copper focus. London-headquartered Rio Tinto plc is one such company.
Rio Tinto plc ADR (NYSE: RIO) is one of the longest-established diversified mining companies in the world, with exposure to iron ore in Australia and Canada (it is the world’s largest iron ore producer), aluminum, lithium, and copper, as well as borates and titanium, which it is looking to dispose of.
With a market capitalization of $78 billion and 60,000 employees in 35 countries, Rio is one the 10 largest mining companies by market capitalization. It is focusing on growth in copper – it owns a majority interest and operates the giant Oyu Tolgoi mine in Mongolia.
Rio’s share price trades below its level five years ago, due to the difficult environment for iron ore sales, with reduced Chinese demand. Other problems are the impact of tariffs, operational issues in several divisions, and the disposal of its coal operations.
However, Rio’s new CEO, Simon Trott, recently announced a new structure to divide the company into three divisions, iron ore, aluminum, and copper. The revamped Rio will give investors exposure to three of the metals (iron ore, aluminum, and copper) that will be vital in the electrification of the global economy as well as a greatly increased lithium exposure, a vital element in the electric vehicle industry and in battery storage.
Rio’s half-year results to June 30 saw underlying earnings down 16%, to $4.8 billion ($2.96 per underlying share). Revenues remained flat at $26.8 billion due to a 13% decline in iron ore prices, operational disruption from four tropical cyclones in the first quarter of 2025, and a 34% decline in lithium prices. This was partially offset by rising contributions from its aluminum and copper businesses. Underlying earnings before interest, tax, depreciation and amortization (EBITDA) were down a much smaller 5%, to $11.5 billion.
As noted, Rio aims to pay out half of its underlying earnings. It distributed $2.4 billion ($1.48 per share) for the first half of 2025, equivalent to an annual dividend yield of 4.6%. As an ADR, dividends will be subject to a 15% withholding tax if held in non-registered and TFSA accounts.
Rio would be suitable for investors looking at add to their geographically diversified exposure to strategic metals and minerals. The vast majority of Rio’s assets are in politically stable and mining-friendly jurisdictions, such as Australia, Canada, Chile, and the U.S. Compared with other mining stocks, such as Teck, Rio has lagged due to operational issues and concerns over its exposure to commodities such as coal and iron ore that are regarded as less attractive. With the management change and focus on the three main divisions, Rio looks set to both perform better and be rerated.
Mining stocks carry more than the average degree of market risk, and can be very volatile. Consult with your financial advisor before investing, to ensure your investment aligns with your tolerance for risk and your financial objectives.
Gavin Graham is a veteran financial analyst, money manager, formerly Chief Investment Officer of BMO Financial, and a specialist in international investing, with over 35 years’ experience in global investment management. He is currently Chief Investment Officer of Calgary-based Spire Wealth Management.
Notes and Disclaimer
Content copyright © 2025 by Gavin Graham. This is an edited version of an article that first appeared in The Income Investor newsletter. Used with permission.
The commentaries contained herein are provided as a general source of information, and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.
The views expressed in this post are those of the author. Equity investments are subject to risk, including risk of loss. No guarantee of performance is made or implied. The foregoing is for general information purposes only. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
Image: iStock.com/Bjoern Wylezich
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