GlencoreXstrata, the world’s fourth-biggest mining company, is studying separate deals with Rio Tinto and BHP Billiton in Australia to reap cost savings at struggling coal and nickel operations.

The company is assessing a bid for BHP Billiton’s Nickel West assets in Western Australia, which are near a GlencoreXstrata nickel project, CEO Ivan Glasenberg said last week. The sale has also attracted rival Mick Davis, former CEO of Xstrata, whose X2 Resources has studied bidding, says a person familiar with the matter, who asked not to be named.

Global mining companies are looking to make cost savings after a decade-long boom in metal prices waned amid increased supply and slower Chinese economic growth. A combined Glencore-Rio coal business on the east coast of Australia would save more than $500-million, Credit Suisse Group said last week. The price of power station coal is trading near a four-year low.

“There’s a lot to be done where we can get substantial synergies,” Glasenberg, 57, told analysts in London last week regarding the possible coal tie-up. We’re talking to Rio Tinto, but it takes time for both sides to assess each other’s assets. We’ve been talking to them for a long time. How far we’ll get and how soon we can reach an agreement, I don’t know. But it’s something that clearly makes a lot of economic sense.”

Glencore last week reported a 2013 pro-forma adjusted net income of $4.58-billion, described by Citigroup as an “exceptionally strong” result, exceeding its $4.01-billion estimate, even as year-earlier earnings were 23% higher.

The world’s biggest exporter of power station coal owns the Ravensworth, Mount Owen and Liddell coal operations, in Australia’s Hunter Valley. It has held talks with Rio Tinto on ways to share mines and infrastructure to cut costs, two people with knowledge of the matter have said. Rio Tinto’s interest in the region is through its Coal & Allied unit, which runs three mines.

“A material level of synergies is potentially on offer should the two companies look toward a joint venture structure,” Credit Suisse analysts said in a February 27 report. “Glencore is highly likely to want marketing rights over combined production and these could prove an issue with Rio Tinto.”

BHP Synergies

Glasenberg said he was interested in the BHP Billiton nickel assets, given their proximity to the Murrin Murrin mining and refining pro- ject, controlled by Glencore’s Minara unit. Glencore last week took a $454-million impair-ment charge on Murrin Murrin in the north-eastern Goldfields region of Western Australia.

BHP Billiton has booked impairment charges on the Nickel West assets of almost $1.6-billion in the last two fiscal years after prices for the metal had fallen.

“We will kick the tyres,” Glasenberg said in a telephone interview from London. “It’s something that would make sense, but it is an asset that’s had its problems.”

X2 had studied an offer of less than $1-billion, said the person with knowledge of the matter. Australian nickel producer Western Areas has also looked at the assets, according to two people familiar with the situation, who asked not to be identified.

Nickel West

The Nickel West operations produced 103 300 t of the metal in fiscal 2013. The assets include the Mount Keith opencut mine and concentrator, two underground mines and smelting plants at Kalgoorlie and Kwinana.

Glasenberg, Glencore’s largest shareholder, with an 8.3% stake, completed the $29-billion takeover of Xstrata in May last year to add coal, copper, zinc and nickel mines to his trading empire. Glencore expects the transaction to generate cost savings of as much as $2.4-billion this year, compared with an estimate of $2-billion in September.

The company agreed to sell its Las Bambas copper mine in Peru as part of a deal to win Chinese regulatory authorisation for the Xstrata purchase.

Glencore remains in talks with a group led by China Minmetals, and negotiations are focused on price.

“If we can get the right price, we will go ahead and sell it,” Glasenberg said. There is a leading bidder, the Chinese – that’s no secret, so we are continuing to have discussions with them. There’s no roadblock in the talks.”

The Minmetals-led group is nearing an accord to buy Las Bambas for more than $5-billion. Proceeds may be returned to shareholders, Glencore CFO Steve Kalmin said in September.