There had been rumours last month that acquisitive Glencore boss Ivan Glasenberg might have set his sights on Rio but speculation went into overdrive overnight when Bloomberg reported that Glencore was planning a bid for 2015.

The report, citing people familiar with the situation, said Glencore approached Rio’s major shareholder Aluminium Corporation of China (Chinalco) to gauge its interest in a potential combination.

Earlier this year, Glencore confirmed it was in talks with Rio about combining its Hunter Valley coal operations.

The merger speculation pushed Rio shares up by as much as 20% during trade in New York overnight.

Yesterday morning, Rio confirmed that it was contacted by Glencore in July over a potential merger.

Rio said its board unanimously decided that a merger was not in the company’s best interests, following consultation with financial and legal advisors.

The company informed Glencore of its rejection in early August and said there had been no further contact between the two parties.

Rio chairman Jan du Plessis said Rio had made progress in refocusing and strengthening the business under the leadership of CEO Sam Walsh and chief financial officer Chris Lynch.

“The board believes that the continued successful execution of Rio Tinto's strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders,” he said.

“Rio Tinto's shareholders stand to benefit from the very considerable value that this will generate.”

The news emerged as Glasenberg said overnight that low iron ore prices were likely to make the development of the massive Simandou iron ore project in Guinea by Rio and Chinalco less likely.

“Is Guinea going to have Simandou developed at current prices? It’s going to be difficult,”Dow Jones Newswires quoted Glasenberg as telling a panel session in London overnight.

“It’s a project that is going to cost in excess of $US25 billion ($A28.6 billion). Who’s going to put in $25 billion?” he said.

Glencore has a current market capitalisation of about £45 billion ($A82.5 billion), while Rio has a current market cap of £56.6 billion.

However, the timing of the deal is opportunistic, with Rio shares down about 11% in London this year while Glencore shares are up by more than 5%.

Glencore’s approach to Rio came only 15 months after completing a $US35 billion merger with Xstrata.

Of the four London-listed majors – Rio, Glencore, BHP Billiton and Anglo American – analysts from JP Morgan view Glencore as the most likely to pursue merger and acquisition opportunities.

Anglo American

It had been long speculated that Glasenberg’s next target would be Anglo.

With a market cap of £18.8 billion and a recent history of underperformance, it is a more manageable deal for Glencore – though obviously not as compelling as Rio.

Xstrata made a hostile tilt for Anglo in 2009 and was rejected by former CEO Cynthia Carroll but her successor Mark Cutifani indicated last month he was open to an offer.

"My job is to create value, however that may be shown," Cutifani told the Wall Street Journal last month.

"Our job is to do a good job with the business and at the end of the day if somebody sees value then there's a conversation to be had.”

But a day later, Glasenberg hosed down speculation of a Glencore bid for Anglo.

“With Anglo, we don’t trade diamonds, if that gives you a good idea and we don’t trade platinum,” Glasenberg told reporters in Johannesburg last month.

“We will only look at assets which we trade, which we market.”