KEY POINTS
- Mining companies face tougher regulatory reviews as governments focus more on critical minerals and supply security.
- Executives from Glencore, Anglo American and Rio Tinto say the scrutiny may delay deals but is not making major mergers impossible.
- Valuation, strategy and shareholder concerns remain major obstacles, while geopolitics and national security are becoming increasingly important in regulatory decisions.
Major mining companies are facing tougher regulatory reviews when they seek to merge or acquire rivals, but industry executives say the increased scrutiny is not enough to stop large deals from going ahead.
Executives from Glencore, Anglo American and Rio Tinto said governments are paying greater attention to mergers involving copper and other critical minerals because of growing concerns about national security, supply chains and geopolitical tensions.
However, the mining bosses said companies can still complete major transactions if they properly consider regulatory requirements before pursuing a deal.
The regulatory environment for the global mining industry has changed significantly as governments seek greater control over strategically important resources.
Copper, nickel and other critical minerals are essential for electricity networks, electric vehicles, renewable energy technologies, batteries and other industrial applications. As demand for these minerals rises, governments are becoming increasingly concerned about who owns major mines and where the minerals are processed.
This means regulators are no longer looking only at whether a proposed merger could reduce competition. They are also examining whether a transaction could affect the security of supply or allow important mineral resources to be controlled by companies from countries considered strategic competitors.
Glencore Chief Executive Gary Nagle said regulators have always examined major mergers and acquisitions, but geopolitical tensions and the growing importance of critical minerals have made the reviews more intensive.
He said Glencore takes the regulatory environment into account before deciding whether to pursue a transaction, adding that the company would not commit to a deal it believed could not ultimately receive the necessary approvals.
Regulatory Reviews Could Take Longer
Although mining executives do not believe tougher regulation will prevent major deals, they acknowledge that transactions are taking longer to complete.
Anglo American CEO Duncan Wanblad said mining deals may now require 12 to 18 months to secure regulatory approval, compared with potentially shorter periods in the past.
He said the additional scrutiny meant transactions could take longer, but rejected the suggestion that regulators had made mining deals fundamentally impossible or significantly more difficult to complete.
The longer approval process means companies must consider regulatory risks much earlier when developing acquisition strategies. Potential buyers may also have to prepare for conditions imposed by governments before a transaction can be approved.
Despite the growing regulatory pressure, executives said government approval is not necessarily the biggest obstacle facing major mining mergers.
The industry’s recent experience suggests that disagreements over valuation, corporate strategy and shareholder interests have played a significant role in derailing proposed transactions.
Glencore and Rio Tinto previously held discussions over a possible combination, while BHP made several attempts to acquire Anglo American. None of those transactions was completed.
The experience highlights the complexity of major mining deals, which can require agreement from management teams, boards, shareholders, regulators and governments across several countries.
Anglo American’s proposed merger with Teck Resources provides an example of how regulators are increasingly considering national and strategic interests.
China remains the final major jurisdiction yet to approve the transaction, and investors expect Beijing could seek commitments related to security of supply rather than requiring the companies to sell major assets.
The combined company would account for roughly 5% of global copper production. That relatively modest market share could make a major asset sale less likely because the deal would not give the merged company overwhelming control of global copper output.
Instead, China could potentially seek commitments to maintain supplies to Chinese customers.
Such an approach would resemble China’s handling of Glencore’s acquisition of Xstrata in 2013. Beijing approved that transaction after requiring both structural and behavioural measures, including the sale of the Las Bambas copper project in Peru and commitments to supply Chinese customers with copper, zinc and lead.
