KEY POINTS
- MMG offers long-term ferronickel supply deals to Europe.
- EU regulators are reviewing the $500 million acquisition.
- MMG wants to keep full control of the Brazilian assets.
MMG is offering long-term ferronickel supply agreements to European customers as it seeks to overcome regulatory concerns threatening its planned acquisition of Anglo American’s Brazilian nickel business.
The Hong Kong-listed mining company agreed last year to acquire Anglo American’s Barro Alto and Codemin ferronickel operations in Brazil, along with two development projects, in a deal valued at up to $500 million.
The transaction has since stalled as European Union regulators examine whether MMG’s ownership could create risks for European stainless steel producers that depend on ferronickel supplies.
MMG’s proposed solution is to guarantee ferronickel supplies to European customers over an extended period rather than give up part of its ownership of the Brazilian assets.
Troy Hey, MMG’s executive general manager of corporate relations, said the company wants to do everything possible to address the European Commission’s concerns while retaining the ability to invest in and expand the Brazilian operations.
MMG has already established an office in Europe as part of its effort to maintain close engagement with customers and regulators.
Hey said the company was prepared to make commitments that would leave European customers in an equal or better position than they were under Anglo American’s ownership.
The company believes such commitments could help address concerns about access to ferronickel without weakening its control over the Brazilian assets.
EU regulators question the deal
The European Commission formally set out its concerns in a statement of objections on Tuesday, confirming the regulatory timeline previously reported by Reuters.
The concerns come as the EU has become increasingly cautious about Chinese influence over critical raw materials following a series of export restrictions imposed by Beijing.
Although the Brazilian nickel assets are located outside China, regulators are examining whether MMG’s ownership structure could raise similar supply-security concerns.
MMG is 67% owned by China’s State-owned Minmetals, while the remaining shares are held by other investors, including major global investment firms BlackRock and Vanguard.
The company maintains that its ownership would provide the Brazilian operations with the investment needed to develop the assets and expand production.
Company rejects selling a minority stake
The EU may prefer a structural remedy, such as requiring MMG to sell part of its stake in the Brazilian business.
Hey said MMG believes such a move could restrict its ability to make investment decisions quickly and reinvest in the operations.
He argued that reducing MMG’s ownership could undermine the company’s ability to develop the Brazilian projects and deliver the investment benefits expected from the acquisition.
Instead, MMG is proposing behavioural measures centred on long-term supply agreements with European customers.
A person familiar with the European Commission’s thinking said fixed-term ferronickel supply commitments could be difficult to monitor and enforce over a long period.
However, the source said a carefully drafted agreement could potentially address the regulator’s concerns.
Anglo wants a credible buyer
Anglo American selected MMG after a competitive sales process, describing its proposal as the most attractive overall package based on value and the ability to complete the transaction.
The assets include the Barro Alto and Codemin ferronickel operations, as well as two projects still under development.
Anglo had previously warned that the operations could be placed on care and maintenance if a sale could not be completed with a credible buyer.
The outcome of the European Commission’s review therefore remains important to both companies and to the future of the Brazilian nickel assets.
MMG’s latest proposal is designed to preserve its ownership and investment plans while providing European stainless steel producers with greater certainty over future ferronickel supplies. The European Commission has yet to make a final decision on whether the proposed commitments will be sufficient to clear the transaction.
