MMG banks on supply deals to get Anglo nickel deal through

By Melanie Burton and Clara Denina

MELBOURNE/LONDON, Sept 16 (Reuters) - Hong Kong-listed miner MMG 1208.HK is willing to guarantee long-term ferronickel supplies to European customers as it seeks to rescue its acquisition of Anglo American's AAL.L Brazilian nickel business from mounting EU regulatory opposition, a company executive told Reuters.

MMG agreed to buy Anglo's Barro Alto and Codemin ferronickel operations, and two development projects, last year for up to $500 million. But the deal has stalled amid concerns that European stainless steel producers could lose access to ferronickel supplies.

European Union regulators are preparing to warn MMG because of competition concerns, sources told Reuters last week.

Brussels has become increasingly wary of Chinese influence over key raw materials following a series of export restrictions by Beijing. Regulators are now weighing whether similar concerns apply to ferronickel, even though the Brazilian assets are outside China.

"We want to get through the European Commission by doing everything we possibly can to support that market, while having a business in Brazil that we can invest in and grow," said Troy Hey, MMG's executive general manager of corporate relations.

"We've opened the office in Europe... We are willing to commit everything that would make European customers in as good or a better place than they were with Anglo," he said.

MMG, which is 67% held by China's state-owned Minmetals and the rest by investors including BlackRock and Vanguard, argues its ownership would secure investment in the assets. Anglo said MMG emerged from a competitive sales process with the "most attractive offer package as a whole", citing the value and deliverability of its bid.

Anglo also indicated in 2024 that the assets could be mothballed if a sale could not be completed to a credible buyer.

SUPPLY COMMITMENTS

Melbourne-headquartered MMG is proposing long-term European supply commitments rather than remedies that would dilute its ownership of the assets.

The EU views such commitments as behavioural remedies rather than the structural changes it typically prefers. The European Commission, the EU's executive body, declined to comment.

A structural remedy, such as a stake sale, could compromise MMG's ability to develop and invest in the Brazilian business, Hey said.

"If giving up a minority stake means we end up with our hands tied in terms of moving quickly to project development and reinvestment...then we've not delivered for Brazil or for the business," he said.

Commitments to supply ferronickel for a fixed period can be difficult to monitor and enforce over time but a tightly drafted agreement could be sufficient to address concerns, a person familiar with the Commission's thinking said.

"The EU decision is still up in the air," the person added.