Extracting value amid rising risk: Compliance and M&A pressures in the global resources sector

The natural resources extraction industry—spanning mining, oil and gas, and critical minerals—faces an increasingly complex compliance, legal and regulatory environment. Over the next three years, operators will encounter heightened scrutiny across environmental, social and governance (ESG) domains, as well as greater geopolitical and enforcement risks.

Executive Summary

The natural resources sector—including mining, oil & gas, and critical minerals—has most recently faced:

• In February 2025, a catastrophic tailings dam failure in Zambia released acidic waste into the Kafue River, triggering lawsuits, reputational fallout and renewed global calls for stricter tailings oversight.
• On September 21, 2025, the Democratic Republic of Congo (DRC) announced it would replace its cobalt export ban with a quota regime, reshaping global battery supply chains and underscoring the risks of resource nationalism.
• Most recently, operations at Freeport's Indonesian mine were suspended after a fatal accident, underscoring rising scrutiny of mine safety and permitting standards.

At a Glance: Global Hotspots for Compliance Risk

These developments demonstrate that compliance failures or policy shifts can disrupt global markets, trigger litigation and accelerate regulatory reform. Companies that proactively adapt their compliance frameworks, strengthen governance and engage stakeholders early will be best positioned to mitigate these risks. Critical challenges include:

• Environmental & Climate Regulation. Tighter emissions, water withdrawal, waste and biodiversity rules; climate disclosure mandates.
• Permitting & Licensing. Longer reviews, additional "green triggers" and litigation risk (spotlight: Indonesia mine accident).
• Heightened human rights in conflict affected areas. With the significant spread of conflict affected areas over the last five years, more projects must evaluate the risks of exacerbating the causes of conflict and actively manage the human rights impacts.
• Supply Chain & Responsible Sourcing. Expanded conflict minerals, labor and deforestation obligations (spotlight: DRC cobalt quotas).
• Community & Indigenous Rights. Free, Prior and Informed Consent (FPIC) standards and litigation growth.
• Anti-Corruption & Governance. FCPA/UK Bribery Act/other non-US anti-corruption enforcement efforts (particularly in the context of third-party vendor/logistic and local stakeholder engagement), along with beneficial ownership disclosure, continue to require particular sensitivity and attention.
• Geopolitical Risks. Sanctions, export quotas and nationalization trends (spotlight: cobalt, lithium).
• Digital Compliance. Real-time monitoring, data integrity and cybersecurity enforcement.
• Financial Assurance. Higher closure bonds, insurance premiums and liability exposure (spotlight: Zambia tailings).
• Policy Volatility. Shifting political priorities and uneven enforcement capacity.

Recent Developments Snapshot

Environmental Regulation and Climate Transition

The Zambia tailings dam collapse has become a global touchpoint for environmental risk in extractives. Regulators are now signaling stricter tailings management rules, real-time monitoring mandates and higher closure bonds. At the same time, governments are tightening climate disclosure standards, with Scope 1–3 emissions reporting increasingly mandatory.

Supply Chain and Responsible Sourcing

The DRC's cobalt quota system, announced September 2025, exemplifies the volatility of resource nationalism. Companies face heightened pressure to secure traceability, comply with deforestation and forced labor rules, and manage contractor liability. Supply chain shocks highlight the importance of diversified sourcing and proactive due diligence.

Community and Indigenous Rights

Community litigation and indigenous rights enforcement continue to expand. The Zambia disaster illustrates how community harm can escalate into litigation, while Indonesia's Freeport accident underscores the human cost of operational failures. FPIC standards are increasingly enforced as binding obligations.

Anti-Corruption and Governance

Despite some conflicting guidance, enforcement under the US FCPA, UK Bribery Act and (notably rising) non-US anti-corruption efforts are here to stay, particularly in high-risk jurisdictions like the DRC. The cobalt quota policy may increase reliance on state-controlled entities, raising new governance and corruption risk. Third-party vendor, logistics and local stakeholder engagement, therefore, continue to be areas deserving particular attention.

Geopolitical and Cross-Border Risks

Resource nationalism is accelerating, from DRC quotas to Mexico's lithium policies. These developments demonstrate that governments are asserting tighter control over critical minerals, with export restrictions, royalty hikes and local processing mandates likely to spread across other jurisdictions.

Jurisdictional Highlights

United States

SEC climate disclosure rules and California reporting laws will affect U.S. and non-U.S. operators. Enforcement priorities include FCPA and environmental crimes.

European Union

The CSRD and CSDDD will impose extensive ESG reporting and general due diligence requirements. Specific due diligence obligations will be imposed on the extractives sector through both the Batteries Regulation and Critical Raw Materials Act while the EU deforestation regulation tightens supply chain oversight for certain commodities.

Latin America

Mexico and Chile continue to tighten state control over lithium and copper; community water disputes are rising.

Africa

The DRC's cobalt quotas replace an export ban, reinforcing the trend toward resource nationalism. Anti-corruption enforcement remains active, often with international coordination.

Asia-Pacific

Following the Freeport Indonesia accident, regulators may impose stricter mine safety and permitting requirements. Australia is expanding climate and indigenous heritage compliance rules.

Mergers & Acquisitions Implications

The compliance and regulatory landscape outlined above is increasingly shaping M&A activity in the natural resources industry. Over the next five years, acquirers and investors should expect the following dynamics:

• Heightened Due Diligence Requirements. ESG, climate disclosure, tailings management and FPIC obligations are now central to transaction risk assessments, requiring deeper environmental, social and compliance audits.
• Valuation Adjustments. Regulatory uncertainty, resource nationalism and potential liabilities tied to environmental disasters or community disputes are increasingly factored into pricing models, often resulting in discounted valuations for high-risk assets.
• Transaction Structuring. Parties are using indemnities, earn-outs and escrow arrangements to allocate compliance and ESG-related risks. Buyers are also insisting on robust representations and warranties covering anti-corruption, supply chain practices and regulatory permits.
• Strategic Consolidation. Compliance burdens and escalating capital costs are likely to accelerate consolidation among mid-sized operators, as larger players with established governance frameworks are better positioned to absorb rising obligations.
• Cross-Border Challenges. Divergent ESG and anti-corruption regimes create added complexity for cross-border deals, particularly where assets are located in jurisdictions with rising resource nationalism.

In this environment, M&A strategies must incorporate compliance as a value driver and risk mitigant, with legal and business teams working closely to evaluate not only financial but also regulatory, environmental and community-related exposures.

Key M&A Takeaways

For dealmakers in the natural resources sector, compliance and regulatory risks are now central to M&A strategy:

• ESG and compliance due diligence must be as rigorous as financial due diligence.
• Valuations are increasingly adjusted to reflect regulatory and community-related liabilities.
• Deal structuring tools (indemnities, earn-outs, escrows) are being used to allocate ESG risks.
• Strategic consolidation is expected, as larger players absorb rising compliance costs more effectively.
• Cross-border deals face added complexity from divergent ESG, anti-corruption and resource nationalism regimes.

Practical Compliance Takeaways

• Stress-test environmental and safety controls against global best practices—tailings failures and mine accidents now carry amplified legal and reputational consequences.
• Strengthen supply chain diligence, particularly for cobalt, nickel and lithium, where resource nationalism and ESG rules collide.
• Deepen community engagement and FPIC compliance, ensuring grievance mechanisms are robust and transparent.
• Enhance board-level governance of ESG risks, particularly where state-owned counterparties are involved.
• Integrate higher compliance costs and sovereign risk into project finance models, reflecting insurance, closure and remediation obligations.
• Document your compliance measures, including trainings, to a strong compliance culture should enforcers, regulators, litigators or consumer advocacy groups come knocking.
• Perform occasional global compliance audits or gap-analysis in order to pressure test your program.
• Take an integrated approach where local "compliance champions" are responsible for ensuring that policies are understood and followed and where all compliance activities feed up to a dedicated team or individual within the legal function who quarterbacks the program in a holistic manner.

Conclusion and Outlook

The convergence of ESG regulation, community expectations and geopolitical volatility will make the next three years particularly challenging for natural resource extractors. Recent events, from Zambia to the DRC to Indonesia, demonstrate the scale of potential disruption. Companies that integrate compliance into strategy, invest in monitoring and governance and anticipate jurisdictional shifts will be best positioned to secure financing, permits and a competitive edge.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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