COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 26/LM/May03
In the large merger between:
Sasol Mining (Pty) Ltd
and
Anglo Operations Ltd (acting through its Anglo Coal division)
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Reasons for Decision
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Approval
The Competition Tribunal issued a Merger Clearance Certificate on 23 July 2003
approving the merger without conditions. The reasons are set out below.
The merger
The transaction
The transaction consists the sale of assets in two separate but interdependant stages
and is governed by three agreements concluded between the merging parties.
It, firstly, entails the transfer of mineral rights from Anglo Operations Limited, acting
through its Anglo Coal Division, to Sasol Mining (Pty) Ltd (“Sasol Mining”). In
exchange for the underground mineral rights, Sasol Mining will grant Anglo
Operations access to its existing market. Anglo Operations will supply Sasol Mining
with the required volumes of thermal coal from its new opencast mine to be
constructed in the Kriel area for the next 21 years.
Secondly, Anglo Operations will acquire certain assets, infrastructure, equipment and
employees from Sasol Mining’s Syferfontein Opencast Colliery when it closes down.
On conclusion of the transactions, Anglo Operations will have ceded the Kriel
Underground Mineral Rights to Sasol Mining. The reserves will then be mined by
Sasol Mining. Anglo Operations (having bought the Strip Mining Business from
Sasol’s Syferfontein Opencast Colliery), will mine the open cast reserves at Kriel
South for sale of coal to Sasol Mining under the Coal Supply Agreement.
The parties
The parties to the transaction are:
Sasol Mining, a wholly owned subsidiary of Sasol Limited. Sasol Limited
does not have a single controlling shareholder.
Anglo Operations Limited, acting through its Anglo Coal Division. Anglo
Operations Limited is a wholly owned subsidiary of Anglo American
Corporation of South Africa Limited, which in turn is controlled by Anglo
American Holdings Limited, a company registered in the United Kingdom.
Anglo does not have a single controlling shareholder.
The rationale for the transaction
Sasol’s coal reserves at its Syferfontein Opencast Colliery will be exhausted in four
years time. In order to secure the future supply of thermal coal, Sasol Mining decided
to source a portion of its thermal coal requirements from outside its own organisation.
Anglo owns undeveloped reserves adjacent to Sasol’s existing colliery. The Kriel
South reserves lie in close proximity to Sasol’s existing operations and the continuous
nature of the coal seam means that the gasification characteristics of the coal are well
known to Sasol.
Furthermore, by selling its opencast mining equipment and infrastructure to Anglo
Sasol will realize a return on its assets, which otherwise would have become
redundant in 2007. Anglo will use these assets to develop the new opencast mine.
Evaluating the merger
The relevant market
Sasol’s coreactivities are the conversion of coal into synthetic fuels and chemicals as
well as the refining of crude oil into liquid fuels. These core activities are
complemented by coalmining operations and oil and gas exploration and production.
Sasol Mining produces thermal coal primarily for use within the Sasol Group.
Sasol Mining produces thermal coal primarily for use within the Sasol Group.
Anglo Operations owns collieries that mainly supply thermal and metallurgical coal to
Eskom, other domestic users and the export market.
The relevant market is therefore defined as the market for thermal coal sold in the
South African market.
2
The market shares of the five largest producers of thermal coal, excluding Sasol 1, in
South Africa are:
BHP Billiton 36.9%
Anglo Coal 26.3%
Eyesizwe 10.0%
Kumba 9.5%
Duiker 8.9%
Effect on competition
Although both parties are active in the mining of thermal coal within South Africa,
Sasol Mining is not a competitor of Anglo Operations, as it is not regarded as a
participant in the market for the production and supply of thermal coal to domestic
third parties. It consumes its entire annual thermal coal production internally.
The coal supplied by Anglo Operations will replace Sasol’s supply from its
Syferfontein colliery. As a result of the transaction Anglo Operations will become the
first outside coal supplier to gain access on a longterm contractual basis to Sasol’s
previously closed coal market.
Eskom and Sasol account for approximately 90% of thermal coal consumption in
South Africa. The proposed merger will not have an impact on the supply of coal to
Eskom, as its supply is secured by longterm supply agreements. Furthermore, since
there are a number of coal suppliers with excess production the remaining smaller
thermal coal consumers will not be negatively affected by the transaction.
We thus agree with the Commission that the transaction will not significantly prevent
or lesson competition in the relevant market.
Public interest
The transaction does not raise any public interest concerns.
____________ 12 August 2003
D Lewis Date
Concurring: N Manoim, F Fourie
1 Although Sasol is the second largest thermal coal producer it consumes all of its production and does
not sell to third parties.
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