IN THE COMPETITION TRIBUNAL SOUTH AFRICA
Case no: 118/LM/Dec05
In The Large Merger Between:
Barrick Gold Corporation Acquiring Firm
And
Placer Dome Incorporated Target Firm
Reasons for Decision
Approval
1. On 11 January 2006 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Barrick Gold Corporation and Placer Dome Incorporated.
The reasons for this decision follow.
The Transaction
1.1.1. The acquiring firm is Barrick Gold Corporation (“Barrick Gold”), a
global entity operating through subsidiaries in each country in which
it is engaged in commercial activity. 1 Barrick Gold does not own any
subsidiaries or assets in the Republic of South Africa.
1.1.2. The target firm is Placer Dome Incorporated (“Placer Dome”), a
public company incorporated in Canada. Placer Dome has the
following interests in South Africa:
1.1.3. An indirect shareholding in Placer Dome South Africa (Pty) Ltd; 2
1.1.4. A 50% interest in the South Deep Joint Venture, a joint venture
with Western Areas Limited;
1.2. A contingent interest in the Sedibelo Platinum Project, located in the Bushveld
Igneous Complex; 3
1 Barrick Gold’s common shares are listed on the Toronto Stock Exchange, the New York Stock
Exchange, the London Stock Exchange, the EuronextParis Stock Bourse and the Swiss Stock
Exchange.
2 See page 21 of the Record for the shareholding structure of the Placer Dome group.
3 Through a joint venture agreement (signed in November 2004) with the Bakgatla Ba Kgafela
community, Placer Dome has the right to earn a 10% interest in the Project by completing a feasibility
study to support the development of a mine and has the right to earn an additional 40% interest upon
making a decision to develop a mine on the property. At the time of the merger filing, Placer Dome was
undertaking prospecting activities on the property and had not earned any ownership rights in the Project.
2. The transaction is essentially an offer by Barrick Gold to acquire the entire issued share
capital of Placer Dome, inclusive of its interests in Placer Dome’s South African operations. 4
According to Barrick Gold the transaction is expected to create significant cost savings in
operating and capital efficiencies, general administrative expenses, exploration, tax
efficiencies, debt optimization and procurement practices. 5 Placer Dome initially opposed
the transaction and had advised its shareholders to reject the Barrick Gold’s offer. However,
before the hearing held on the 11 January 2006, the Tribunal was informed that the merging
parties had reached agreement on the terms of the transaction and that the acquisition
would proceed on a “friendly” basis. 6
The Relevant Market
3. Barrick Gold is a global gold producer. Placer Dome is primarily involved in the production
and supply of gold, silver and copper. Even though Barrick Gold does not have any
operations in South Africa, the merging parties activities overlap in the production and
supply of gold. We have previously accepted this market as being global in nature.
4. The Commission provided the following market shares for the top 15 global gold producers
for 2004:
Company Market share %
Newmont 8.60
AngloGold Ashanti 7.64
Barrick Gold 6.26
Gold Fields Limited 5.22
Placer Dome 4.61
Harmony 4.11
Navoi Metals and Mining 2.37
Kinross 2.00
Rio Tinto 1.96
FreeportMcMoran 1.84
Norilsk 1.51
China National Gold Group 1.30
DRD Gold 1.15
Shandong Zhaojin 1.15
Others 50.3
Total 100
Original Source: GFMS Limited Gold Survey 2005.
4 The public announcement was made on 31 October 2005. At the time the merger was filed with the
Tribunal, the transaction had already been notified and cleared by the relevant authorities in the USA,
Switzerland, Canada, Germany and Australia. See page 4 of the Commission’s Report.
Switzerland, Canada, Germany and Australia. See page 4 of the Commission’s Report.
5 Barrick Gold admits however that it was not contemplated that any of these synergies would be directly
derived through its acquisition of control over Placer Dome’s South African operations. See page 31 of
the Record.
6 Correspondence with Tribunal dated 9 January 2006.
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5. The merged entity’s market share post merger will be 10.87%, making it the largest gold
producer in the world. 7 While Placer Dome, in its submission to the Commission, did not
dispute the accuracy of the above market shares, it did note that the table referred only to
production and did not deal with inter alia the “capacity of the various producers which is
determined by, among other things, their reserves.” 8
6. During the hearing, the Tribunal requested more information on the parties’ position with
regard to reserves. According to the parties, 9 in December 2004, Barrick’s estimated gold
reserves amounted to 2769.95 tons of gold and Placer Dome’s amounted to 1863.62 tons of
gold. The combined gold reserves of the merging parties, expressed as a percentage of the
total estimated world gold reserves at the end of 2004, amounted to 11.03%. 10 This is not
dissimilar to their combined share of world gold production.
Impact on Competition
7. We have observed in our previous decisions, that no single gold producer has the ability to
influence the gold price, and that gold producers are essentially “price takers” with the price
being determined by reference to the daily price fixings of the London Bullion Association.
The international gold price is influenced by factors such as the sale of new production by
worldwide producers, global economic trends, currency exchange fluctuations, expectations
of investors and the sale of reserves by financial institutions such as international central
banks, the World Bank and the IMF. 11
8. Although the transaction will lead to the creation of the largest gold producer in the world,
given the international character of the gold market, we are of the view that the transaction
is unlikely to substantially prevent or lessen competition.
Conclusion
9. There are no significant public interest issues and we accordingly approve the transaction
for the above reasons.
for the above reasons.
7 This is in fact Barrick Gold’s stated intention for the transaction. At page 300 of the Record, Barrick
identifies a rationale for the transaction as being the creation of the “ largest gold company on all metrics”.
8 Page 898899 of the Record.
9 Correspondence with Tribunal dated 11 January 2006.
10 On an individual basis, Barrick Gold’s share of gold reserves amounted to 6.59% and Placer Dome’s
share amounted to 4.43% of total estimated worldwide gold reserves.
11 See Harmony Gold Mining Company Limited/Randfontein Estates Limited 16/LM/Feb00, Harmony
Gold Mining Company Ltd and African Rainbow Minerals Gold Ltd Case Number: 25/LM/May03,
Randfontein Estates Ltd and Anglogold Ltd Case Number: 03/LM/Jan01, FrancoNevada Mining
Corporation Ltd and Gold Fields Ltd Case Number:77/LM/Jul00 and Anglogold Limited and Driefontein
Consolidated (Pty) Limited Case Number: 66/LM/Nov03.
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24 March 2006
D Lewis Date
Concurring: N Manoim and M Mokuena
For the merging parties: S Langbridge (Bell Dewar & Hall Inc) and R Legh (Bowman Gilfillan
Attorneys)
For the Commission: T Kekana and J Theron (Mergers and Acquisitions)
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