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Competition Tribunal
Republic of South Africa
CASE NO: 110/LM/OCT07
In the matter between:
PAMODZI GOLD LTD Acquiring firm
And
PRESIDENT STEYN GOLD MINES (FREE STATE) (PTY) LTD Target firm
Panel : DH Lewis (Presiding Member), N Manoim (Tribunal Member), and
U Bhoola (Tribunal Member)
Heard on : 7 November 2007
Decided On : 9 November 2007
REASONS FOR DECISION
Approval
[1] The Tribunal unconditionally approved the merger between Pamodzi Gold and
President Steyn Gold Mines. The reasons for the decision follow:
The Parties
[2] The primary acquiring firm is Pamodzi Gold Ltd (“Pamodzi Gold”), and the
primary target firm is President Steyn Gold Mines (Free State) (Pty)(Ltd) (“PSGM”)
which is ultimately owned and controlled by Thistle Mining Inc (“Thistle”), a Canadian
company.
The Transaction
[3] In terms of this transaction, Pamodzi Gold will acquire 100% of the shares in
and claims against PSGM from Thistle Mining. For Pamodzi Gold this is an opportunity
to expand by entering the Free State gold fields. PSGM is currently in an unstable
financial position and experiencing production problems 1. Pamodzi Gold avers that it
will ensure continuity in production and is in a strong position to pursue PSGM’s
1 PSGM is however not considered to be a failing firm
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development.
[4] This merger is brought on an urgent basis as the merging parties submitted that
PSGM is currently operating under limited resources and funding, which if depleted, will
place PSGM in provisional liquidation resulting in the loss of approximately 4 200 jobs.
The Relevant Market
[5] The relevant market is the production and supply of gold and the relevant
geographic market is international as established in the Tribunal’s previous decisions in
the gold mining market.2
Competition Analysis
[6] Pre-merger Pamodzi Gold has an estimated market share of 2.32%, and PSGM
has no more than 0.4% estimated market share of global gold production. Post merger,
there will be an inconsiderable market share accretion of less than 1%, and the merging
parties’ estimated market share will be 2.72%. In addition there are larger competitors
including AngloGold Ashanti Limited, Gold Fields Limited, Harmony Gold Mining
Corporation Limited, Barrick Gold Corporation, and Newmont Mining Corporation.
Third Party Objection
[7] The Commission and the Tribunal received a belated objection to the proposed
transaction from Virgile Mining Contractors (Pty) Ltd (“Virgile Mining”). Nevertheless the
representatives of Virgile Mining were given an opportunity to make submissions at the
hearing of this matter.
[8] The main reasons for the objection to this proposed transaction are firstly that
Virgile Mining was the first company to submit a proposal to purchase PSGM, which
proposal was made twice, both in 2006 and 2007, at a higher bid, and which was not
considered by PSGM. Secondly, Virgile Mining representatives argue that they are a
small company which should be provided with an equitable opportunity to participate in
the mining industry. Thirdly, they argue that they have a Black Economic Empowerment
(BEE) partner and that their main objective is to support and advance disadvantaged
communities within the Welkom area. It was not disputed that Pamodzi Gold is also
communities within the Welkom area. It was not disputed that Pamodzi Gold is also
equally a BEE compliant company.
[9] When deciding mergers we are mandated to determine whether the transaction
2 Pamodzi Gold/ARMGold Tribunal case no.: 62/LM/JUN07; Cf Harmony Gold Mining Company Limited
and African Rainbow Minerals Gold Limited Tribunal case no.: 25/LM/MAY03; and Anglogold Limited and
Driefontein Consolidated (Pty) Ltd Tribunal case no.: 66/LM/NOV03
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before us is likely to lead to a substantial lessening or prevention of competition. We
are also obliged to determine the effect that the merger will have on a number of
specified public interest considerations, including the effect on a particular industrial
sector or region, on employment and on the ability of small businesses or firms
controlled or owned by historically disadvantaged persons to become competitive.
[10] Virgile Mining’s submission raised one apparent competition issue, that is, that
Phamodzi’s acquisition of PSGM would foreclose Virgile Mining from processing the
gold mined at other mines in the Free State gold fields purchased by Virgile Mining from
Harmony. This contention was investigated by the Commission which found that
PSGM’s gold processing facilities were fully utilized in processing ore from its own mine
and that, in any event, there are other gold processing facilities owned by Gold Fields
and Harmony to whom Virgile Mining could turn.
[11] Moreover, on closer examination it transpired that Virgile does not, in fact, own
any gold mining assets at all. All that could be ascertained is that Virgile Mining, or the
BEE partner with which it claims to be associated, has been involved in talks of an
indeterminate nature with Harmony concerning, it is claimed, the possible purchase of
certain gold mining assets in the Free State. Accordingly, we find that there are no
competition concerns arising from this transaction.
[12] Nor will the transaction impact negatively on the public interest. On the contrary
Phamodzi is an empowered company committed to maintaining production in a troubled
gold mine in a distressed region of the country. If anything the public interest provides
further reason for the unconditional approval of this transaction.
[13] The burden of Virgile Mining’s objection is that it would be more in the public
interest to have the target firm sold to it, instead of Pamodzi. Hence its representatives
interest to have the target firm sold to it, instead of Pamodzi. Hence its representatives
spent much time describing their ambitions, in particular emphasizing their connection
with the local community, but they advanced no reasons as to why Pamadzi’s
transaction contravened the Act. In this respect Virgile Mining seems to have
misconceived our function. We are not empowered to tell sellers who they must sell to.
They are free to sell to whom they please, provided the transaction does not constitute
one prohibited by the Act. This position is elucidated in an earlier Tribunal decision in
Vodafone Group PLC/ Venfin Limited and Others in which the following was said:
“In terms of the Competition Act, the Tribunal does not have the power to tell
parties whom they should sell to. At most, the Tribunal is empowered to prohibit a
merger on the grounds listed in the Act. It is axiomatic that if the Tribunal cannot
order a firm who they should sell to that it follows that a party who feels
disaffected, because the seller has not sold the target firm to it, has no remedy
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under the merger provisions of the Competition Act on that ground…”3
Conclusion
[14] We conclude that the proposed transaction is unlikely to substantially prevent or
lessen competition. Accordingly we approve the merger unconditionally.
D Lewis
Presiding Member
Date 9 November 2007
N Manoim and U Bhoola concur in the judgment of D Lewis
Tribunal Researcher: L Xaba
For the merging parties : Cliffe Dekker Inc
For the Commission : M Mohala and I Selaledi
(Mergers and Acquisitions)
3 Tribunal case no.: 110/LM/NOV05 at para 16