COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 17/LM/Mar11
In the matter between:
Rio Tinto Plc and Rio Tinto Ltd Acquiring Firms
And
Riversdale Mining Ltd Target Firm
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 19 May 2011
Order issued on : 19 May 2011
Reasons issued on : 12 July 2011
Reasons for Decision
APPROVAL
1] On 19 May 2011 the Competition Tribunal (“Tribunal”) unconditionally
approved the acquisition by Rio Tinto Plc and Rio Tinto Ltd of Riversdale
Mining Ltd. The reasons for approval follow below.
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PARTIES TO THE TRANSACTION
2] The primary acquiring firms are Rio Tinto Plc and Rio Tinto Ltd. Rio Tinto Plc
and Rio Tinto Ltd are public companies listed on the London Stock Exchange
and the Australian Securities Exchange respectively. Rio Tinto Plc and Rio
Tinto Ltd together comprise the Rio Tinto Group (hereinafter “Rio Tinto”) in
terms of a dual listed company structure, which is managed as a single
economic unit.1 Rio Tinto’s shares are widely held and as such it is not
controlled by any single entity. It has direct and indirect controlling interests in
various companies throughout the world.
3] The primary target firm is Riversdale Mining Ltd (“Riversdale”), a public
company incorporated in accordance with the laws of the State of Victoria,
Australia and listed on the Australian Securities Exchange. As such its shares
are widely held and it is not controlled by any single entity. It has direct and
indirect controlling interests in various companies located in Australia,
Mauritius, Mozambique and South Africa. In South Africa, Riversdale controls
the following firms: Riversdale Holdings (Pty) Ltd (100%); Riversdale
Anthracite Colliery (Pty) Ltd (74%); and Zululand Anthracite Colliery (Pty) Ltd
(“Zululand Anthracite Colliery”) (74%).
PROPOSED TRANSACTION
4] In terms of the structure of the proposed transaction Rio Tinto intends to
acquire all of the issued and outstanding shares of Riversdale. Following the
completion of the proposed transaction Rio Tinto will control a majority of the
issued shares in Riversdale.
RATIONALE FOR TRANSACTION
5] For Rio Tinto the rationale is that this acquisition is in line with its growth
strategy of investing in, developing and operating large, long term, cost-
competitive mines and businesses. Further, Rio Tinto submitted that because
of its extensive experience in infrastructure and large project development
of its extensive experience in infrastructure and large project development
combined with its significant financial capacity, it is well placed to take
Riversdale’s asset base through a next phase of development.
6] Riversdale submitted that this transaction offers its shareholders the
1 See page 8 of the record.
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opportunity to realise value in their shares. In addition Riversdale submitted
that considering the fact that the majority of its assets are in a pre-production
phase and the significant time, risks and uncertainties involved in brining
those assets to the production stage, Rio Tinto’s offer provides immediate
value and certainty.
ACTIVITIES OF MERGING PARTIES
Rio Tinto
7] Rio Tinto is an international mining group involved in the finding, mining and
processing of mineral resources. Its major products globally are aluminium,
copper, diamonds, energy, gold, industrial minerals (i.e. borax, titanium
dioxide, salt and talc) and iron ore. The only activity of Rio Tinto that is
however relevant for purposes of the present transaction is the mining of coal.
8] In South Africa Rio Tinto operates a coal exploration project, i.e. the Chapudi
Coal Project (“Chapudi”) in the Limpopo province with a joint venture partner,
Kwezi Mining. According to the merging parties, this project is still in its pre-
feasibility stage and mining has not yet begun. Chapudi contains both coking
and thermal coal.
9] The merging parties however have also indicated that Rio Tinto is currently
divesting its interest in Chapudi. 2 This divestiture will, according to the
merging parties, bring an end to Rio Tinto’s involvement in coal operation in
South Africa for the time being. This process of divestiture was confirmed at
the Tribunal hearing by the legal representatives of the merging parties.
Riversdale
10] As stated in paragraph 3 above, Riversdale has a 74% shareholding in
Zululand Anthracite Colliery, which is involved in the underground mining of
anthracite in KwaZulu-Natal. Zululand Anthracite Colliery is currently the only
Riversdale entity involved in mining in South Africa.
11] The merging parties however indicated that Rio Tinto does not have the
intention to retain an interest in Zululand Anthracite Colliery following the
intention to retain an interest in Zululand Anthracite Colliery following the
completion of the proposed transaction (also see paragraph 18 below).3
2 See inter alia page 79 of the record and page 10 of the Commission’s recommendation.
3 See page 82 of the record.
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12] Riversdale’s other primary assets are two coking and thermal coal projects in
Mozambique: the Benga 4 and Zambeze 5 projects. According to the merging
parties a mining concession has been granted for the Benga project and
construction of stage one has commenced. With regard to the Zambeze
project, the merging parties submitted that a mining concession has not yet
been granted for the project and that it continues to operate under an
exploration licence.
COMPETITION ANALYSIS
Horizontal assessment
13] The Competition Commission (“Commission”) concluded that there is no
horizontal overlap in the activities of the merging parties in South Africa.
Although the merging parties both have projects in the mining of thermal and
coking coal, there is no geographic overlap in these activities since Rio
Tinto’s interest is in the Chapudi project in the Limpopo province of South
Africa (which interest is in the process of being divested, see paragraph 9
above) and Riversdale’s interests are in the Benga and Zambeze projects in
Mozambique.
Vertical assessment
14] A supply relationship exists between the merging parties in terms of which
Zululand Anthracite Colliery supplies Rio Tinto’s joint venture, RBM 6, with
anthracite coal. The anthracite is used as a reductant in the production of
titanium dioxide slag at RBM’s Richard’s Bay mineral separation plant, as well
as in the production of high purity iron.
15] The merging parties submitted that in the preceding twelve months
approximately [80 – 100]% of RBM’s annual requirement of anthracite was
purchased from Zululand Anthracite Colliery, which represents less than 30%
of Zululand Anthracite Colliery’s total annual anthracite production. The
merging parties further submitted that for technical reasons the balance of
RBM’s anthracite requirements is obtained from sources outside of South
4 A joint venture between Riversdale and Tata Steel Ltd.
4 A joint venture between Riversdale and Tata Steel Ltd.
5 Adjacent to the Benga project.
6 Joint venture between Rio Tinto and BHP Billiton Ltd.
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Africa, which anthracite is then blended with that purchased from Zululand
Anthracite Colliery in order to obtain the correct blend of anthracite for RBM’s
manufacturing process.
16] The Commission highlighted that the other South African customers of
Zululand Anthracite Colliery do not produce or supply high purity iron and
titanium dioxide slag and that the merged entity therefore is likely to lack an
incentive to foreclose the target firm’s customers.
17] There are also a number of other players in respect of the mining of
anthracite from which customers potentially could obtain their anthracite
requirements, including Petmin (Somkhele Colliery), Leeuw Mining
(Vaalkranz Colliery) and Tweewaters Fuel (Springlake Colliery).
18] Furthermore, the merging parties submitted that any potential vertical effects
of the proposed merger are likely to be short term since Rio Tinto “ has
already announced its intention to divest Riversdale’s interest in Zululand
Anthracite Colliery to a suitable purchaser”.7
19] For the above reasons we conclude that the proposed transaction is unlikely
to result in a substantial prevention or lessening of competition since both
customer foreclosure and input foreclosure appear unlikely as a result of the
proposed deal.
PUBLIC INTEREST
20] The merging parties have confirmed that the proposed deal will not result in
any retrenchments.8 No other public interest issues arise from the proposed
transaction.
CONCLUSION
21] In light of the above the Tribunal finds that the proposed transaction is
unlikely to substantially prevent or lessen competition in any market. In
7 See page 91 of the record.
8 See inter alia pages 12 and 92 of the record.
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addition, no public interest issues arise from the proposed transaction.
Accordingly we approve the proposed transaction unconditionally.
12 July 2011
____________________ DATE
Andreas Wessels
Medi Mokuena and Andiswa Ndoni concurring
Tribunal researcher: Ipeleng Selaledi
For the merging parties: Bowman Gilfillan Inc.
For the Commission: Werner Rysbergen
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