COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:42/LM/APR12
(014944)
In the matter between:
Gold One International Limited Acquiring Firm
And
First Uranium Limited and its wholly owned Target Firm
Subsidiary, Ezulwini Mining Company (Pty) Ltd
Panel : Norman Manoim (Presiding Member),
Andreas Wessels (Tribunal Member),
Takalani Madima (Tribunal Member)
Heard on : 27 June 2012
Order issued on : 27 June 2012
Reasons issued on : 29 June 2012
Reasons for Decision
Approval
1] On 27 June 2012 the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger between Gold One International Limited and
First Uranium Limited and its wholly owned subsidiary, Ezulwini Mining
Company (Pty) Ltd. The reasons for approving the proposed transaction
follow below.
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Parties to transaction
2] The primary acquiring firm is Gold One International Limited (“Gold One”),
a public company with a primary listing on the Australian Securities
Exchange and a secondary, dual listing on the Johannesburg Securities
Exchange. Gold One is controlled by BCX Gold Investment Holdings Ltd
(BVI) (“BCX”), a company incorporated in the British Virgin Islands. BCX is
a special purpose vehicle created by a consortium of investors from the
People’s Republic of China for the purpose of acquiring and holding
interest in Gold One. BCX is ultimately controlled by the Baiyin Non-
Ferrous Group Co Limited (“BNG”), the CADFund Group, the Changxin
Element Group and the China-Africa Xinyin Group.
3] The primary target firms are First Uranium Limited (“FUL”) and its wholly
owned subsidiary, Ezulwini Mining Company (Pty) Ltd (“EMC”). FUL is
incorporated in terms of the laws of Cyprus, and EMC is a private
company incorporated in terms of the laws of the Republic of South Africa.
FUL is the wholly owned subsidiary of First Uranium Corporation (“FIU”), a
public company incorporated in terms of the company laws of Canada and
controlled by AngloGold Ashanti Limited.
Activities of merging parties
4] Gold One produces and supplies gold as its primary product, and
produces a negligible amount of silver as a by-product of the gold refining
process. Its mining operations are located in the Gauteng Province. Gold
One owns uranium deposits but does not yet supply uranium as its
uranium processing plant is only scheduled to begin operating in 2015.
5] The BCX consortium’s members are active in the minerals and natural
resources industries. BNG is a large-scale mining and smelting group
based in the People’s Republic of China which operates across the
industry chain in the non-ferrous metals industry. Its operations include
industry chain in the non-ferrous metals industry. Its operations include
developing, mining, smelting and mineral processing of copper, aluminium,
lead, zinc, sulphur and, to a negligible extent, gold and silver. 1 The
1 See footnote 9 on page 60 of the Record.
2
CADFund Group is a Chinese equity fund focused on direct investments
from China into Africa. The Changxin Element Group invests and
manages Chinese capital investments in natural resources, resource
companies and properties outside China, and the China-Africa Xinyin
Group invests in the development and extraction of mineral resources in
emerging markets.
6] FUL is a holding company whose sole activity entails holding all the issued
share capital of EMC. EMC’s activities involve producing and supplying
gold and uranium sourced from its Ezulwini Mine located in the Gauteng
Province. EMC also produces a negligible amount of silver as a by-product
of the gold refining process.
Proposed transaction and rationale for transaction
7] The proposed transaction entails Gold One acquiring 100% of the total
issued share capital of FUL, and any and all claims FIU has against either
or both FUL and EMC. Gold One will thus acquire sole control of FUL and
EMC.
8] According to Gold One Ezulwini Mine is an attractive investment for its
BCX investors because it will expand Gold One’s existing Cooke
Operations by providing an alternative gold processing plant and access to
an adjacent gold and uranium ore body to which EMC holds the
prospecting rights. It will also enable Gold One to begin immediate
uranium production. In addition, the transaction provides Gold One with
both cost saving and future expansion opportunities.
9] From FUL’s perspective, the company is in severe financial difficulties and
the proceeds of the sale will help FUL meet its outstanding financial
obligations.
Relevant markets and impact on competition
Horizontal Analysis
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10]The Commission found that there is a horizontal overlap in the activities of
the merging parties with regard to the production and supply of gold, silver
and uranium. Although Gold One does not produce uranium at present, its
uranium processing plant is substantially complete and expected to be
operational by 2015. Given the long lead times for uranium mining
projects, Gold One’s facility will be operational relatively soon, and Gold
One’s potential presence in the uranium market is therefore relevant for
the competition analysis. Furthermore, the merger will grant Gold One
access to EMC’s uranium processing plant, which will enable Gold One to
begin extracting and supplying uranium from its uranium deposits earlier
than 2015. The Commission thus defined the relevant markets as the
international markets for the production and supply of gold, silver and
uranium.2
11]In assessing the impact on competition, the Commission considered the
market shares and the characteristics of the relevant markets. The
merging parties’ combined post-merger market share is very low at 0.28%,
0.9% and 0.04% in the international markets for the production and supply
of gold, silver and uranium respectively. These markets are highly
fragmented, and the merged entity will continue to face competition from a
large number of players in all three markets. Furthermore, in the market for
uranium, the customers have significant countervailing power as utility
providers generally diversify their sources of supply, and can switch to
secondary suppliers (military and commercial entities with large stockpiles)
if the price increases. It is therefore unlikely that the merged entity will be
able to influence prices to the detriment of consumers.
12]We thus agree with the Commission that the proposed transaction is
unlikely to substantially prevent or lessen competition in the market.
Public Interest
13]The merging parties submitted that the proposed transaction will have no
Public Interest
13]The merging parties submitted that the proposed transaction will have no
2 In previous cases involving these markets the Tribunal has repeatedly held that the markets are
international in scope, and there is no basis for distinguishing those decisions in this case. See
AngloGold Ashanti Limited and First Uranium Corporation, 84/LM/Sep11; Harmony Gold Mining
Company Limited and Pamodzi Gold Free State (Pty) Ltd, 71/LM/Oct09
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adverse effects on employment since they do not foresee any
retrenchments as a result of the merger. 3 The Commission noted that
although there have been retrenchments at Ezulwini Mine since December
2011, these retrenchments were a consequence of FUL’s financial
difficulties and were conducted in a transparent manner with the National
Union of Mineworkers. The Commission thus concluded that the
retrenchments were not merger-specific.
14]In addition, the merging parties submitted at the hearing that Ezulwini and
Gold One’s adjacent shafts were historically part of one mine. Gold One is
thus ideally located to make the most efficient use of the mine’s resources,
and through sharing the processing plants and senior management Gold
One will be able to decrease the operating costs and potentially rescue the
mining operations at Ezulwini Mine. The Commission is thus of the view
that the transaction may save employment in the long run.
15]No other public interest issues arise due to this transaction.
Conclusion
16]Having regard to the facts above, we find that the proposed merger is
unlikely to substantially lessen or prevent competition in any relevant
markets. Furthermore, the proposed transaction raises no public interest
concerns. Accordingly, we approve the merger unconditionally.
____________________ 29 June 2012
Norman Manoim DATE
A Wessels and T Madima concurring
Tribunal Researcher: Elizabeth Preston-Whyte
For the merging parties: HB Senekal of Edward Nathan Sonnenbergs
3See page 86 and 109 of the Record
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For the Commission: Bheki Masilela and Lindiwe Khumalo
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