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[2018] ZACT 41
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Harmony Moab Khotsong Operations (Pty) Ltd v Vaal River Mining Business and Others (LM229Nov17) [2018] ZACT 41 (14 March 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM229Nov17
In
the matter between:
HARMONY
MOAB KHOTSONG OPERATIONS (PTY)
Acquiring Firm
LTD
And
VAAL
RIVER MINING BUSINESSES, NUCLEAR FUELS
CORPORATION
OF SOUTH AFRICA (PTY) LTD, AND
Target Firms
MARGARET
WATER COMPANY NPC
Panel
: Norman Manoim (Presiding Member)
: Enver Daniels (Tribunal Member)
: Medi Mokuena (Tribunal Member)
Heard
on
: 16 February 2018
Order
Issued on
: 16 February 2018
Reasons
Issued on
:
14 March 2018
Reasons
for Decision
Approval
[1]
On
16 February 2018, the Competition Tribunal ("Tribunal")
approved the transaction involving Harmony Moab Khotsong Operations
(Pty) Ltd("Harmony Operations") and Vaal River Mining
Businesses ("VR mining businesses"), Nuclear Fuels
Corporation
of South Africa (Pty) Ltd ("Nufcor"), and
membership interests in the Margaret Water Company NPC ("MWC").
[2]
The
transaction is, in essence, the purchase of a mine complex and
ancillary businesses on the border of the Free State and North-West
Provinces.
[3]
The
reasons for the approval follow.
Parties
to the proposed transaction
Primary
Acquiring Firm
[4]
The
primary acquiring firm is Harmony Operations, a firm wholly owned and
controlled by Harmony Gold Mining Company Limited ("Harmony").
Prior to the transaction, Harmony Operations was a dormant company
and thus conducted no activities and controlled no other firm.
[1]
[5]
Harmony
is primarily a producer and supplier of gold, which is also active in
the production and supply of silver. Although it holds
uranium
reserves and uranium is mined as part of its gold mining activities,
Harmony does not currently extract or process uranium.
Primary Target Firms
[6]
The
primary target firms are VR mining business, Nufcor and MWC. Pre
transaction, the VR mining business, Nufcor and the relevant
MWC
membership was controlled by AngloGold Ashanti Limited ("AGA").
[7]
The
VR mining business comprises the mining, ore processing and gold
production business, and ancillary assets at the Great Noligwa
and
Moab Khotsong Mines as well as the Great Noligwa plant complex,
situated adjacent to the Great Noligwa Mine.
[2]
[8]
Nufcor
was established in 1967 to process and market uranium concentrate
produced by South African gold mining companies to nuclear
power
generators around the world. Since then is has become a wholly owned
subsidiary of AGA. Whilst it is active in the exportation
of uranium
oxide to conversion plants, it is not active in the conversion,
enrichment or fabrication of uranium.
[9]
MWC
was incorporated in 2007 as the result of a directive issued by the
Department of Water Affairs and forestry which made the
mining
companies operating in the Vaal region responsible for the long term
sustainable management of water arising from mining
activities in the
KOSH basin.
[3]
MWC pumps underground water to manage the flooding of the KOSH basin.
[10] After the
Commission had filed its recommendations with the Tribunal, but prior
to the Tribunal hearing
the matter, the merging parties submitted
additional information, indicating that a number of ancillary assets
had been included
in the transaction since the date of notification.
The ancillary assets included the remainder of a plot of land, a mine
garage,
the great Noligwa Bridge and various surface rights permits
and servitudes. The Commission assessed the ancillary assets, finding
that such were essential for the activities of the VR mining
business, that no third parties would be affected by the addition
of
the assets and therefore the addition would not impact its
finding.
[4]
Proposed transaction and rationale
[11]
The
proposed transaction involves the acquisition by Harmony Operations
of the VR mining business, equity in Nufcor and membership
interests
in MWC. Upon the conclusion of the transaction, the target firms will
be directly controlled by Harmony Operations and
indirectly
controlled by Harmony.
[12]
In
terms of rationale, the acquiring firm submitted that the proposed
transaction is in line with its strategy of increased growth
and
improved quality of assets.
[13]
AGA,
the seller, indicates that selling the VR mining business is in line
with its strategy of optimizing returns and generating
sustainable
cash flow. And as the shares in Nufcor and membership interests in
MWC are critical to the operations of the VR mining
business, it was
sensible to dispose of these interests together with the VR mining
business.
Impact on competition
[14]
The Competition Commission
("Commission") identified a product overlap between the
activities of the merging parties insofar
as both were active in
production and supply of gold and silver. The Commission assessed the
transactions impact on the international
market for the production
and supply of gold and the international market for the supply of
silver. In both instances, the Commission
found that the post-merger
market share of the merged entity was less than 1.5% in the market
for the supply of gold and less than
1% in the supply of silver. The
Commission concluded that the proposed transaction was unlikely to
substantially prevent or lessen
the competition in the relevant
market.
[15]
We see no reason to differ from this
conclusion.
Public interest
[16]
The merging parties confirmed that the
proposed transaction will have no negative effects on employment and
particularly that no
retrenchments or job losses will occur as a
consequence of the proposed transaction.
[5]
[17]
No other public interest concerns arise
from the proposed transaction.
Conclusion
[18]
In
light of the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition in any
relevant market. In addition no public interest issues arise from the
proposed transaction. Accordingly we approve the proposed
transaction
unconditionally.
Mr.
Norman Manoim
Mr.
Enver Daniels and Mrs Medi Mokuena concurring.
14 March 2018
Tribunal
researcher:
Alistair Dey-Van Heerden.
For
the acquiring firm: Gomolemo
Kekesi and Michelle De Lange of Bowmans.
For
the target firm:
Richardt van Rensberg of ENS Africa.
For
the commission:
Rethabile Ncheche and Zanelle Hadebe.
[1]
At the time of notification, Harmony Operations was titled Coreland
Investments. The merging parties have informed the Tribunal
that
since notification, the name of the company has been amended
[2]
The Noligwa Plant Complex comprises the South Uranium Plant, The
Great Noligwa Gold Processing Plant, the Mispah Gold Plant and
storage facilities.
[3]
An
area
encompassing the locals of Klerksdorp, Orkney,
Stillfontein, and Hartebeestpoort.
[4]
Tribunal Transcript page 7 lines 13-16.
[5]
Merger Record page 675.