PROPOSED MERGER BETWEEN SIBANYE GOLD LIMITED AND LONMIN PLC
17 October 2018
The Competition Commission (“Commission”) has recommended to the Competition Tribunal (“Tribunal”) that the large merger whereby Sibanye Gold Limited t/a Sibanye-Stillwater (“Sibanye”) intends to acquire sole control of Lonmin Plc (“Lonmin”) be approved subject to conditions.
Among other minerals, Sibanye holds reserves and assets used to produce concentrate containing certain Platinum Group Metals (“PGMs”). Lonmin also owns various PGM mines/shafts and PGM reserves, various PGM exploration projects, tailings dams, concentrators, a smelting complex and PGM refining facilities, the majority of which are located in South Africa.
The proposed transaction presents both a horizontal and vertical overlap. In relation to the horizontal overlap, both Sibanye and Lonmin mine and produce PGM concentrate which is further refined at refineries by companies such as Anglo American, Implants and Lonmin. PGMs are ultimately sold in international markets. The Commission found that the merged entity is unlikely to exert market power in any of the PGM markets affected by the merger as both merging parties have relatively low market shares in these international markets.
In relation to the vertical overlaps wherein Lonmin currently refines PGM concentrate for other PGM producers, the Commission found that no foreclosure concerns arise since the merged entity is unlikely to have incentives to foreclose other upstream PGM concentrate producers. In light of the above, the Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition in the abovementioned markets.
However, the Commission found that the proposed transaction raises significant public interest concerns.
These concerns relate to the negative impact of the merger on employment, procurement from historically disadvantaged persons (“HDPs”), existing arrangements with the BEE Bapo ba Mogale Community as well as adherence to Social and Labour Plans (“SLPs”).
In respect of employment, the Commission found that the proposed merger results in a substantial negative impact on employment given that more than 3 000 employees are likely to be retrenched as a result of the proposed merger. In order to mitigate the impact of such retrenchments, the Commission imposed a condition that Sibanye embark on 3 short term mining projects which are earmarked to avoid retrenchments.
The employment savings on 2 of these 3 projects are likely to materialize in the event that platinum prices increase in future and mining costs are maintained at certain levels. In addition, Sibanye is required to implement an Agri-Industrial Community Development Programme in the Rustenburg area in the event that a feasibility study permits for such a programme to be implemented in the area. For avoidance of doubt, these conditions do not absolve the merging parties from any obligations contemplated in any applicable statute relating to retrenchments, including the LRA and the MPRDA to the extent required, in the event that any retrenchments are effected post-merger.
With regard to procurement from HDPs, the Commission imposed conditions that Sibanye continue to honor the contracts of Lonmin’s existing HDP suppliers and also endeavor to continue to procure from non-contracted HDI suppliers. With regard to the existing arrangements with the BEE Bapo ba Mogale Community and adherence to SLPs, the conditions oblige Sibanye to continue to honor these arrangements.
Statement issued by Sipho Ngwema, Head of Communications, Competition Commission of South Africa, 17 September 2018
