[miningmx.com] — ALLOWING the sale of Petmin’s SamQuarz mine to Thaba Chueu would remove an independent silica supplier from the market and enable the buyer to control the critical input of its downstream competitors, the Competition Commission said on Tuesday.
This followed Petmin’s announcement on Monday that the proposed R259m sale of SamQuarz to Thaba Chueu had been blocked by the commission, due to the “strategic importance’ of the mine as a supplier to the producers of ferrosilicon and silicon metal in South Africa.
In an e-mailed response to questions, Hardin Ratshisusu, acting manager of mergers and acquisitions for the Competition Commission, said South Africa’s downstream markets for ferrosilicon, silicon metal and silicon carbide were highly concentrated.
“SamQuarz currently supplies the bulk of silica requirements absorbed in the ferrosilicon, silicon metal and silicon carbide industries,’ said Ratshisusu.
“The acquisition of SamQuarz by Thaba Chueu would mean that companies that are currently customers of SamQuarz and who directly compete with Thaba Chueu in downstream markets would become reliant on their direct and potential competitor for the supply of critical input.
“SamQuarz is the most significant producer of high quality silica (in South Africa). There are other silica mines, but the relative inferior quality of their silica, available capacity and relative distant location, render them unviable economic alternatives to the downstream competitors of the merging firms.’
Thaba Chueu is a unit of Spain’s FerroAtlantica, which also owns silicon producer Silicon Smelters in Polokwane and ferrosilicon producer Rand Carbide in Witbank.
Ratshisusu also said the commission feared that Thaba Chueu would be able to divert any supply surplus to its own need from downstream competitors for “lucrative’ export purposes.
“In the main, the proposed acquisition will result in a fundamental change in the structure of the ferrosilicon market,’ he said.
“It essentially removes an independent supplier of silica and as a result will create an environment in which the merged entity controls the critical input of its competitors downstream.
“Moreover, it creates a platform where competitors will discuss sensitive commercial information, which in itself is a serious competition concern.’
Meanwhile, Petmin’s shares on Tuesday recovered most of the losses it sustained on Monday. The price closed up 5.97% at R2.84, compared with Friday’s closing price of R2.86.
Petmin bought SamQuarz in 2004 for R65m. The mine contributed around R24m to Petmin’s after tax profit of R101m in the group’s 2011 financial year.
COO Bradley Doig told Miningmx Petmin would decide upon its next move within a week.
“The worst case scenario is that we’ll sit with a highly profitable asset which has a 40-year life of mine,’ Doig said.
“We won’t need the cash at all this year; the amount is something we would’ve taken forward for our plans in future.”
