The Competition Commission has recommended conditional approval of the proposed acquistion of the entire shareholding of Rio Tinto South Africa by the Industrial Development Corporation (IDC) and a Chinese consortium.

The consortium comprises Hebei Iron and Steel Group and a Mauritius-domiciled special- purpose vehicle company, which is yet to be formed and will be owned by Hong Kong-based Smart Union Resource.

The IDC and the consortium would, through the transaction, gain full control of Rio Tinto South Africa’s primary asset – Limpopo-based copper miner Palabora Mining Company (PMC) – in which it held a 57.7% stake.

The commission’s recommended conditions for the approval of the transaction were that customers of PMC, including coal mines, had to have access to sufficient volumes of dense-medium separation (DMS) iron-ore. This would address the concerns that, in the case of shortages, the merging parites would have a contingency plan to supply firms that the merging parties had an interest in first and potentially impact on the supply to local coal mines that were customers of the merging parties.

In its investigation, the commission found that there had, in the magnetite iron-ore and sulphuric acid market, been an overlap in the business activities of PMC and phosphoric acid producer Foskor, over which the IDC had pre-exising control.

The commission’s investigation further revealed that sulphuric acid produced by the merging parties was unlikely to fall in the same product market and that market conditions would not lead to foreclosure. It stated that the merger was, therefore, unlikely to raise competition concerns in the sulphuric acid market.

“Foskor and PMC are the only South African firms that have magnetite iron-ore that can be upgraded to DMS iron-ore that is used in coal mines to wash coal . . . Foskor and PMC do not compete for the same customers of DMS iron-ore and this position is likely to remain the same [after the] merger owing to the material differences in the iron-ore and its capabilities,” the commission said in a statement.