| Wed 21 Feb 2007, 16:15 | | HVL - Highveld Steel and Vanadium Corporation Limi |
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HVL
HVL
HVL - Highveld Steel and Vanadium Corporation Limited - Further Cautionary
Highveld Steel and Vanadium Corporation Limited
Registration No. 1960/001900/06
(Incorporated in the Republic of South Africa)
("Highveld")
Share code: HVL
ISIN code: ZAE000003422
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the initial Cautionary Announcement published
on 26 October 2005, as well as to subsequent Cautionary Announcements,
relating to the sale by Anglo American plc ("Anglo American") of its
shareholding in Highveld.
The attention of shareholders is again drawn to the joint announcement
issued by Anglo American, Evraz Group S.A. ("Evraz") and Credit Suisse on
14 July 2006 announcing that agreement had been reached in relation to the
sale by Anglo American of its shares in Highveld, as well as to the Anglo
American Interim Results Announcement dated 4 August 2006.
Shareholders are now referred to the ruling of the European Commission
following a filing by Evraz on 22 December 2006, which filing was also made
to the South African Competition Commission on the same date.
"EC Statement: Mergers - Commission approves proposed acquisition of steel
and vanadium producer Highveld by steel company Evraz, subject to
conditions
20 February 2007, 18:00 GMT
The European Commission has cleared under the EU Merger Regulation, subject
to conditions, the proposed acquisition of the South African steel and
vanadium producer Highveld by the steel company Evraz, incorporated in
Luxembourg and primarily active in Russia.
Vanadium is a metal primarily used in the production of alloys (e.g. steel
alloys used in axles, crankshafts, gears, and other critical components;
mixed with aluminium in titanium alloys used in jet engines and high-speed
airframes) plus rust resistant and high speed tool steels and in specialty
stainless steel for use in surgical instruments and tools.
The Commission found that the proposed transaction as initially notified
would give rise to competition concerns at all levels of the vanadium value
chain. However, Evraz has offered to divest an equity interest or a
proportion of Highveld`s large iron and vanadium mine in Mapoch, South
Africa, together with Highveld`s vanadium oxides and vanadium finished
products activities, also based in South Africa.
The remedies would eliminate the merged entity`s ability and incentive to
exploit its strong position in vanadium feedstock and remove all overlaps
between Evraz and Highveld for vanadium oxides and vanadium finished
products. In the light of these commitments, the Commission has concluded
that the proposed transaction would not significantly impede effective
competition in the European Economic Area (EEA) or any substantial part of
it.
Evraz is an international vertically integrated steel and mining company.
It also has joint control of Strategic Minerals Corporation, which produces
a number of vanadium products. Highveld is a steel producer also active in
the production of various vanadium products.
The Commission`s investigation revealed that the proposed transaction would
not significantly modify the structure of steel markets in the EEA, in
particular due to Highveld`s very limited presence.
However, the Commission found that there were serious concerns that the
proposed transaction would significantly impede effective competition
worldwide for vanadium products, such as vanadium chemicals, specialty
vanadium alloys for the titanium industry and ferrovanadium used for steel
applications. The combination of the vanadium feedstock activities of
Evraz and Highveld (ore, slag and residues), added to their combined
presence in the downstream markets of vanadium oxides and finished
products, would have given the merged entity the ability and incentive to
reduce the global production of vanadium feedstock (in particular vanadium-
bearing ore) so as to increase global vanadium prices and to foreclose the
downstream rivals it supplies with vanadium feedstock. In addition, the
merged entity would have gained a very strong market position for the
supply of high-purity vanadium oxides.
To resolve these competition concerns, Evraz proposed to divest its
vertically integrated vanadium operations, consisting of an equity interest
or a portion of Highveld`s Mapoch iron and vanadium ore mine; Highveld`s
vanadium extraction, vanadium oxides and vanadium chemicals plants (also
referred to as the Vanchem operations); a ferrovanadium smelter located on
the site of Highveld steel facility; and Highveld`s 50% shareholding in
SAJV, a joint venture between Highveld and two Japanese partners active in
the production and marketing of ferrovanadium. The divested business
comprises all Highveld`s vanadium businesses with the exception of the
production of vanadium steel slag as a by-product of its steel operation.
The Commission`s investigation has shown that it constitutes an independent
and economically viable entity, able to compete effectively on the markets
for vanadium oxides and vanadium finished products.
The proposed remedies would remove the competition concerns deriving from
the new entity`s strong market position at the vanadium feedstock level.
The production shares of the merged entity in vanadium feedstock would
indeed decrease to under 30% with the partial sale of the Mapoch mine. The
sale of the entire vanadium oxides and ferrovanadium business of Highveld
would eliminate the merged entity`s ability and its incentive to reduce
output.
Finally, Evraz committed to maintain and strengthen the existing feedstock
supply relationships with Tula, Chussovskoy and Treibacher. These
companies are the major consumers of the feedstock sold by Evraz and
Highveld. These supply commitments make a further contribution to
eliminating the risk of feedstock supply problems to the vanadium-
processing industry."
The transaction remains subject to South African competition approval.
Shareholders are advised to continue to exercise caution when dealing in
Highveld shares until a further announcement is made.
Witbank
21 February 2007
Sponsor
JPMorgan Equities Limited
Date: 21/02/2007 16:15:00 Produced by the JSE SENS Department.
