Concerns about Bis-Cougar mining equipment deal

8 August 2019

The ACCC has raised preliminary competition concerns about Bis Industries Holdings Ltd’s (Bis) proposed acquisition of Cougar Mining Group Pty Ltd (Cougar), in a statement of issues published today.

Bis and Cougar both provide mining equipment hire services to the underground coal mining industry in New South Wales and Queensland, including the hire of longwall relocation equipment and run-of-mine equipment.

The ACCC has preliminary concerns about the supply of longwall relocation equipment hire services.

“A number of mine operators have raised strong concerns that the proposed acquisition would reduce the number of significant suppliers of longwall relocation equipment hire from two to one,” ACCC Chair Rod Sims said.

“In our opinion this would likely lead to higher prices and reduced quality of service.”

The ACCC’s preliminary view is that the threat of new entry or expansion is unlikely to significantly constrain a combined Bis-Cougar.

“There appear to be high barriers for a company seeking to enter or expand into the supply of longwall relocation equipment hire, including high capital costs and long lead times in acquiring the equipment,” Mr Sims said.

The ACCC also considers that self-supply of longwall relocation equipment by mine operators is unlikely to significantly constrain a combined Bis-Cougar.

“While some mine operators own some pieces of longwall relocation equipment, it doesn’t make commercial sense for most mine operators to own a full suite of longwall relocation equipment. This is due to the high up-front purchasing costs, costs of maintaining the equipment, and the relative infrequency for the need for this equipment.”

The ACCC also examined the impact of the proposed acquisition in the supply of run-of-mine equipment hire services. The ACCC’s preliminary view is that the proposed acquisition is unlikely to raise competition concerns in this area.

The ACCC invites submissions from interested parties on the statement of issues by 23 August 2019. The ACCC’s final decision is scheduled for 24 October 2019.

The statement of issues is available at Bis Industries Holdings Limited - proposed acquisition of Cougar Mining Group

Background

Bis is an Australian unlisted public company. It provides equipment hire, haulage and logistics services to companies in the coal, iron ore, bauxite, nickel and gold mining industries.

The services it provides to the underground coal mining industry in New South Wales and Queensland includes mining equipment hire (including longwall relocation equipment and run of mine equipment), longwall relocation and run of mine labour hire, workshop repairs, field maintenance services, tyre sales and spare parts sales.

Cougar is a privately owned company based in Newcastle, New South Wales. The services it provides to the underground coal mining industry in New South Wales and Queensland includes mining equipment hire (including longwall relocation equipment and run of mine equipment), workshop repairs, field maintenance services and spare parts services.

Longwall coal mining is a method of underground coal mining. Once all of the available coal along a coalface (or longwall) is mined, the longwall coal mining machinery needs to be moved and set up in a new location within the same mine.

This is referred to as a ‘longwall relocation’. Specialised longwall relocation equipment is required to move longwall coal mining machinery. Longwall relocation occurs infrequently, approximately every 9-18 months at a mine. It takes approximately six to eight weeks to accomplish a longwall relocation.

Run-of-mine equipment is used to carry out the general operations of an underground mine. Examples of tasks include the transportation of personnel or coal, power generation and ground surfacing.

Release number: 
140/19
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