Barrick offers Acacia minority shareholders $285m after Tanzania refuses to deal

Mark Bristow, CEO, Barrick Gold

BARRICK Gold sought to bring a speedy end to a dispute involving its 63.9% owned subsidiary, Acacia Mining, and the Tanzanian government (GoT) outlining a potential offer to buy the shares of minority shareholders in Acacia for a total of $285m.

In 2017, the GoT stopped exports of gold concentrate from two of Acacia’s mines on the basis the company, which is listed in London, owed the government $190bn in tax, interest and penalties. The government said the company had undervalued exports from Tanzania for nigh on two decades.

Acacia disputed the claims (which have yet to be proven) but the pressure of the export ban led it to mothball underground mining at one of its flagship mines, Bulyanhulu. This motivated Barrick to begin negotiations on Acacia’s behalf. The Tanzanians would not countenance meetings with Acacia signalling a complete relationship breakdown.

Barrick chairman, John Thornton, brokered a framework agreement which offered to joint venture Acacia’s mines and for Acacia pay the government a $300m goodwill fee. This formed the basis of renewed negotiations led by Mark Bristow, appointed CEO of Barrick in January following the merger of his company, Randgold Resources, with Barrick.

Bristow said last night that during the course of continued negotiations with the GoT, it became clear a direct agreement between it and Acacia would not be possible, hence the decision to take control of Acacia. If the takeover was accepted by Acacia’s minority shareholders and completed, an end to the tax dispute would be captured in an agreement between Barrick and the GoT.

The detail of the potential offer is a share exchange of 0.153 Barrick shares for each ordinary share of Acacia with a total value of $787m. The exchange ratio is based on the 20-day volume weighted average trading prices of Acacia and Barrick as at market close in London and New York on 20 May 2019.

Acacia said in an announcement that its board was “… considering these developments, and will be taking steps to seek clarification of the GoT’s position”. It advised its minority shareholders to take no action.

Acacia also provided further gloss on the GoT’s position. Citing a letter provided to Barrick by the acting chairman of the GoT negotiating team, Acacia said the government “…  will not execute final agreements for the resolution of the company’s disputes if the company is one of the counterparties to the agreements”.

The GoT also said that it would only sign such agreements “… if satisfied that substantial changes have been made to the management style of the operating companies and of their shareholders”.

Barrick’s takeover offer will require the support of Acacia’s minority shareholders. Bristow told Miningmx on May 8 that Acacia was not cooperating regarding the dispute. His comments may be related to Acacia minority opposition to the deal Barrick was negotiating with the GoT. There was also some confusion regarding whether Barrick would be allowed to vote on any proposal with the GoT.