SUPPORT for Barrick Gold’s improved buy-out of Acacia Mining would only gain momentum if minority shareholders in the UK-listed firm took the view of Standard Bank Group Securities (SBG) which said the offer was the best option for both companies.
“Given the circumstances in which Acacia has been placed, we think shareholders have no choice but to vote in favour of the deal,” said Adrian Hammond, a gold analyst for SBG in a note dated July 22. “However, we think this is a good deal for both Acacia and Barrick.
“We think the share offer is a fair offer which we estimate incorporates a value for the assets that assumes the disputes with the Tanzanian authorities are resolved, although this seems unlikely with Acacia in control. In addition, shareholders will receive a significantly more liquid share in Barrick,” he said.
SBS Group’s view on the proposed transaction comes on the day UK hedge fund Odey Asset Management, which owns about 1.94% of Acacia, said it intended to vote in favour of Barrick Gold’s improved offer.
On July 19, Barrick said it would offer 0.168 Barrick shares for each Acacia share. In addition, it would pass on the proceeds of any asset sales via a dividend. This was as Barrick took into consideration the value of certain of Acacia’s exploration properties and administrative and general savings the transaction would create.
The new offer valued Acacia at £951m or 232 pence per share, and the 36.1% Barrick doesn’t own in Acacia at £347m. The offer is below an independent valuation of consulting engineering company, SRK, which imputed £1.1bn to Acacia shares, and fell beneath the 50% premium some of Acacia’s minority shareholders have requested.
However, Hammond thought that in Barrick’s hands, the Acacia exploration assets would be given a new lease on life and could result in discoveries and developments taking the Canadian firm’s exposure to African assets beyond the current 25% of production.
“In the hands of Barrick, we think Acacia is worth 216p per share at spot prices. In the hands of Acacia, we think the share is worth 148p with further downside to 30p,” he said of the uncertain future Acacia would face in the event of a no-deal.
Acacia has swam against a tide of Government of Tanzania (GoT) imposts amid a two-year dispute over unpaid tax allegations. The latest GoT action was to apply an export ban on Acacia’s only fully operating mine, North Mara. Acacia’s transaction committee said the company had no choice but to accept Barrick’s improved offer.
“Considering the impending loss of the ability of Acacia to produce gold and operate the mine at North Mara, the Acacia Group’s cash flow from operations will be adversely impacted and the Acacia Group will be required to meet its on-going working capital requirements and other financial obligations from its existing cash balance,” it said.
“This position is not sustainable and the liquidity of the Company will be constrained in the absence of a resolution.”
