Acacia’s isolation plain as potential change at Barrick dubbed “fantastic”

THE isolation in which Peter Geleta finds himself was almost tangible today when he described the prospect of having Randgold Resources CEO, Mark Bristow, as boss of parent company, Barrick Gold in glowing terms.

It would result in “fantastic support” were the merger of Barrick with Randgold concluded, said Geleta, who is interim of Acacia Resources, the UK-listed company in which Barrick has a 64% stake. In terms of the merger, Bristow is the nominated CEO.

Geleta was commenting during Acacia’s third quarter conference call: a gloomy affair despite the firm turning in another solid performance, business conditions notwithstanding. But Geleta audibly brightened when asked about the possible impact the Barrick, Randgold merger would have on Acacia’s position.

Acacia is in crisis mode politically. It is locked out of discussions with the Tanzanian government after having concentrate exports blocked amid allegations of unpaid tax that reach back to a time when Barrick Gold was directly in charge of the mines. And whilst Barrick had taken on responsibility of negotiating the crisis with the Tanzanian government, the Randgold merger proposal has quite clearly become a major distraction.

Geleta said there had been little sign of progress in the Barrick, Tanzanian negotiation process which currently proposes Acacia pay $300m as per a proposed Framework Agreement with the Tanzanian government. “We haven’t met with Barrick on the merger specifically,” said Geleta.

“We haven’t really communicated with them specifically on their intentions. But if look at the merger from an Acacia perspective, we are pretty positive given that if it comes through there’s a new CEO [in] Mark Bristow who has years and years of African experience. It would be fantastic support going forward given their [Randgold’s] African experience. We are looking forward to it,” he said.

In an interview with Miningmx on October 1, Bristow described himself as “an interested by-stander” regarding the dispute between Acacia, Barrick and the Tanzanian government, which went from brouhaha to scrimmage to feud in double-quick time. It has turned particularly dark in the last few days following arrests of former and current Acacia employees on charges of fraud.

But he indicated that a resolution had to take place and suggested that New Barrick, as the merger has been called, would look positively on the Tanzanian assets. Acacia is aiming at production of just over 500,000 ounces, in excess of the 435,000 and 475,000 oz previous outlook. “Would we, as Randgold, go into Tanzania? Absolutely,” said Bristow. “Have we engaged with the government of Tanzania as Randgold? Yes, we have,” he said.

Analysts believe Acacia’s immediate future will remain clouded and volatile, especially whilst the Tanzanian government persists with its “warn on the minerals industry”, as the arrests have been described in the media.

“We continue to believe there are considerable risks around minority holders’ interest even under a scenario where the Framework Agreement is implemented and/or any transaction is successful,” said JP Morgan Cazenove in a note. While a delay in signing a Framework Agreement was not “wholly unexpected”, JP Morgan said that “… in the context of its materiality on ACA’s [Acacia’s] investment case, uncertainty will continue to permeate given the ambiguity now around any form of conclusion”.

Said RBC Capital Markets: “With an international arbitration claim ongoing and the proposed merger of the group’s parent with Randgold grabbing international mining headlines it is not entirely surprising to us that the Government of Tanzania has escalated pressure on the group through its recent measures”.

The relationship between Acacia and the government was “… now be entering a more volatile phase which could create more headline risk for shares,” it said.