Photographer: Simon Dawson/Bloomberg

Barrick-Brokered Tanzania Pact Leaves Acacia in the Dark

Updated on
  • Acacia to pay $300 million, split benefits with state: Barrick
  • London-based miner says it’s ‘seeking clarification’

Acacia Mining Plc’s tumultuous year doesn’t seem likely to ease up any time soon.

The gold miner’s shares surged as much as 41 percent Thursday, after controlling shareholder Barrick Gold Corp. said it moved closer to resolving a crippling dispute with Tanzanian authorities. Yet it seems Acacia itself -- which must approve any deals Barrick negotiates with the government -- was left out of the loop.

Tanzania banned exports of unprocessed gold in March and hit Acacia with a $190 billion tax bill in July, claiming the company had under-declared export revenue since 2000. The ban meant the London-based company was forced to stockpile output and curb mining at its flagship operation. Third-quarter earnings plunged 70 percent from a year ago, the company said Friday.

On Thursday afternoon, following three months of negotiations, multiple intercontinental flights and a six-hour meeting with Tanzanian President John Magufuli, Barrick Chairman John Thornton announced in the commercial capital, Dar es Salaam, that the two sides had reached a preliminary solution.

Tanzania will receive a $300 million payment -- from Acacia, not Barrick, the Canadian company later clarified -- as a “a show of good faith” and the two sides agreed to share the economic benefits from the mines 50-50, Thornton said. “Good trust” has been established between the two parties, he said. Barrick, which is based in Toronto, later issued two separate statements with details of the terms.

What Thornton didn’t say was whether Acacia’s management was on board with the plan. In its own statement issued nearly four hours after Thornton’s announcement, Acacia said it “just” received a copy of the framework agreement and was seeking further explanation. That hadn’t changed by Friday morning.

“We are seeking further clarification on what has been agreed,” Chief Executive Officer Brad Gordon told analysts on a call. “We believe it’s very early in the process, there’s a long way to go before any proposal is made to Acacia.”

Barrick said Thursday that the proposals included a new Tanzanian operating company to manage Acacia’s three mines, as well as giving the state a 16 percent stake in the assets. The lifting of the national ban on the export of concentrates was also under discussion, it said.

A group from the two sides still needs to work out the details and payment terms of an eventual agreement.

Read more: World’s Biggest Tax Bill Is Latest Woe for Africa Gold Miner

"Although there are some early indications towards a resolution, which is positive, more detail and clarity on the framework is still required," Andrew Kaip at analyst at BMO Capital Markets, said in a note.

While it’s still seeking clarification, Acacia doesn’t have the ability to make an upfront $300 million payment, Chief Financial Officer Andrew Wray said on the call Friday.

“Barrick are equally aware of our balance sheet as we are,” he said.

Barrick has had a troubled time in Tanzania since it entered the country in 1999. It spun off the business to create African Barrick Gold Plc -- later renamed Acacia - but struggled to manage costs and community relations. Barrick continues to hold a 64 percent stake in the company.

Shares Fall

Acacia’s shares, which closed 16 percent higher on Thursday, fell 11 percent by 3:51 p.m. in London Friday. That pared the two-day gain to 3.6 percent. Barrick gained 0.8 percent in Toronto.

The company’s third-quarter revenue fell 40 percent from a year earlier, while profit dropped to $16 million, from $52.8 million a year ago.

While Barrick has won Magufuli’s backing, that support may not extend to Acacia, the president suggested.

"The government of Tanzania from now onwards will deal directly, as we have been dealing, with you Barrick" he said in a televised address following the negotiations. "We trust Barrick."

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