Barrick signs two key deals

Tuesday September 25 2018


By Citizen Reporter @TheCitizenTZ

Dar es Salaam. Barrick Gold Corporation has signed two key mining deals which could signal its future business model in Africa.

The Canada based mining giant has bought Africa-focused rival Randgold Resources based in South Africa to create a $18.3 billion (Over Sh41 trillion) –strong conglomerate.

Separately, Barrick also announced it had reached a mutual investment agreement with Shandong Gold Corporation, one of China’s leading mining companies. Under the Agreement, Shandong Gold will purchase up to $300 million (Sh675 billion) of Barrick shares, and Barrick will invest an equivalent amount in shares of Shandong Gold Mining Co.

The two deals will likely reshape Barrick’s business strategy, including in Africa, as it seeks to entrench its global leadership in the mining industry.

It was not immediately clear what these two deals would mean for Acacia Mining Company, which operates three main mines in Tanzania, with Barrick the majority owner with a 64 per cent stake.

Acacia yesterday issued a cautionary statement over the Randgold deal, saying it was seeking further details before duly informing its shareholders.

“Acacia notes today’s announcement by Barrick and Randgold regarding a potential merger……We further note that the potential transaction will be subject to the approval of both Barrick and Randgold shareholders.”

“Acacia are currently seeking further clarity from Barrick and will update the market in due course,” read a statement posted on its website. These developments will be keenly watched locally, considering the fact that Barrick has publicly indicated the likelihood of divesting all or part of its interests in Tanzanian mines to Chinese investors.

The company announced early in the year talks were ongoing with a small circle of potential Chinese investors over its Tanzanian business. However there was no indication in the signed deal that Shandong Gold would be tapped for that interest.

Last month, Barrick sold its majority stake at Nyanzaga gold project in Shinyanga region to OreCorp, which has been approved by Fair Competition Commission (FCC). Nyanzaga is set to become the country’s next big mine. Barrick has signed a framework agreement with the government to significantly raise Tanzania’s stake in the business, and offered to pay an upfront goodwill fee of $300 million as talks on how to roll out the agreement continue.

But the company has disputed in the internal court of arbitration, a tax bill of $190 billion slapped by Tanzania Revenue Authority. Efforts yesterday to get comment from the ministry of minerals were futile by the time of filing this report.

An extractive sector researcher at Repoa, Dr Abel Kinyondo, yesterday told The Citizen that while buying and selling of companies was a normal business phenomenon, it would be important for authorities to seek to understand what is in the said Barrick agreements.

He said, previously such agreements or buy outs were made to evade tax or escape responsibility but new laws passed in 2016 offer no chance for that. “The deal with the Chinese company may symbolize China’s intent of spreading its influence, including in Africa,” said Dr Kinyondo.

In South Africa, details show Barrick investors will own a majority 66.6 per cent stake in Randgold while shareholders in the latter will hold the rest. The enlarged company, keeping the Barrick name, will be traded in New York and Toronto. Randgold’s London listing will be cancelled, it was revealed.

Barrick executive chairman John Thornton will take up the same role at the new company, while Randgold chief executive Mark Bristow will retain his CEO position. Mr Thornton negotiated Tanzanian deal with the government (see earlier story on Page 20).

Regarding the Chinese company deal, Shandong Gold will purchase up to $300 million of Barrick shares, and Barrick will invest an equivalent amount in shares of Shandong Gold, a publicly listed company.

A press release by Barrick Vice President, investors relations Deni Nicoski, said under the agreement, the parties will share technical expertise and best practices related to mining technology, information technology, information management, and digital innovation.

Mr Nickoski said in a statement that through the partnership, Barrick and Shandong Gold have also agreed to establish additional mechanisms to foster greater communication and knowledge-sharing between their respective management and technical teams.

Such engagement may cover mining, engineering, construction, social and environmental management, and finance.

The parties also agree to provide access to their respective supplier networks, service providers, investors, and capital providers.

Barrick and Shandong Gold also holds the 50-50 joint venture partners at the Veladero mine in Argentina, the first step in the partnership between the two companies.