Dar es Salaam. Barrick Gold Corporation is to force a takeover of its Tanzania subsidiary, Acacia, to rescue the deal it has negotiated with the government, it has emerged.
The company yesterday served a notice of intention to buy off Acacia through a share swap, a culmination of its attempt to secure a seal of approval over its Tanzania deal.
The giant miner is running out of time to push through the cooperation framework agreement, against resistance of its London based minority shareholder.
Acacia which was locked out of negotiations, insists its board must approve any agreement reached between the government and Barrick, and has opened a trade dispute arbitration at the international court.
The said agreement is meant to end a $190bn tax dispute with Tanzania and allow resumption of normal business, including export of withheld gold concentrate worth millions of dollars.
Yesterday, the writing was on the wall for Acacia as the government declared the company was “unwanted in Tanzania.” It demanded that Barrick sorts out the standoff if it wanted the deal.
“As a new era is downing in the Tanzanian gold mining relations, the Government does not want the presence of Acacia in any form in the country,” said the government in a statement released by its spokesperson, Dr Hassan Abassi.
“The ball is now in Barrick’s court. Solve Acacia or no deal,” said the government, as it made it clear to Barrick that if its gold mining subsidiaries are to continue operating in Tanzania, it must be under a new operating company in which the Government has a stake and there is no presence or participation of Acacia.
The government accuses Acacia of operating as a “rogue company that was disdainful of the Tanzanian authorities and the laws of the land.”
With no clear breakthrough, Barrick’s new CEO Mark Bristow is keen to bulldoze a takeover, probably by June, 2019, to allow him to open a new chapter in dealing with Tanzania. He has suggested a 100 per cent ownership of local business by Barrick or some type of shareholding with interested investors, likely from China.
Bristow has wealth of experience in Africa and built South Africa-based Randgold Resources into London’s biggest gold miner before selling it to Barrick which is now his current employer.
In the proposed plan, Barrick has offered to buy the remaining 35 per cent of Acacia Mining through an all-stock offer pitched at a discount to the prevailing share price.
Barrick said in a statement that it made an indicative offer because it was clear the government of Tanzania was not prepared to deal directly with Acacia to settle the long-running row over outstanding tax claims.
“Since the proposal is in Barrick shares, the Acacia minority shareholders will be able to benefit from any future potential upside in both the Acacia assets and Barrick’s broader portfolio of assets,” Barrick said in the statement.
Barrick, one of the world’s biggest gold producers, is offering 0.1533 of its shares for every Acacia share. The proposal values London-listed Acacia at $787m (1.81 trillion) and minority shareholders are being offered roughly 147p share, against a closing price on Tuesday of 159p. Shares in Acacia were recently trading 5 per cent lower at 151.2p.
Analysts quoted by Financial Times said the bid value reflects the $300m tax payment that has been negotiated between Barrick and the government of Tanzania, which becomes payable once a resolution is ratified.
Acacia said it was “considering these developments” and was attempting to seek clarification of Tanzania’s position. It did not state whether it was prepared to recommend the offer.
“Barrick has also provided the company today with a letter from the acting chairman of the government of Tanzania negotiating team who have been in discussions with Barrick,” it said in a statement.
“This letter states that the government of Tanzania is resolved that it will not execute final agreements for the resolution of the company’s disputes if the company is one of the counterparties to the agreements, and that it will only sign such agreements if satisfied that substantial changes have been made to the management style of the operating companies and of their shareholders,” Acacia added. Acacia has been unable to export gold-bearing ore from Tanzania since March 2017 because of the row over unpaid taxes.
Analysts said it was not clear Barrick would be allowed to vote its shares under the UK takeover rule, although the Canadian company says it has the right to do so.