Tanzania government, Barrick ink historic mining deal

Saturday January 25 2020

 

By Frank Kimboy @frankkikmboy fkimboy@tz.nationmedia.com

Dar es Salaam. Barrick Gold Corporation and the Government finally put pen to paper on a long-waited mining agreement that redefines how the leading global gold miner will operate in Tanzania.

The two signed nine sets of agreements that significantly shifts the balance in Barrick operations in the country which have spanned over 20 years, and wins President John Magufuli one of his signature economic reforms. Among other things, the deal gives the state a 16 per cent holding in three operating gold mines whose combined output is Tanzania’s biggest export earners.

The signing of the Frame Work Agreement ends over three years of a standoff between the miner and the government over sweeping legal reforms pursued by the administration to raise the country’s stake in the mining sector. It also brought to and end fears, as late as last week, that the initial agreement between them could collapse and probably force Barrick out of the country.

Both President Magufuli and Barrick’s President and chief executive Mark Bristow witnessed the signing of the deal at a function aired live on television from State House in Dar es Salaam. They welcomed the amicable end of the long-drawn out, sometimes bitter negotiations, and also pledged to back each other’s interests going forward.

President Magufuli’s delightment was evident before the deal was sealed, telling a meeting of the ruling party delegates drawn from across the country; “I thank God for the success of this agreement.” He added that there would be “no more cheating” in the mining sector.

“I believe that this today is a historic day for Africa,” said Mr Bristow whose assumption of the office last year is credited for finding a breakthrough as he pushed for acquisition of Acacia which had fallen out with the government. Barrick had 64 per cent stake in Acacia which was the operating company in Tanzania. Acacia has since been wound up and a new joint management venture, Twiga Mining Corporation, incorporated in the country to take over.

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“Many people said your criticism will chase away investors ... what it’s done is challenge the mining industry and all of us to embark on something where we win together or lose together,” Mr Bristow said. “President, what I am here to do today is to offer you the hand of Barrick,” the CEO added.

Finer details of the nine agreements were not made public at the time. Neither the President nor Mr Bristow or Foreign Affairs minister Prof Palamagamba Kabudi talked of the much anticipated $300 million (Sh690bn) good will payoff by Barrick, which was reportedly agreed to shelve a dispute on a $1.2 billion (Sh2.76 trillion) tax bill slapped on the corporation.

President Magufuli also denied reports that hundreds of containers carrying copper concentrate, and which have piled up at the port of Dar es Salaam as the standoff raged will be processed at a local smelter in Dodoma. The President said instead, the concentrate containers worth millions of dollars will be handed to Twiga Corporation and sold to willing traders and profits shared.

The government and Barrick, according to the agreement, will split economic benefits on a 50/50 basis in the new company after factoring in operational costs. The government will own 16 per cent free carry interest. The President said Tanzania was still a better place to invest. He welcomed more investors and asked them to ignore claims that his administration has created a bad investment environment.

Prof Kabudi who led the negotiations on behalf of the government revealed that it was a tough battle to negotiate with the giant company like Barrik gold. He admitted the process was stressful, which at some point forced him to write a resignation letter only to withdraw it after he was dissuaded out of the idea.

Following the agreement, Barrick Corporation later issued a statement highlighting some of its expected contributions, among them, investing $40 million (Sh92bn) to upgrade the road between Bulyanhulu and Mwanza as well as constructing a housing estate and related infrastructure.

The company will also partner with the University of Dar es Salaam and commit up to $10 million (Sh23bn) in funding over a 10-year period for training and skills development in the mining industry.

“Reflecting our confidence in the potential of this highly prospective gold region, we have budgeted $50 million for brown and greenfields exploration here in 2020 alone and are looking at various opportunities to sustain and expand our operations,” Bristow said in the statement.