Details of Tanzania-Barrick deal emerge

Monday July 22 2019

President John Magufuli with Barrick Gold

President John Magufuli with Barrick Gold Corporation chairman John Thornton after holding talks at State House, Dar es Salaam, on June 14, 2017. PHOTO | FILE 

By Louis Kolumbia @Collouis1999 lkolumbia@tz.nationmedia.com

Dar es Salaam. Details are beginning to emerge on the agreement in 2017 between the government and Barrick Gold in efforts to resolve a dispute over a ban on gold concentrates exports.

Apparently, the ban has been costing Acacia Mining dearly.

The two parties to the agreement announced in October 2017 that they had agreed Tanzania would own a 16 per cent stake in the three gold mines operated by Acacia Mining Plc, a company which is 63.9 per cent-owned by Barrick Gold Corporation of Canada.

It was also agreed that the company would pay $300 million to Tanzania (about Sh700 billion at the prevailing exchange rate) as a show of good faith -- among other factors.

But a July 19, 2019 joint statement by Barrick Gold and Acacia Mining, the two detail how the Barrick Gold agreement with the government of President John Magufuli would be handled.

The statement outlines how the government will actually be paid the $300 million agreed upon as a gesture of good faith. In the event, it may take some seven years before the entire amount is paid into government coffers.

The statement also outlines the rights and duties of each shareholder after the government officially gets the 16 per cent stake in Acacia Mining as part of the deal.

As Acacia Mining is based in the UK, the Dodoma-based Tanzania government will be a co-runner of a new mining company which will be formed to replace Acacia Mining, with its headquarters in Mwanza, Tanzania.

Expounding on the $300 million goodwill gesture, the money will be paid in installments, beginning with $100 million.

“There will be an initial, upfront payment by way of assignment to the government of minerals contained in containers at Dar es Salaam port with a value of $100 million to be determined pursuant to a protocol agreed separately between both parties,” the statement reads in part.

However, payment of the cash will be subject to lifting the export ban imposed on Acacia’s subsidiaries in Tanzania.

Upon fulfilling the terms and conditions of the agreement, Acacia Mining would be given six more years in which to complete payment of the amount remaining from the original $300 million.

“Conditional on, and following completion under the Framework Agreement, six subsequent payments of $33.33 million each will be made to the government starting on the first anniversary of completion, and then annually thereafter for five years,” the statement says.

Each of the payments, the statement adds, will not exceed 75 per cent of the aggregate post-tax free cash flow in any year attributable to Acacia’s 84 per cent share in the TMCs.

In what looks like ‘a give-and-take’ situation, Acacia’s subsidiaries in Tanzania will have the liberty to open and maintain bank accounts outside Tanzania in accordance with the Foreign Exchange Act.

But, the accounts will be opened only after receiving government approval, a consent which shouldn’t unreasonably be withheld or delayed.

On resolution of disputes, the statement says the two sides have agreed to refer any existing dispute for final resolution by arbitration in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

To that end, the president of the Singapore International Arbitration Centre has been given the mandate to determine the arbitral seat upon failure by both sides to agree.

Ownership

The government’s 16 per cent ownership of the proposed mining company will be regarded as ‘Class B’ shares.

According to the statement, ‘Class B’ shares are non-transferrable to financial institutions for the sake of securing a bona-fide debt with the voting and economic rights in the Tanzania Mining Companies (TMCs), considered collectively as ‘Class A’ and ‘Class B’ shares.

“The holder of ‘Class B’ shares will not have any pre-emption rights over any allotment of new ‘Class A’ shares, and its proportionate interest will not be affected by such allotment; whereas the holder of ‘Class A’ shares has pre-emption rights over any allotment of new ‘Class A’ shares,” reads the statement in part.

Also, the chairman of the board of directors for the company to be established will have to be elected from among holders of ‘Class A’ shares. “…a holder of Class B shares has no such right,” the statement stresses.

The 50/50 question

The statement also says that, on the 50/50 principle between the two sides, the government (of Tanzania) will receive its economic benefits shares through payment of taxes, royalties, fees and other fiscal levies, including corporate income tax by TMCs jointly established by the two sides.

“They also include withholding tax, royalties, clearing fee, fuel and petrol levies, road tolls, local government levies, import duties, skills development levy and other similar fiscal levies, if any,” reads the statement.

Finally, the statement says the agreement calls for the lifting of the export ban on mineral concentrates that was imposed on March 3, 2017 by the-then minister for Energy and Minerals.

Furthermore, TMCs shall not at any time have any obligation to establish beneficiation – including gold refining and concentrate smelting facilities – in the country.