Barrick Gold’s African dream faces first test in DRC
Randgold boss Mark Bristow will have to exercise his Midas touch as its DRC state-owned partner says it will assert its rights in the sale of the Kibail mine to Barrick
Barrick Gold’s decision to double down on Africa is a bet on Randgold Resources boss Mark Bristow keeping his Midas touch on a continent where many miners have floundered. That wager is facing its first test.
Among the assets Barrick will acquire in the $5.4bn deal for Randgold is Kibali, a mine Bristow built from scratch in the Democratic Republic of Congo. While that operation has been a crowning achievement for Randgold, it is set to challenge Bristow’s trouble-shooting skills even before he takes over as CEO of the enlarged company.
Sokimo, Randgold’s state-owned partner in Kibali, has protested that it was not informed of the deal in advance and said it would “assert its rights”.
Barrick will not be the first company to be squeezed by an increasingly assertive government in Kinshasa, DRC’s capital. Mining giant Glencore paid $150m earlier in 2018 to settle a dispute with state-owned Gecamines, which used identical resource-nationalist language as Sokimo when objecting to Freeport-McMoRan’s plan to sell a copper and cobalt mine to Chinese buyers. Freeport is said to have paid Gecamines $100m to smooth the transaction.
Even Bristow came away empty-handed when he led fellow CEOs in lobbying for concessions on the DRC’s new mining code. While the latest spat will not lead to a repeat of March’s face-to-face showdown with President Joseph Kabila, Bristow has already come out fighting, rebuffing Sokimo’s assertion that it is entitled to intervene as the merger would introduce a “de facto new partner” at Kibali. The deal “would have no effect” on the company that owns Kibali, Randgold said.
“The Congo government can’t block the transaction,” Bristow said. “We’ve engaged with the government in accordance with the legislation.”
Bristow said comparisons with Freeport are misleading as the US company was exiting the DRC as part of its deal.
“It’s a very different transaction to that which we are proposing,” said Bristow, who was in Kinshasa this week. “There’s no change of control for Kibali.”
That has not stopped DRC mining minister Martin Kabwelulu from invoking the nation’s new law, which decrees any takeover at a mine requires government approval. The proposed merger “must obtain the prior agreement of the Congolese state” to take effect at Kibali, Kabwelulu said on September 28, even though Randgold owns only 45% of the project. AngloGold Ashanti owns the same share, while Sokimo — officially known as Societe Miniere de Kilo Moto — holds 10%.
Bristow said Randgold has supplied Kabwelulu with all requested information and “in the fullness of time, I am sure we will come to the right conclusion”.
Randgold’s proven track record and ability to negotiate such regulatory roadblocks is central to its appeal. Volatile bullion prices have not derailed its profit-making abilities and it is the best performer on the FTSE 100 index this century.
By contrast, Barrick’s African unit, Acacia Mining, has long been mired in conflict with Tanzania’s government. In 2017, the country banned exports of mineral concentrates and slapped Acacia with a $190bn tax bill, forcing the company to shutter some production.
Once the Canadian company has completed its acquisition of Randgold, it would favour taking back control of its separately listed Tanzanian assets, according to people familiar with the situation. That would allow Bristow, who has publicly criticised Barrick’s handling of the Tanzania crisis, to plot a turnaround.
Before that happens, the swashbuckling South African must silence the rumblings of discontent in the DRC.