Barrick’s offer for Acacia Mining reflects Tanzania risk, says CEO
Mark Bristow says Acacia has not been functioning as a company should be but some shareholders are not happy with the offer
London/Toronto — Barrick Gold Corporation’s offer to buy the rest of Acacia Mining for $787m is fair because the Canadian company is taking on more risk by increasing its exposure to Tanzania, Barrick CEO Mark Bristow said on Friday.
Barrick, which owns 63.9% of London-listed Acacia, proposed last on Tuesday to buy out the minority shareholders as part of efforts to resolve a 2017 tax dispute with the Tanzanian government.
However, its offer, which was not a firm intention, represents a near 11% discount to Acacia’s closing share price on Tuesday and is 42% below Barrick’s own audited valuation of Acacia’s assets in its 2018 annual report.
The discount has elicited complaints from some of Acacia’s minority shareholders, but Bristow said the offer was fair because Barrick was taking on more risk.
“We have had a good look at the assets and ... the [agreement with the Tanzanian government], which still has to be finalised, comes with risk,” he said in an interview.
“Tanzania is considered a higher risk jurisdiction and [Acacia] hasn’t been functioning as a company should be, otherwise we wouldn’t be interfering in it.”
Barrick clinched a framework deal with Tanzania on the tax issue in 2017 that required Acacia to pay $300m, hand over a 16% stake in its three gold mines and split the economic benefits from its operations.
“I can assure you there’s nothing else,” Bristow said. “No side agreement or other agreement, which we’re trying to exploit.”
Acacia declined to comment.
Barrick’s offer follows more than two years of wrangling over a ban on mineral concentrate exports from Tanzania and a $190bn tax bill, which has dragged Acacia’s share price 70% lower. The tax bill has since been reduced to $300m.
Barrick was leading negotiations with the Tanzanian government on the tax issue while Acacia was shut out of the talks. Barrick has accused Acacia of failing to co-operate.
Barrick said the east African country had refused to settle directly with Acacia, prompting it to make the offer to take full control of the miner.
Some minority shareholders and analysts have said Barrick’s offer was too low, but also said that the Tanzanian government’s stance limited Acacia’s options.
One Acacia shareholder said he was sceptical as Barrick had not made a firm offer but only an indicative one.
“That shows that [Barrick] can pull the offer at any point,” the shareholder, who declined to comment, said.
Analysts at Jefferies said: “An outcome whereby Acacia could return to a normalised operating environment appears increasingly unlikely and we believe this was the trigger to Barrick proposing the offer.”
Asked whether there were alternative plans to solving the dispute, Bristow said: “If we had a better plan, we would have tabled it. This is not an opportunity to exploit a situation, it is a genuine attempt to mediate an outcome to a situation which has become extremely emotional and which is holding up the mining industry in Tanzania.”