Barrick Gold proposes Acacia acquisition

A miner operates his scoop tram at the Barrick Gold/Acacia Mining Bulyanhulu gold mine in Tanzania. Source: Acacia Mining plc.

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Barrick Gold Corp. [ABX-TSX, GOLD-NYSE] has delivered a conditional proposal that would see the gold mining giant acquiring the 36% stake in Acacia Mining Plc’s [ACA-LSE] that it doesn’t already own in a share exchange deal.

The proposal involves an exchange of 0.153 Barrick shares for each share of Acacia Mining. The offer implies a value for Acacia of US$787 million and a total consideration to the minority shareholders of US$285 million.

Acacia has three mines in Tanzania, including Bulyanhulu, Buzwagi, and North Mara. The aim is to resolve the ongoing dispute between the two parties following the concentrate export ban that was implemented in March, 2017.

Acacia has previously said it produced 521,980 ounces of gold in 2018. That was ahead of the initial guidance of between 435,000 and 475,000 ounces. The all-in sustaining cost of US$905 per ounce was also below the guidance range of US$935-US$985 an ounce.

The Tanzania government had previously alleged that mining companies had underpaid up to US$50 billion in taxes over the past 20 years.

The government recommended that an export ban on concentrates remain in place until the back taxes are paid.

Over the weekend, the Government of Tanzania stated that it will not sign any agreements related to the ongoing disputes directly with Acacia (under its current management). Apparently this has prompted Barrick to offer to consolidate its ownership of the company in order to facilitate a deal with the Government of Tanzania.

Negotiations between Barrick and the Government of Tanzania (GoT) to resolve the various disputes between Acacia and Tanzania have been ongoing for the past two years. Acacia remains excluded from the talks at the request of the government. In a press release, Barrick said it has been seeking a basis for a settlement of Acacia’s ongoing disputes with Tanzania and to establish a framework under which Acacia could resume its full operations in Tanzania and rebuild its relationships with the government.

“While a basis for a settlement has been developed, but not finalized, in meetings this past weekend, the GoT stated that it is not prepared to enter into any settlement directly with Acacia,” Barrick said in a press release.

However, Barrick warned that the announcement does not amount to a firm intention to make an offer.

Meanwhile, Acacia issued its own press release stating that it is considering these developments and will be taking steps to seek clarification of the GoT’s position. A further announcement will be made in due course, the company said. “In the meantime, Acacia shareholders are strongly advised to take no action,” Acacia said.

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