Barrick Gold strikes friendly deal with Acacia

Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] is set to acquire the 36% stake in Acacia Mining Plc. [ACA-LSE] that it doesn’t already own in an all-share friendly transaction worth $428 million or $2.90 per share.

The announcement came Friday July 19 after the boards of both companies agreed to the terms of a recommended offer of 0.168 Barrick share for each Acacia share. The offer includes some additional potential future cash for proceeds received from the sale of Acacia’s exploration properties.

The exchange ratio has increased by about 10% from the previously announced non-binding offer in recognition of the expectation that Barrick will be able to reduce G&A costs (from the closure of Acacia’s U.K. head office) and generate $10 million from certain exploration properties that have pending sales agreements in place.

After closing, Barrick will endeavour to sell Acacia’s remaining exploration assets and any net proceeds received (including deferred consideration such as royalties) will be distributed to Acacia shareholders (as of the deal record date) on a pro rata basis via a special dividend at the end of each year.

Friday’s news release brings to a close a saga that began on May 20, 2019 when Barrick’s initial proposed offer was announced.

The world’s second largest gold producer, Barrick has said it is aiming to resolve the ongoing dispute between the Government of Tanzania (GoT) and Acacia following a concentrate export ban that was implemented in March 2017. Tanzania imposed the export ban after alleging that mining companies had underpaid up to US$50 billion in taxes over the past 20 years. It recommended that an export ban on concentrates remain in place until the back taxes are paid.

GoT subsequently stated that it will not sign any agreements related to the ongoing disputes directly with Acacia (under its current management), a move that prompted Barrick to offer to consolidate its ownership Acacia in order to facilitate a deal with the GoT.

Acacia has three mines in Tanzania, including Bulyanhulu, Buzwagi, and North Mara.

On May 20, 2019, Barrick announced that it had met with directors and senior management of Acacia and presented a proposal for the consideration by the independent directors of Acacia to acquire all the Acacia shares it doesn’t already own via a share exchange of 0.153 Barrick shares for each share of Acacia Mining.

The offer was extended until today (July 19, 2019) to permit Barrick to review SRK Consulting (UK) Ltd.’s analysis on Acacia’s share value, which was pegged in the range of 271 British pence to 281 pence.  SRK’s evaluation range is above Acacia’s closing price on July 9, 2019 and Barrick’s implied offer price.

Barrick has previously stated that the GoT has made it clear that it is not prepared to enter into settlement agreements directly with Acacia. “In Barrick’s view, it is now clear that the relationship of Acacia with GoT has been so damaged by events that led to the concentrate ban being imposed by the GoT in March 2017 and by the subsequent arbitration proceedings initiated by Acacia against the GoT that is no longer possible for Acacia to continue to function as an independent public company, with substantially all of its value represented by assets in Tanzania,” the gold mining giant said.