Tanzania: To get off to a good start, Barrick Gold is offering to buy all of Acacia Mining.

In his desire to find common ground with the Tanzanian authorities, who accuse Acacia of having reduced its tax returns for many years, Barrick Gold proposed on Tuesday to acquire the 35% of the firm’s capital that he does not yet own.

The Canadian company’s offer would be made by way of an exchange of shares (0.1533 Barrick Gold shares for each Acacia share) and would value the acquired mining company at US$787 million. An operation that Barrick justifies by the fact that, in its long tax dispute with Acacia, the Tanzanian government is not ready to deal directly with the current management. « Following negotiations with the Tanzanian government, Barrick had the opportunity to conduct a thorough due diligence of Acacia’s assets and, based on this work, concluded that the above conditions proposal reflected the company’s fair value, » explained Canadian mining management in its press release. In the meantime, and again by press release on Wednesday, it was Acacia that made its own clarification: « Barrick provided the company[Acacia] with a letter indicating that the Tanzanian government is committed not to sign the company’s final agreements for the settlement of disputes if the company is one of the counterparties to the agreements, and to sign such agreements only if it is convinced that substantial changes are being made. In other words, taking over 100% of Acacia would allow Barrick Gold to definitively remove the management team at the origin of the dispute and, thus, to restart on a better basis.

It remains to be seen whether the buyback proposal will satisfy shareholders. While the experts at Jefferies consider that « the value of the transaction reflects the payment of the $300 million in taxes negotiated between Barrick and the Tanzanian government », many security holders firmly reject the terms of the offer. Quoted by the Financial Times, one of Acacia’s main shareholders, on condition of anonymity, described Barrick’s proposal as « ridiculous », arguing that it would be rejected by the minority shareholders. In fact, Barrick’s offer values Acacia at a lower level than its current level (147 pence per share compared to 151 pence on Wednesday). Barrick, which holds a majority interest (65%) in Acacia, has been negotiating with Tanzania for two years to resolve this tax dispute. The resolution of this dispute would allow Acacia to fully resume its activities in the country.

Evolution of the Acacia Mining share over 3 years, on the London Stock Exchange.
Source : Reuters