Barrick Weighs Options for Copper Mine as Zambia Tax Hikes Loom

- January 21st, 2019

Barrick has once again found itself involved in an African tax dispute, with the latest affecting its Lumwana copper mine.

Barrick Gold (TSX:ABX,NYSE:GOLD) has begun considering various options for its Lumwana copper mine, which includes selling the asset, the company announced on Monday (January 21).

The miner began fleshing out arrangements for the mine when concerns surrounding potential tax hikes in Zambia grew.

“The proposed changes to taxes and royalties would imperil the mine’s ability to sustain returns to all stakeholders, such as the significant contribution of more than US$3.3 billion it has already made to the Zambian economy over the past 10 years,” said Willem Jacobs, CEO at Barrick in Africa and the Middle East.

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While Barrick had previously stated that its copper mine was strategic and it would not be selling the asset, the miner has now noted that the “challenging conditions” which Lumwana faces have resulted in “all options” being considered.

“Lumwana has made detailed proposals to the government about a partnership approach which would provide the state with an improved share in the economics of Lumwana without overburdening the mine,” stated Jacobs.

“Finding a win-win solution between the industry and government would without doubt increase investor confidence in Zambia and safeguard the long-term prospects of its mining industry,” he added.

This is not the first African tax dispute that Barrick has been involved with in recent years. At the beginning of this year, the miner began fleshing out options for its stake in gold producer Acacia Mining (LSE:ACA), as it has spent almost two-years in the middle of a tax dispute in Tanzania, where its government has accused the company of US$200 billion in tax fraud.

“This has been a very complex and challenging situation where no one has won. It’s untenable and will be resolved,” said Mark Bristow, CEO, in January.

Barrick revealed that it could purchase the remaining shares of Acacia, or it could split the company up, among other options.

“This conflict has destroyed lots of value. We need to make sure there’s enough value to work out a solution that various interested and affected parties get something that’s fair and proper for them,” he said, adding that the company would provide more information during the second week of February.

As of 4:01 p.m. EST, Barrick was up 1.6 percent, trading at C$15.89..

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article. 

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