Acacia Climbs as Barrick Creates Proposal to End Dispute with Tanzania

Shares of Acacia Mining (LSE:ACA) climbed over 12 percent on Wednesday (February 20), after Barrick Gold (TSX:ABX,NYSE:GOLD) announced that it put forth a proposal with the Tanzanian government in order to settle the ongoing dispute between the country and Acacia.

The miner fleshed out a plan that involves a US$300-million payment to resolve tax claims from the East African country.

“Significant amounts of real value have been destroyed by this dispute and, in Barrick’s view, this proposal will allow the business to focus on rebuilding its mining operations in partnership with their respective stakeholders, and most importantly long suffering investors, including Barrick,” said Mark Bristow, president and CEO of Barrick.

Acacia and the Tanzanian government have been embroiled in a long-lasting dispute over tax evasion and breach of environmental regulations, among other issues. The dispute has depleted both the miner’s production and bottom line, with the company reporting an almost 50-percent decrease in output in April of last year.

Acacia noted that the main reason behind the large reduction stemmed from the dispute.

Barrick, which owns 63.9 percent of Acacia, has spent several months trying to determine what it could do with its stake in the company, with Bristow stating at the time that, “[t]his has been a very complex and challenging situation where no one has won. It’s untenable and will be resolved.”

Today, both Barrick and the Tanzanian government arrived at the proposal. In addition to the large payment, Barrick said that it could create a local operating company in Tanzania in order to share economic benefits from Acacia’s operations with the Tanzanian government on an even 50:50 basis.

Barrick will soon present the plan to Acacia’s independent directors, with the hopes that all parties can agree to its terms and begin to move forward.

Following the announcement that the dispute may be coming to an end, shares of Acacia rose over 12 percent and as of 12:32 p.m. EST on Wednesday, the miner was up 12.80 percent, trading at GBX 253.80.

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