Barrick Prepares to Purchase Remaining Shares of Acacia

Barrick Gold (TSX:ABX,NYSE:GOLD) proposed to increase its stake in Acacia Mining (LSE:ACA) on Tuesday (May 21) under a plan where the Canadian miner will acquire all outstanding shares of Acacia that it does not currently own for US$285 million.

The strategic move by Barrick comes after two years of negotiations with the government of Tanzania over an ongoing dispute with Acacia. The African country has refused to enter into an agreement directly with the London-listed miner, which was accused of US$200 billion in tax fraud in 2017.

According to the offer, the acquisition will materialize through a share-for-share exchange of 0.153 Barrick shares for each ordinary share of Acacia, which represents a total value of US$787 million for the Tanzania-focused miner. Barrick currently owns 63.9 percent of Acacia.

As a result of the ongoing tax dispute with the government of Tanzania, Acacia has been forced to cut output by a third after the African country banned the export of mineral concentrates from the Bulyanhulu and Buzwagi mines back in 2017.

The company’s gold production fell 13 percent in the first quarter of this year, even though months before it seemed like Barrick and the Tanzanian government were close to resolving the dispute when the Canadian miner put together a plan that would have involved a US$300 million payment to resolve tax claims from the East African country.

Despite earlier talks, on Monday (May 20), prior to Barrick’s takeover proposal, the government fined Acacia US$2.4 million for alleged pollution at its North Mara mine.

Adding stress to the situation is the fact that Barrick has alleged that Acacia is not cooperating with the Tanzanian government — a claim that Acacia denies.

“While the outcome of this proposal is still unknown, we believe a resolution of the Tanzanian dispute could be positive for Barrick,” Raymond James analysts said in a note to clients.

Acacia responded to Barrick’s proposal and comments on Wednesday (May 22), stating that it has been, and continues to be, excluded from discussions between Barrick and the Tanzania government.

The miner also noted that Barrick has provided it with a letter from the government’s negotiating team, which states that the government of the country will not move forward with final agreements surrounding the resolution of the disputes if Acacia is one of the counterparties to the agreements.

Additionally, in the note, Barrick told Acacia that Tanzania will only sign such agreements “if satisfied that substantial changes have been made to the management style of the operating companies and of their shareholders.”

Acacia’s board is considering the options and information set forth by Barrick, but it has stated that shareholders have been “strongly advised to take no action” at this time.

As of 10:54 p.m. EDT on Wednesday, shares of Acacia had risen 5.63 percent to trade at GBX 159.50; meanwhile, Barrick was relatively flat, trading at C$16.28.

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