LONDON/TORONTO – Barrick Gold's offer to buy the rest of Acacia Mining reflects the risk the Canadian-listed mining company faces in increasing its exposure to Tanzania, its chief executive said on Friday.
Barrick, which owns 63.9% in London-listed Acacia, on Tuesday proposed to buy out the minority shareholders as part of efforts to resolve a 2017 tax dispute with the Tanzanian government.
Barrick's offer values Acacia at $787-million, a near 11% discount to its closing share price on Tuesday and 42% below Barrick's own audited valuation of Acacia's assets in its 2018 annual report.
But Bristow said the offer was fair as Barrick was taking on more risk.
"We have had a good look at the assets and ... the (agreement with the Tanzanian government), which still has to be finalised, comes with risk," Barrick CEO Mark Bristow said in an interview with Reuters.
"Tanzania is considered a higher risk jurisdiction and (Acacia) hasn’t been functioning as a company should be, otherwise we wouldn't be interfering in it," he said.
Barrick clinched a framework deal with Tanzania in 2017 that required Acacia to pay $300-million, hand over a 16% stake in its three gold mines and split the economic benefits from its operations.
"I can assure you there's nothing else," Bristow said. "No side agreement or other agreement, which we're trying to exploit."
Acacia declined to comment.
Barrick's offer follows two years of wrangling over a $190-billion Tanzanian tax bill, which has since been reduced to $300-million.
Barrick negotiated with the Tanzanian government on the tax issue on Acacia's behalf. But Acacia has blamed Barrick for being shut out of the talks, while Barrick has accused Acacia of failing to cooperate.
Barrick said on Tuesday the Tanzanian government had refused to settle directly with Acacia, prompting it to make the offer to take full control the miner.
Shareholders and analysts have said Barrick's offer was too low, but also said that the Tanzanian government's stance limited Acacia's options.
One Acacia shareholder told Reuters he was sceptical that Barrick had not made a firm offer but only an indicative one.
Analysts at Jefferies said: "An outcome whereby Acacia could return to a normalised operating environment appears increasingly unlikely and we believe this was the trigger to Barrick proposing the offer."
Asked whether there were alternative plans to solving the dispute Bristow said: "If we had a better plan, we would have tabled it.
"This is not an opportunity to exploit a situation, it's a genuine attempt to mediate an outcome to a situation which has become extremely emotional and which is holding up the mining industry in Tanzania," he said.