Barrick’s trouble in Tanzania deepens

The downfall of Acacia Mining Plc took a new turn as the company’s top executives resigned, bringing fresh uncertainty to the future of the Tanzanian miner owned by Barrick Gold Corp.

Chief executive officer Brad Gordon and chief financial officer Andrew Wray will step down on Dec. 31, the gold miner said in a statement. The miner’s top three executives are planning to leave, as chief operating officer Mark Morcombe said last month he would resign.

The departures suggest Acacia’s relationship with Barrick, its majority shareholder, is worsening during a long-running dispute with the Tanzanian government.

Barrick last month reached a preliminary agreement with the Tanzanian government to resolve a US$ 190 billion tax penalty, but didn’t tell Acacia about the terms of the settlement until after the deal was announced. Acacia shares have lost about half their value this year as Tanzania banned exports of unprocessed gold in March and claimed the company had under- declared export revenue since 2000.

“We can only assume that the lack of control over the negotiations with the Tanzanian government made their positions untenable,” said Michael Stoner, an analyst at Berenberg Bank, referring to the resignations. “We view this as negative news for the company.”

Barrick chairman John Thornton agreed last month that Acacia would establish a new operating model to share the economic benefits from the mines equally with the Tanzanian government and pay US$ 300 million to the state as a “show of good faith.”

A spokesman for Barrick declined to comment on the resignations.

Though the exact terms of the deal are still to be agreed, it will include the creation of a Tanzanian operating company with substantial decision- making power, leaving little room for Acacia’s international executives, said Andrew Breichmanas an analyst at BMO Capital Markets Ltd.

It’s “clearly not a positive given the depth of experience that Brad and Andrew have, but it could appease the Tanzanian government,” Investec analysts wrote in a report.

“Barrick will be able to say how they are sorting things out.”