Aca­cia wants ex­port ban lifted in deal

Firm is set to pay Tan­za­nia $300 mil­lion and give the gov­ern­ment a 16 per cent share in three gold mines

The East African - - FRONT PAGE - By AL­LAN OLINGO The Eastafrican

If Tan­za­nia lifts its gold ex­port ban, Bar­rick Gold could pay a $300 mil­lion set­tle­ment to the gov­ern­ment.

Bar­rick said the $300 mil­lion would be paid from Aca­cia’s cash flows, ef­fec­tively push­ing Tan­za­nia to al­low the gold ex­ports.

“Given Aca­cia’s cur­rent fi­nan­cial po­si­tion, these pay­ments would be made over time, us­ing Aca­cia’s on­go­ing cash flows. As such, pay­ment would be conditional on Aca­cia’s abil­ity to sell con­cen­trate. Bar­rick will also be work­ing with the gov­ern­ment to es­tab­lish the ba­sis upon which the con­cen­trate ex­port ban can be lifted as ex­pe­di­ently as pos­si­ble,” the firm said in a state­ment on Wed­nes­day.

If Tan­za­nia lifts its gold ex­port ban, Bar­rick Gold could pay a $300 mil­lion set­tle­ment to the gov­ern­ment.

On Thurs­day, the firm said that it hoped for a fi­nal agree­ment in the first half of next year.

Bar­rick said the $300 mil­lion would be paid from Aca­cia’s cash flows, ef­fec­tively push­ing Tan­za­nia to al­low for gold ex­ports.

“Given Aca­cia’s cur­rent fi­nan­cial po­si­tion, these pay­ments would be made over time, us­ing Aca­cia’s on­go­ing cash flows. As such, pay­ment would be conditional on Aca­cia’s abil­ity to sell con­cen­trate. Bar­rick will also be work­ing with the gov­ern­ment of Tan­za­nia to es­tab­lish the ba­sis upon which the con­cen­trate ex­port ban can be lifted as ex­pe­di­ently as pos­si­ble, in­clud­ing pro­to­cols for joint over­sight and ver­i­fi­ca­tion of con­cen­trate ship­ments,” the firm said in a state­ment on Wed­nes­day.

Last week, Aca­cia’s chief fi­nance of­fi­cer An­drew Wray told an­a­lysts said that the firm doesn’t have the abil­ity to pay $300 mil­lion to Tan­za­nia to re­solve the tax dis­pute.

The world’s largest gold miner said that it was op­ti­mistic that its ne­go­ti­at­ing team and that from the Tan­za­nian gov­ern­ment would work to com­plete de­tailed doc­u­men­ta­tion and fi­nal agree­ments for re­view and ap­proval by Aca­cia in the first half of 2018.

Bar­rick added that the agree­ment pre­sented it with an op­por­tu­nity to re­de­fine Aca­cia’s re­la­tion­ship with Tan­za­nia for the long term, mov­ing to a part­ner­ship char­ac­terised by trust and trans­parency.

“We be­lieve the pro­posed frame­work rep­re­sents the op­ti­mal path for the res­o­lu­tion of out­stand­ing dis­putes be­tween Aca­cia and the gov­ern­ment of Tan­za­nia, and for the re­sump­tion of nor­mal op­er­a­tions. Such a part­ner­ship has the po­ten­tial to pro­vide greater near-term cer­tainty to Aca­cia and Bar­rick share­hold­ers, and mit­i­gate the risk of fu­ture business dis­rup­tions, thereby im­prov­ing the long-term sta­bil­ity and sus­tain­abil­ity of Aca­cia’s op­er­a­tions in Tan­za­nia,” the firm said.

The state­ments were in an earn­ings report from Bar­rick re­leased mid last week, which showed that the firm’s earn­ings dropped from $278 mil­lion to $186 mil­lion, com­pared with the same quar­ter last year. The firm said the earn­ings were af­fected by Bar­rick mak­ing a tax pro­vi­sion of $172 mil­lion for out­stand­ing claims against Aca­cia.

Un­der­stat­ing ship­ments

In March, Tan­za­nia ac­cused Aca­cia Min­ing, of which Bar­rick holds 63.9 per cent, of un­der­stat­ing its gold ship­ments. The gov­ern­ment then banned the ex­port of un­pro­cessed min­er­als. The firm’s op­er­a­tions af­fected by the ban ac­counted for about 6 per cent of Bar­rick’s 2017 gold pro­duc­tion forecast, which has now been re­vised down­wards to be­tween 5.3 mil­lion and 5.5 mil­lion ounces of gold from be­tween 5.3 mil­lion ounces and 5.6 mil­lion ounces. The com­pany re­ported a net loss of $11 mil­lion for the third quar­ter to Septem­ber this year, com­pared with net earn­ings of $175 mil­lion in 2016.

“The de­crease in net earn­ings

We be­lieve the pro­posed frame­work rep­re­sents the op­ti­mal path for the res­o­lu­tion of out­stand­ing dis­putes.” Bar­rick Gold

pri­mar­ily re­flects lower gold pro­duc­tion and lower gold prices, as well as the im­pact of Tan­za­nia’s con­cen­trate ex­port ban on Aca­cia. Net earn­ings were also im­pacted by a tax pro­vi­sion of $172 mil­lion re­lated to the pro­posed frame­work for Aca­cia’s op­er­a­tions in Tan­za­nia. The lower rev­enues, earn­ings, and cash flow for the quar­ter re­flect lower gold pro­duc­tion com­pared with the prior-year pe­riod, as well as the im­pact of lower sales from Aca­cia,” Bar­rick said.

Some share­hold­ers have crit­i­cised the deal that Bar­rick struck with Tan­za­nia, say­ing that it may have set the base­line for what na­tions will de­mand from global min­ing com­pa­nies, pos­si­bly slow­ing mine de­vel­op­ment.

In an in­ter­view with Reuters, Chris Mancini, an an­a­lyst at Ga­belli Gold Fund, which owns shares in Bar­rick, said that the 50 per cent is not a good prece­dent for a risky business.

“Min­ers would gen­er­ally want more than half the profits from mines to give them the in­cen­tive to build op­er­a­tions in geopo­lit­i­cally risky parts of the world. They are dis­in­cen­tivis­ing de­vel­op­ment. Bar­rick’s re­ally im­per­illing the rest of their op­er­a­tions. They are im­per­illing the in­dus­try,” Mr Mancini said.

File Pic­ture:

In March, the Tan­za­nian gov­ern­ment banned the ex­port of un­pro­cessed min­er­als.

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