LONDON/TORONTO (Reuters) - Barrick Gold Corp’s offer to buy the rest of Acacia Mining for $787 million is fair because the Canadian company is taking on more risk by increasing its exposure to Tanzania, its chief executive said on Friday.
Barrick, which owns 63.9% of London-listed Acacia, proposed on Tuesday to buy out the minority shareholders as part of efforts to resolve a 2017 tax dispute with the Tanzanian government.
However, its offer, which was not a firm intention, represents a near 11% discount to Acacia’s closing share price on Tuesday and is 42% below Barrick’s own audited valuation of Acacia’s assets in its 2018 annual report.
The discount has elicited complaints from some of Acacia’s minority shareholders, but Bristow said the offer was fair because 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 on the tax issue 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 more than two years of wrangling over a ban on mineral concentrate exports from Tanzania and a $190 billion tax bill, which has dragged Acacia’s share price 70% lower. The tax bill has since been reduced to $300 million.
(For a graphic on 'Acacia shares eroded by Tanzania tax dispute' click tmsnrt.rs/2EwEduT)
Barrick was leading negotiations with the Tanzanian government on the tax issue while Acacia was shut out of the talks. Barrick has accused Acacia of failing to cooperate.
Barrick said on Tuesday that the east African country had refused to settle directly with Acacia, prompting it to make the offer to take full control the miner.
Some minority 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 skeptical as Barrick had not made a firm offer but only an indicative one.
“That shows that (Barrick) can pull the offer at any point...” the shareholder, who declined to comment, said.
Analysts at Jefferies said: “An outcome whereby Acacia could return to a normalized 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.
Writing by Zandi Shabalala. Editing by Jane Merriman and Susan Fenton