The Citizen (Dar es Salaam)

Tanzania: African Barrick Gold Targets Sh1.3 Trillion in Initial Public Offer (IPO)

African Barrick Gold (ABG), the new company, which has taken over four gold mines in Tanzania, hopes raise up to $1 billion (about Sh1.3 trillion) when it sells 25 per cent of its stake to investors in London next month.

According to reports released yesterday in the United Kingdom, after raising the targeted capital during the initial public offer (IPO), some of the proceeds will be used to enhance and expand the new company's operations in Africa, and clear debts.

The Sh1.3 trillion is almost equivalent to one-eighth of the Tanzania Government's current Budget.

The amount is also nearly a fourth of the current value of the total shares being traded on the Dar es Stock Exchange (DSE), which recorded a turnover of only Sh94 million in yesterday's trading session.

However, some local experts have raised doubts over the decision to float ABG shares in London, instead of Tanzania, where the company has most of its assets.

These comprise Bulyanhulu, North Mara, Tulawaka and Buzwagi mines, representing 9.6 per cent of total gold production of the parent company, Barrick Gold Corporation, which has a market capitalisation of about $37 billion (about Sh48.1 trillion).

The new vehicle established to cater for the interests of the world's biggest gold producer in Africa will target institutional investors in the IPO.

The UK headquartered spin-off has assets worth about $4 billion (about Sh5.2 trillion) and is likely to be admitted to the FTSE 100 Index after selling the 25 per cent of its enlarged share capital.

According to people familiar with the flotation, the biggest gold producer in Tanzania started pre-marketing its $875 million to $1 billion IPO on Monday.

UK capital markets sources said the IPO would be London's biggest in almost two years. Two of Tanzania's mostly oversubscribed IPOs, Twiga Cement in 2006 and National Microfinance Bank in 2008, raised Sh92.5 billion and Sh224 billion, respectively.

British papers have reported that some analysts believe Barrick's new African subsidiary, which will later list on the DSE, is an attempt by the Canadian multinational to reduce portfolio risk.

Barrick has been operating in Tanzania for a decade, producing 716,000 ounces in 2009, which would make it the largest UK-listed gold producer at flotation and the fourth largest working in Africa.

Mr Greg Hawkins, the new chief executive of ABG, said Barrick had been looking at how to develop its African assets and maximise their value.

"With the African assets sometimes it's been difficult to grow because there are so many other huge Barrick projects around the world and Africa is often a bit smaller and hard to get on the radar," he said.

Barrick's primary listing is on the Toronto Stock Exchange but the AGB offering was seeking to tap London-based investors seen as more favourable toward African assets.

"Our understanding is that Africa is more attractive for the investor base in Europe and London," said Mr Hawkins. "There's a variety of reasons for this: London's neatly in the time zone, there's the history."

But local economists and other experts have warned that the secondary listing of ABG at the DSE would not be of much benefit, as was being anticipated in some quarters.

They argued that the London flotation would raise the price of the shares beyond the reach of the majority people in Tanzania.

Barrick's new move came as it reported a fourth-quarter net income of $215 million, or 21 cents per share, compared with a loss of $468 million, or 53 cents per share, in the year-ago quarter.

Mr Joe Lunn, an analyst at British firm FinCapp, said: "It's a marketing thing. London is starved of large-cap gold miners.

Randgold Resources is the only mid-to large-cap producer in London and as such commands a significant premium. In spinning off its African assets, Barrick will be hoping this new company commands a similar premium."

The sceptical local experts are calling for a careful assessment of the DSE listing plan even as other stakeholders laud the move as a major development in the quest for public participation in the ownership of the country's mineral wealth.

The latter also argue that the listing will boost the Dar bourse's operations and performance, which currently has only 15 companies.

In wide-ranging interviews since last Thursday, when Barrick officials announced the development to reporters at a briefing in Dar es Salaam, the local experts have given insights into what the public should expect.

The most notable concern is whether the intended listing of the company on the local stock market will be affordable for the majority.

Barrick officials say the DSE listing will facilitate local ownership of the company.

"Listing on the DSE will allow for local investors to participate in the gold business and increase our profile both in Tanzania and Africa," said Mr Deo Mwanyika, the vice-president for corporate affairs in the new firm, ABG.

But the Civic United Front (CUF) national chairman, Prof Ibrahim Lipumba, said the share-trading plan at the DSE following the London IPO would not be of benefit to the national economy. He said that due to the immaturity of DSE, the foreign IPO would dictate the prices of the shares, putting them out of reach for many Tanzanians.

"Will Barrick set different prices for the shares in London and Dar es Salaam? The firm is out to raise capital and I doubt any such considerations are a priority,"said Prof Lipumba, a renowned economist and former university lecturer.

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