16 February 2017

Tanzania Unaware of Acacia, Endeavour Mining Merger

Tanzania has said it is yet to be notified of the merger between local miner Acacia and Endeavour Mining Corporation, which is partly owned by Egyptian tycoon Naguib Sawiris.

The merger would create one of the biggest mining companies in Africa specialising in precious minerals.

The director-general of Tanzania's Fair Competition Commission (FCC), Frederick Ringo, said Acacia was required by law to inform the watchdog before making any changes in ownership.

"Acacia haven't made any formal notification to the Commission about the merger. Before signing the final agreements or transfer of shares, they will need to notify the Commission," said Dr Ringo.

The merger would allow Barrick Gold Corporation, which cross-listed on the London stockmarket and Dar es Salaam Stock Exchange as Acacia in December 2011, to reduce its stake in Acacia to about 30 per cent. Last year, several South African firms including Harmony Gold Mining Company Ltd and Sibanye Gold Ltd considered buying shares in Acacia.

"Acacia confirms it is in preliminary discussions regarding a possible combination with Endeavour. This may or may not result in agreement of a transaction. A further announcement will be made when appropriate," said Acacia's investor relations manager Giles Blackham.

Toronto Stock Exchange-listed Endeavour's market value is about $1.66 billion, while Acacia, which is 63.9 per cent majority-owned by Barrick Gold Corporation of Canada, has a valuation of about $2.1 billion.

Gold prices are expected to rise from the current $1,213.38 to about $1,500 per ounce by mid 2017 as a result of geopolitics and Brexit-driven demand for the precious metal, which is regarded as a safe haven for investors. The shares of Acacia and Endeavour were not much affected by the announcement.

The discussions come at a time when Tanzania's government wants gold mining firms to build smelting plants in the country. Acacia runs the Bulyanhulu, Buzwagi, and North Mara gold mines in northwest Tanzania. It also owns exploration projects in Tanzania and western Kenya as well as prospecting interests in Burkina Faso and Mali.

Endeavour is building the Houndé project in Burkina Faso, where gold output is expected to start in October this year. The firm has mines in Agbaou and Ity in Côte d'Ivoire, Karma in Burkina Faso, Nzema in Ghana and Tabakoto in Mali.

The Fair Competition Act (2003) gives the commission the mandate to oversee mergers and acquisitions. However, parties usually report to it once negotiations are concluded and modalities of the merger agreed on.

"Acacia will be required to inform the commission, which will then determine if the merger should go on or not," said Dr Ringo.

The FCC must be notified of any merger or acquisition in which there is a turnover of assets in excess of $380,000. A merger can be prohibited or its terms varied where it is found to create or strengthen "a position of dominance" in a market.

The Act defines a position of dominance as where a person with a market share of more than 35 per cent can restrain or reduce competition in a market for a significant period of time.

Additional reporting by Kennedy Senelwa.

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