1 July 2019

Tanzania: Besieged Acacia Wants Direct Talks With Tanzania

Acacia Mining Plc wants a truce with the Tanzania government over the tax arrears dispute.

"Acacia's desire is to engage the government of Tanzania and continue to seek a direct negotiated resolution of the dispute. We still seek to continue demonstrating our long-term commitment to Tanzania, our people, and the mining industry going forward," the company said in a statement last week.

The latest statement was in response to an offer by Canadian-based majority shareholder Barrick Gold Corp to buy the company's assets, including the three goldmines it operates in Tanzania.

PROPOSAL

Barrick Gold owns 64 per cent of Acacia Mining, and has tabled a proposal to acquire the remaining 36 per cent stake at 0.153 Barrick shares for each Acacia ordinary share.

The Canadian firm has extended its discussion deadline on the offer to July 9, as it continues mediation efforts to end an impasse with the Tanzanian government the has seen Acacia's own shares plummet over the past two years.

Acacia's fortunes have been hardest hit by the government's ban on further exports of mineral concentrates from its three gold mining operations in the country pending payment of a $190 billion tax bill.

Barrick said recently that its reduced share price offer "reflects the fair value of Acacia" in its current state, based on a "detailed due diligence on all its assets."

But, according to Acacia's statement on June 24, the London Stock Exchange-listed firm remains deeply distrustful of Barrick's ultimate motive in the deal.

Acacia appears to have now shifted its row with the government to the majority shareholder, saying it never endorsed Barrick's 2017 move to intervene in its dispute with Dar es Salaam by opening negotiations on its behalf in the first place.

The negotiations between Barrick and the Tanzanian government, from which Acacia was excluded, led to the signing of an agreement that included a $300 million one-off payment to settle outstanding tax claims and an equal 50-50 share-out of all future economic benefits from the three mining operations between Acacia and the government.

Now, Acacia says Barrick's intervention has proved more damaging for its material operations in the country.

"Acacia did not invite Barrick into our negotiations with Tanzania; we had our own engagements with the highest levels of the government at the time and had no reason to believe that these engagements would not continue," the company said. "With the length of time Barrick's negotiations with the government have taken, and the way they have been managed, they have had the effect of undermining Acacia in Tanzania.

COMPLETE PROPOSAL

"Barrick has never actually presented Acacia with a complete proposal for Acacia's consideration and shareholder approval, and this has been a key contributor to a material deterioration of Acacia's operating position in Tanzania over the past two years," it added.

The company said it would "continue seeking a direct negotiated settlement with the government - however negotiated."

It also said that to protect the interests of its shareholders, it will continue to pursue international arbitration proceedings against the Tanzanian government, although it is understood that hearing dates have not been set yet.

But the Tanzanian government recently announced its intention to "cut all ties" with Acacia Mining and instead work with only Barrick on the implementation aspects of the 2017 deal.

"The government insists that under no circumstances can Acacia be a party to the agreement, or have any role in the operation or management of the Barrick mining subsidiaries in Tanzania," government spokesperson Dr Hassan Abbasi said.

Tanzania

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