Acacia board left out in the cold, as Barrick’s Bristow steps in to resolve long-standing Tanzanian dispute

Control of the destiny of Acacia Mining PLC (LON:ACA) looks rapidly to be slipping away from incumbent board members and into the hands of one man, Mark Bristow.

Bristow’s only a couple of months into his new role at the helm of Barrick Gold, but already he’s making his mark.

He’s already shaken up the management structure with the establishment of regional executive teams for North America, Latin America and the Middle East, and now he’s moving on to tackling what’s been a major thorn in Barrick’s side for a long time now: Acacia.

As we highlighted on these pages a few weeks ago, Bristow was always going to make some sort of move in regard to Acacia.

The reasons were simple.

Firstly, Barrick owns a 63.9% stake in Acacia so, allowing for due process at general meetings and the like, it gets to call the shots. Secondly, Bristow, as the former chief executive of Randgold, has a wealth of African experience he can bring to bear on Acacia’s ongoing dispute with the Tanzanian government. Barrick has always been light on African expertise, which is partly why it spun off Acacia in the first place.

And thirdly, in spite of recent relative share price strength Acacia is still trading a long way below the price it was floated off at, and any resolution to the issues would likely result in a significant uplift in value that would show through immediately onto the Barrick balance sheet, making it an easy early win for Bristow.

That would then leave Barrick in a much stronger position when it comes to making the next crucial decision regarding Acacia’s future: does it take it completely in-house, or off-load the rest of the stake. Given that Bristow’s African empire is now firmly inside the Barrick fold, it would make plenty of sense to expand it with the addition of some major Tanzanian projects. But first, there’s an urgent need to square off the Tanzanian government, if indeed it can be squared off.

How culpable Acacia’s own management team is for the company’s current predicament is a matter for some debate, but Barrick and Bristow are certainly sending a clear enough signal to the market in their approach to solving the issue. At its heart is an allegation by the Tanzanian government that Acacia “under-declared”, to use the wording of Barrick’s cautionary statement, the amount of gold it was exporting out of the country in concentrate form. There are also several separate festering issues relating to tax payments, in particularly in the context of a new mining law that was brought in in 2018. Bristow’s no stranger to arguments with governments: on occasion he’s had to bang heads together in relation to the Randgold operations in the Democratic Republic of Congo. Sometimes he’s given ground, but so far when problems have arisen there’s always been a solution to be thrashed out.

That’s what made Acacia stand out in the days when it was measured against Randgold on the London stock exchange – as far as London investors are concerned, there’s no reason why operations in Africa can’t be made to work on as satisfactory a footing as operations anywhere else in the world.

Accordingly, Bristow has wasted no time in opening negotiations at the top levels of the Tanzanian government. Pointedly though, he hasn’t brought any of the Acacia directors along to help or advise him in any way. The public spin on this is that Barrick is acting as a “facilitator.”

But it doesn’t take much reading between the lines to conclude that Acacia’s days an independent operating entity are over.

Indeed, one reading of recent announcements implies that Acacia wasn’t even aware of the negotiating position that Bristow was adopting on its behalf.

Instead, it said simply that it had not received “any proposals” from Barrick, and added lamely that any proposal it did receive would be “subject to review.”

So there’s no doubt now about who’s controlling events.

It’s Bristow, and on behalf of Barrick, he’s now laid out clearly possible terms that might allow for an agreement with the Tanzanians.

In a joint proposal he’s put together with the Tanzanian government, it’s envisaged that a local operating company will be created to manage Acacia’s projects more effectively than the somewhat hands-off approach that has hitherto been employed.

Further, the Tanzanians and Bristow reckon that the economic benefits from Acacia’s gold operations in Tanzania, including the troubled Bulyanhulu mine, ought to he shared on a 50:50 basis.

And finally, it’s proposed that Acacia pay US$300mln to settle “outstanding tax claims” and that this payment will be staged over time.

If the Tanzanians are on board with this proposal, it’s hard to see things playing out in any other way, however much the Acacia side may or may not wish to protest about the former negotiating positions it’s struck in the past.

It remains to be seen exactly what future Bristow has in mind for Acacia. But it looks like we won’t have long to wait.

Story by ProactiveInvestors