LAWRIE WILLIAMS: The Bristow factor helps end Barrick’s Tanzania gold dispute

Barrick Gold, now led by Mark Bristow following the merger with Randgold, seems to have sorted out the very severe ongoing difficulties which occurred between Barrick subsidiary Acacia Mining and the Tanzania Government.  Randgold, under Bristow’s leadership, has had a history of working amicably with the governments of African nations where its operations are located and, hopefully, the new agreement between Barrick and the local government will carry forward to be the start of a much more productive relationship between the two entities and help the company’s significant gold mining operations in the East African nation move ahead smoothly from now on.

In a press release issued yesterday, Barrick noted that the Tanzania government and Barrick have reached an agreement to settle all disputes between the government and the mining companies formerly operated by Acacia but now managed by Barrick.  The final agreements have been submitted to the Tanzanian Attorney General for review and legalisation.
 
The terms of the agreement include the payment of US$300 million to settle all outstanding tax and other disputes; the lifting of the concentrate export ban; the sharing of future economic benefits from the mines on a 50/50 basis; and the establishment of a unique, Africa-focused international dispute resolution framework.

The mechanics of the settlement involve the creation of a new operating company called Twiga Minerals Corporation which has been formed to manage the Bulyanhulu, North Mara and Buzwagi mines.  (Twiga is the Swahili word for giraffe, Tanzania’s national symbol.)  The Tanzania Government will acquire a free carried shareholding of 16% in each of the mines and will receive its half of the economic benefits from taxes, royalties, clearing fees and participation in all cash distributions made by the mines and Twiga.  An annual true-up mechanism will ensure the maintenance of a 50/50 split.

Speaking after a meeting with the chairman of the Negotiating Committee of the Government of Tanzania, Prof Palamagamba Kabudi, Barrick president and chief executive Dr. Mark Bristow said the agreements introduced a new era of productive partnership with the Tanzania Government and would ensure that Tanzania and its people would share fully in the value created by the mines they hosted.  It also marked the end of the long impasse between Tanzania and Acacia which had led, among other things, to the temporary closure of North Mara and the freezing of export concentrate from the two other operations.

Barrick took over the management of the mines after its buy-out of the Acacia minorities last month.  Since then it has negotiated the re-opening of North Mara and is engaging with the mines’ host communities to restore their social license.

“Rebuilding these operations after three years of value destruction will require a lot of work, but the progress we’ve already made will be greatly accelerated by this agreement.  Twiga, which will give the government full visibility of and participation in operating decisions made for and by the mines, represents our new partnership not only in spirit but also in practice,” Bristow said.

He noted that Tanzanian nationals were already being employed and trained to replace expatriate staff as had been done very successfully at Barrick’s other African operations.

Tanzania was Africa’s fourth largest gold producing nation in 2017, but in part because of the dispute with Acacia had been overtaken by Mali and Burkina Faso in 2018, and will probably also have fallen behind the Democratic Republic of Congo this year.  The settlement with Barrick may now help it claw its way back up the table next year.

The $300 million payment to settle all the government-claimed liabilities may seem a heavy price to pay but is hugely less than the rather ridiculous $190 billion tax bill that had been previously claimed by Tanzania – estimated by Bloomberg as being equivalent to two centuries of prospective revenues for the three mines.

Obviously the original Tanzanian demands for ending the dispute were completely over the top but had emphasised the total breakdown in trust between Acacia and the government.  Barrick’s Executive Chairman, John Thornton, had been leading negotiations to end the impasse, and the bones of the now seemingly accepted deal were down to his work.  But it seems to have taken the Canadian company’s buyout of the minority interests in Acacia, and the changes in Barrick top management to the former Randgold executive team, with its excellent track record of working with African governments, to bring about the settlement.  However the deal still requires signing off by Tanzania’s Attorney General.

21 Oct 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com