Acacia Mining PLC says Barrick Gold Corp.’s takeover proposal undervalues the company, prompting Acacia to push its biggest shareholder to table a “fair” bid.
Last month, Toronto-based Barrick said it was willing to acquire the 36.1 per cent of London-based Acacia that it doesn’t already own for US$285-million in stock. At the time, the proposal was worth roughly 9 per cent less than Acacia’s market value.
Barrick chief executive Mark Bristow told The Globe and Mail that the discounted proposal was justified because of the inherent risk Acacia presents: It operates three gold mines in Tanzania and is currently subject to a gold concentrate export ban in the East African country.
Barrick also expressed skepticism last week about the true value of some of Acacia’s assets, suggesting it may be overestimating grade and underestimating costs at some of its mines.
On Monday Acacia said it “strongly disagrees with Barrick’s view on Acacia’s life of mine plans” and “sees no reasonable basis” for Barrick’s assessment.
In 2017, Tanzania under President John Magufuli accused Acacia of US$200-billion in tax fraud and banned the company from exporting gold concentrate. The move crippled the company’s overall gold production and its share price collapsed in the aftermath.
Last October, in a sign of deteriorating relations between the company and the government, three current or former Acacia employees were charged with criminal money laundering and imprisoned under non-bailable offences.
Over the past two years, Acacia’s management has largely been locked out of negotiations with Tanzania to end the fracas, with Barrick doing most of the heavy lifting.
On Monday Acacia said it had initially been in negotiations with the Tanzanian government – until Barrick “unilaterally intervened.” Acacia subsequently allowed Barrick to take over, but that led to its position in Tanzania being “undermined.”
Barrick recently said the government was refusing to deal with Acacia and would not sign any final agreement to end the dispute if Acacia remained a counterparty.
Over the past month, as Barrick shares have gained in value alongside an appreciation in the price of gold, its offer for Acacia has increased by about 25 per cent.
Still, a number of Acacia’s minority shareholders and analysts have argued that the offer is too low.
Peel Hunt LLP called it a “low-ball” proposal and “a starting point of negotiation, not the end game.”
After Barrick’s purchase of Randgold Resources Ltd. in January, there was much optimism that the Africa-focused company’s founder, Mr. Bristow, might be the one to end the stalemate.
In late 2017, Barrick under executive chairman John Thornton announced a tentative agreement that would have seen Acacia pay a US$300-million penalty to patch things up with the government of Tanzania, but a final deal was not reached.
Barrick shares rose 4.1 per cent Monday on the Toronto Stock Exchange to close at $21.41.
Barrick spun off a minority stake in Acacia (then African Barrick) in 2010 in an attempt to lower its exposure to geopolitically risky Africa. A few years later, it almost sold its remaining stake to state-owned China National Gold Group Corp., but talks ended when the price of gold collapsed.
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Niall McGee