A miner inside the Bulyanhulu gold mine in northern Tanzania. PHOTO | FILE
If Tanzania lifts its gold export ban, Barrick Gold could pay a $300 million settlement to the government.
Last Thursday, the firm said that it hoped for a final agreement in the first half of next year.
Barrick said the $300 million would be paid from Acacia’s cash flows, effectively pushing Tanzania to allow for gold exports.
“Given
Acacia’s current financial position, these payments would be made over
time, using Acacia’s ongoing cash flows. As such, payment would be
conditional on Acacia’s ability to sell concentrate. Barrick will also
be working with the government of Tanzania to establish the basis upon
which the concentrate export ban can be lifted as expediently as
possible, including protocols for joint oversight and verification of
concentrate shipments,” the firm said in a statement on Wednesday.
A
week ago, Acacia’s chief finance officer Andrew Wray told analysts said
that the firm doesn’t have the ability to pay $300 million to Tanzania
to resolve the tax dispute.
The
world’s largest gold miner said that it was optimistic that its
negotiating team and that from the Tanzanian government would work to
complete detailed documentation and final agreements for review and
approval by Acacia in the first half of 2018.
Barrick
added that the agreement presented it with an opportunity to redefine
Acacia’s relationship with Tanzania for the long term, moving to a
partnership characterised by trust and transparency.
“We
believe the proposed framework represents the optimal path for the
resolution of outstanding disputes between Acacia and the government of
Tanzania, and for the resumption of normal operations. Such a
partnership has the potential to provide greater near-term certainty to
Acacia and Barrick shareholders, and mitigate the risk of future
business disruptions, thereby improving the long-term stability and
sustainability of Acacia’s operations in Tanzania,” the firm said.
The
statements were in an earnings report from Barrick released recently
which showed that the firm’s earnings dropped from $278 million to $186
million, compared with the same quarter last year.
The
firm said the earnings were affected by Barrick making a tax provision
of $172 million for outstanding claims against Acacia.
Understating shipments
In
March, Tanzania accused Acacia Mining, of which Barrick holds 63.9 per
cent, of understating its gold shipments. The government then banned the
export of unprocessed minerals.
The firm’s operations
affected by the ban accounted for about 6 per cent of Barrick’s 2017
gold production forecast, which has now been revised downwards to
between 5.3 million and 5.5 million ounces of gold from between 5.3
million ounces and 5.6 million ounces.
The company
reported a net loss of $11 million for the third quarter to September
this year, compared with net earnings of $175 million in 2016.
“The
decrease in net earnings primarily reflects lower gold production and
lower gold prices, as well as the impact of Tanzania’s concentrate
export ban on Acacia. Net earnings were also impacted by a tax provision
of $172 million related to the proposed framework for Acacia’s
operations in Tanzania. The lower revenues, earnings, and cash flow for
the quarter reflect lower gold production compared with the prior-year
period, as well as the impact of lower sales from Acacia,” Barrick said.
Some
shareholders have criticised the deal that Barrick struck with
Tanzania, saying that it may have set the baseline for what nations will
demand from global mining companies, possibly slowing mine development.
In
an interview with Reuters, Chris Mancini, an analyst at Gabelli Gold
Fund, which owns shares in Barrick, said that the 50 per cent is not a
good precedent for a risky business.
“Miners would
generally want more than half the profits from mines to give them the
incentive to build operations in geopolitically risky parts of the
world. They are disincentivising development. Barrick’s really
imperilling the rest of their operations. They are imperilling the
industry,” Mr Mancini said.
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