Barrick Gold stock down despite deal to settle long-running Tanzania dispute

Barrick Gold Corp. announced a deal with the government of Tanzania that will see the gold miner pay US$300 million to settle all outstanding tax and other disputes over its mines in the African country.

The company and Tanzania are also to share the future economic benefits from the mines on an equal basis and create a dispute resolution framework.

On the Toronto Stock Exchange on Monday, Barrick fell as low as $21.95, down 63 cents or 2.8 per cent from a close of $22.58 on Friday.

The slide came despite the deal announced on Sunday matching the company’s key expectations as revealed in an announcement in July, analysts pointed out.

“The announcement … by Barrick is not too dissimilar to the prior release and provides incremental details on the path forward,” said Andrew Kaip of BMO Capital Markets in a report.

“Though we see the transaction as slightly dilutive to Barrick, it brings with it clarity and the potential to add value over time. We expect Barrick will undertake a number of reviews and studies to maximize asset value.”

Under the agreement, a new operating company called Twiga Minerals Corp. has been formed to manage the Bulyanhulu, North Mara and Buzwagi mines in Tanzania. Twiga is the Swahili word for giraffe, Tanzania’s national symbol.

The government is to acquire a 16 per cent stake 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.

“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,” said Barrick CEO Mark Bristow in a news release.

“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.”

Barrick took over the management of the mines after buying the stake in Acacia Mining that it did not already own earlier this year.

Acacia and Tanzania had been embroiled in a dispute that started in 2017 when the country handed the African gold miner a US$190-billion tax bill.

Bristow said the agreement marks the end of the long impasse between the government and Acacia which had led, among other things, to the closure of North Mara and the freezing of export concentrate from the two other operations.

Since then it has negotiated the reopening of North Mara, although last week it blamed lower output there in part for third-quarter production that fell short of analyst expectations.

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