One of the world’s largest gold miners just completed a major takeover it has been planning for years.
Canadian gold giant Barrick Gold (NYSE: GOLD) just acquired all outstanding shares of the London-listed Acacia Mining (LON: ACA), giving Barrick full control of the African gold miner and reacquiring the company which previously had split of from the gold giant back in 2010.
For those unfamiliar with the matter, Barrick had originally valued Acacia at only $787 million, a valuation considered cheap by its management team which felt that the Canadian giant was taking advantage of the fact that Acacia has had troubles negotiating with the Tanzanian government.
After a fierce fight, Barrick buckled under the pressure and agreed to a much better, $1.2 billion offer. This deal represents a 60% premium on Acacia’s stock price and was agreed by all shareholders.
Acacia has been in a constant state of conflict with the Tanzanian government since 2017 when it banned exports of unprocessed metals and also charged a massive $190 billion tax bill on the company, a figure that worth almost 200 years worth of revenue. “It’s a tragedy. We’re dealing with a complete breakdown of relationships,” said Barrick’s CEO and President Mark Bristow in a statement back in June regarding the matter.
The bill is split between $150 billion in interest and penalties along with a $40 billion charge on unpaid taxes. To put this figure into perspective, the $190 billion charge represents four times the size of Tanzania’s GDP, whereas the mining sector has contributed only 4% of the country’s GDP in recent years.
This isn’t the first time a foreign-owned company got hit with an exorbitant fine from an African country. Back in October 2018, the Chad Republic fined Exxon Mobil (NYSE:XOM) over $74 billion, a figure seven times the country’s GDP. While it is not expected that these charges will be met, they will likely be negotiated down to a much smaller, more reasonable figure.
Shares of Barrick Gold were up 5.75% in the day thanks to this news, a significant spike for a $42 billion senior gold miner. Over the past six months, shares of the company have been rising steadily, increasing from C$17.27 in mid-March to its current price of C$23.90, a 38.4% increase.
While impressive, this is on par with many precious metal producers in the gold and silver sectors, who have seen their shares rise as prices have continued to go up. With gold still trading around the $1,500 price range, many analysts are expected prices to surge to $2,000 within the next 12-24 months, something which would only further help gold producers around the world.
Barrick Gold Company Profile
Based in Toronto, Barrick Gold is one of the world’s largest gold producers, operating mines in North America, South America, Australia, and Africa. In 2018, the firm produced roughly 4.5 million attributable ounces of gold and more than 380 million pounds of copper.
Gold production will rise following the acquisition of Randgold at the end of 2018. As of Dec. 31, 2018, Barrick had 75 million ounces and 7.6 billion pounds of proven and probable gold and copper reserves, respectively, including recently acquired assets. – Warrior Trading News