Barrick Gold solves Tanzania gold mine dispute for $300 million

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Barrick Gold

In the mining world, one of the largest gold producers just made a historic announcement. Barrick Gold (NYSE: GOLD), announced over the weekend that it is now in a position to restart its gold mining operation in Tanzania are agreeing with pay $300 million to the country. At the same time, Barrick would share ownership and other benefits at three local mines in the country, achieving an agreement that has failed to be reached for years.

Barrick and another company, Acacia Mining, have been dealing with an ongoing dispute with Tanzania since 2017 over tax issues. Barrick’s gold exports from the country were halted when the country launched an “economic war” against foreign-headquartered mining companies, accusing these firms of not paying enough in taxes as well as royalties.

This new deal, which still requires the approval of Tanzania’s attorney general, would see Barrick create a new corporate entity, Twiga Minerals, that would collectively manage the three gold mines in the country. Barrick will also give Tanzania a 16% stake in each of these facilities alongside 50% of the mine’s royalties.

While $300 million is a significant amount, its trivial in comparison to the original $190 billion bill filed by the Tanzanian government, claiming Barrick owed that much in terms of taxes, penalties, and interests accumulated over the past few years. Since the shutdown, Barrick’s main African subsidiary, Acacia Mining, was Tanzania’s largest gold producer with over $1 billion in annual revenue. While the original $190 billion charge was seen as a completely unreasonable figure my more or less the entire global mining industry, the $300 million figure paid seems much fairer.

Barrick is definitely back in Tanzania. A true partnership can only be described when you have 50/50 and our joint venture with the government of Tanzania is exactly that – a committed partnership to develop Tanzania’s gold assets for the benefit of all stakeholders,” said Barrick Gold President and CEO Mark Bristow.

Barrick had previously made a similar offer back in 2017 when executive chairman John Thornton tried to lift the export ban with his own $300 million offer to the Tanzanian government. However, Barrick’s board of directors, as well as Acacia’s, rejected the move. The resulting delays ended up being a result of disagreements between the two companies, an issue that wouldn’t get resolved until Barrick Gold agree to fully buyout Acacia earlier this year.

Shares of Barrick Gold will likely jump on Monday in response to the news, as the company has been trying to reach an agreement for years. The general consensus on Wall Street at the moment remains quite positive for Barrick, with the already high gold prices helping to increase profit margins for the gold miner.

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

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