Barrick Will Pay Tanzania $300 Million in Acacia Tax Fight

DAR ES SALAM (Capital Markets in Africa) – Barrick Gold Corp. agreed to pay Tanzania’s government $300 million as talks about the state’s tax dispute with unit Acacia Mining Plc continue, Chairman John Thornton said. Acacia shares surged by a record.

The payment is a “a show of good faith” as a working group comprised of representatives from both sides seek to establish an ultimate resolution to the disagreement, Thornton said at a briefing Thursday after a six-hour meeting with President John Magufuli in the commercial capital, Dar es Salaam.

“A partnership requires trust between the two parties,” Thornton said. “I wouldn’t be standing here today if we didn’t feel that there was good trust established between the two parties as a result of our three months of discussions.”

Magufuli in July slapped a $190 billion tax bill on Acacia Mining Plc, which is 64 percent owned by Barrick, claiming the company under-declared export revenue from its mines from 2000 to 2017. Acacia stopped underground production at its Bulyanhulu mine in September until the dispute is resolved, and said output would drop as much as 17 percent this year as a result.

Acacia rose as much as 29 percent, the biggest intraday gain since its initial public offering in March 2010. The shares traded at 234.60 pence a share by 2:19 p.m. in London.

Partnership Agreement
Barrick also agreed to form a 50-50 partnership with the Tanzanian government in the future, Thornton said, without saying when it would be established.

“Not only will it be important and valuable and successful in its own right with respect to the existing assets, but we view this as creating the potential to build a very compelling business inside Tanzania and in this part of Africa,” Thornton said.

Justice and Constitutional Affairs Minister Palamagamba Kabudi said the two sides also agreed:

• The government will take a 16 percent stake in Acacia’s mines in Tanzania; in addition, the state will have representatives on the board of the company and at every mine.
• The company will hire local full-time staff.
• Acacia will have the headquarters for its operations in Mwanza, Tanzania.
• Acacia will keep all cash generated by mines in Tanzania at accounts within the country.

Source: Bloomberg Business News