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Acacia seeks 'further clarity' over proposed merger of Barrick Gold and Randgold Resources

Investors will be keen to hear about Acacia's future in London if the merger of Barrick Gold and Randgold Resources goes ahead, according to analyst Charles Gibson
Tanzania
Acacia Mining, formerly African Barrick Gold, was spun out of Barrick Gold in 2010

Acacia Mining PLC (LON:ACA) said it would be seeking further clarity from majority shareholder Barrick Gold Corp (NYSE:ABX) regarding the Canada miner’s plan to merge with Randgold Resources PLC (LON:RR).

Barrick Gold, which has a 63.9% equity interest in Tanzania-focused Acacia, announced on Monday that it has agreed to buy Randgold in an all-share deal to create the world’s largest gold miner valued at US$18.3bn.

READ: Randgold Resources and Barrick Gold confirm plans for US$18.3bn merger

The deal comes eight years after Barrick decided to spin off its African assets as African Barrick Gold, now called Acacia, in a bid to de-risk the portfolio.

Barrick in discussions with Tanzania government over Acacia dispute

Acacia has been banned from exporting gold and copper concentrates from Tanzania since April 2017 in a long-running dispute with the government over royalties the company allegedly owes on undeclared exports.

Barrick has stepped in to negotiate with the Tanzania government on Acacia’s behalf.

READ: Acacia Mining's first-half earnings fall as no end in sight for Tanzania row

In October last year, Barrick reached a framework agreement with the government that would see Acacia make a payment of US$300mln and share the economic benefits from its mining 50/50 going forward.

But discussions remain ongoing and Acacia needs to give any final deal its approval.

Acacia's response to merger announcement 

Following the merger news from Barrick Gold on Monday, Acacia said: "Acacia notes today’s announcement by Barrick Gold Corporation and Randgold Resources Ltd regarding a potential merger between the two companies. We further note that the potential transaction will be subject to the approval of both Barrick and Randgold shareholders. Acacia is currently seeking further clarity from Barrick and will update the market in due course."

The newly merged company will be called New Barrick Group with Barrick Gold holding a 66.5% stake and Randgold owning the rest of the shares. Mark Bristow, chief executive of Randgold, will become president and chief executive of the New Barrick Group.

Randgold shares on the London Stock Exchange will be cancelled and New Barrick Group will list in Toronto and New York.

Analyst says Acacia's fate in London a key area of concern for investors

Charles Gibson, analyst at Edison Investment Research, said the proposed merger raises two immediate questions - what will become of Acacia in London and will Bristow stay on long enough apply the same “successful approach” that he used at Randgold to New Barrick Group.

Gibson noted that when Bristow first mooted a “transformative deal”, many bankers thought that Acacia would make a perfect fit with Randgold.

“However, Acacia has since fallen on hard times and Mr Bristow wasted little diplomacy in signalling his distaste for the idea (as well – as we see now – as having bigger fish to fry),” he said.

“To be fair, Mr Bristow has always described tax as the dues a company has to pay in order to operate within a particular country and, inasmuch as Randgold has been a diligent taxpayer in the countries in which it operates, he might find himself on common ground with the Tanzania government.

“With Acacia thus far effectively cut out of the talks with the government about its future, however, the gulf between what the Tanzanian government want and what New Barrick might be prepared to offer seems almost impossibly wide and it may tax even Mr Bristow’s legendary deal-making abilities to bring such a fraught dispute to a happy resolution. With his African experience and heritage, however, he might just be the man for the job.”

On Bristow's role as chief executive of New Barrick Group, Gibson said he is "personally credited with creating the environment and philosophy that underpinned much of Randgold’s success and forward-thinking investors were already beginning to ask questions about the succession at Randgold".

"They will certainly want comfort now that he will stay for long enough to apply the same approach to Barrick’s assets before hanging up his spurs," he said.

 

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