Barrick under fire for giving in to Tanzania government demands
Posts net loss for quarter as export ban pinches MINING
TORON TO •
says lower gold production and a hit on sales from its Tanzanian operations pushed the mining giant to a net loss in the third quarter.
The Toronto- based miner says it had a net loss of US$11 million or a penny per share for the quarter, compared with net earnings of US$ 175 million or 15 cents per share a year earlier.
Barrick says overall gold production came in at 1.24 million ounces, compared with 1.38 million for the third quarter last year.
The company, which owns 64 per cent of Tanzania- focused Acacia Mining, is embroiled in a tax and refining dispute with the government there that it says affected its gold sales.
Last week, Barrick said it had reached a resolution to the impasse that would include Acacia paying US$300 million to Tanzania and transferring to the government a 16- per- cent interest in its three gold mines. The deal still needs to be approved by Acacia.
Barrick says net earnings for the third quarter were impacted by a tax provision of US$ 172 million related to the proposed deal.
Meanwhile, some mining investors are criticizing Barrick for agreeing to Tanzanian demands in its proposed settlement with the government, saying this could embolden other host nations to press for bigger concessions from miners, Reuters reported
Several shareholders said this week that by agreeing to hand Tanzania 50 per cent of the “economic benefits” from Acacia’s three gold mines in the East African country, Barrick may have set the baseline for what nations may demand from global mining companies, possibly slowing mine development.
“The 50 per cent is not a good precedent by any means for a very risky business,” said Chris Mancini, an analyst at Gabelli Gold Fund, which owns shares in Barrick.
Miners would gen erally want more than half the profits from mines to give them the incentive to build operations in geopolitically risky parts of the world, Mancini said.
“They are disincentivising development. Barrick’s really imperilling the rest of their operations. They are imperilling the industry,” he said.
Barrick, which is t he world’s biggest gold producer and has operations on five continents, said the proposed agreement complies with Tanzania’s new mining law, which requires the government to hold a stake in mining operations.
“That is not a concession, that is complying with the l aw,” Barrick spokesman Andy Lloyd said.
Tanzania was long seen as one of Africa’s brightest mining prospects but new laws have slowed fresh investment amid government efforts to claim a larger slice of the pie.
It has accused Acacia of understating its gold shipments, serving i t with a US$ 190- billion bill for unpaid taxes and halting most of its exports.
Barrick “are showing a willingness to cave to ridiculous demands,” said another Barrick shareholder who declined to be identified due to company policy.
Lloyd said the alternative to an agreement, which requires Acacia’s approval, would be lengthy international arbitration. Bar rick believed a partnership with the government would “deliver better outcomes and greater stability for shareholders in the long run,” he said.
Barrick also owns mines in the Dominican Republic and Papua New Guinea, considered higher risk by investors. It has been teaming up with partners, as seen at its Veladero mine in Argentina and the Porgera mine in Papua New Guinea, to reduce risks.
The settlement with Tanzania comes at a time of rising so- called “resource nationalism,” notably in countries such as Indonesia and Tanzania, in which host governments seek a bigger financial cut from mines.
Some Barrick investors voiced confidence in the company.