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Acacia and Barrick spat turns investors bearish

Acacia's new bear comes in the form of the chief executive of its 64 per cent shareholder Barrick Gold
May 13, 2019

After returning to profit in 2018, Acacia Mining (ACA) has set a production target of 500,000-550,000 ounces (oz) of gold for 2019. The year started slowly (105,000oz in the first three months) but the company says its mines showed big improvements in April, with North Mara upping its monthly production by 37 per cent to 48,000oz and stockpile and tailings retreatment processing at Buzwagi and Bulyanhulu running along as before.

IC TIP: Sell at 150p

If it was another mining company, concerns on the poor start to the year would be front-and-centre, along with some relief about an uptick in output.

But the company is two years into a crisis, with the Tanzanian government still limiting its concentrate exports and holding $90m (£69m) the company says it is owed in VAT refunds. The much-heralded deal between Barrick Gold and the government of Tanzania to lift the block, first announced in October 2017 and then updated in February, also looks close to failure after a war of words erupted between new Barrick chief executive Mark Bristow and Acacia’s interim boss Peter Geleta last week.

Mr Bristow kicked it off by saying Acacia was not cooperating with the negotiations and Mr Geleta reacted by calling Mr Bristow’s comments “mesmerising”, and saying his company could not hold up talks it was not part of. The Barrick chief's initial volley was followed with further fighting words about Acacia pushing against a shareholder vote on a deal. “...they've also questioned our right to be able to vote our shares," Mr Bristow said. "Then you've got to ask the question, so why are we here? Why doesn't Acacia go and do the deal? And the answer is they can't. So we'll eventually get somebody to see reason, I hope.”

This spat has roots in the initial formation of the deal in October 2017, which would see Tanzania withdraw its $190bn tax bill and concentrate export ban in return for a $300m payment. Barrick president John Thornton reportedly made the agreement without informing Acacia, and there has been disagreement over whether the $300m would be handed over in a lump sum or in stages. The optimism of February is gone: Acacia's shares are at a six-month low of 150p after hitting 268p on the deal progress announcement from Barrick three months ago.