Barrick subsidiary seeks new strategy after latest criminal charges in Tanzania

Barrick Gold Corp.’s subsidiary in Africa, facing criminal charges and an export ban in a protracted dispute with Tanzania, is seeking to open a second negotiating channel to bypass Barrick’s own talks with the government.

Peter Geleta, interim chief executive officer of Barrick subsidiary Acacia Mining, said on Friday that he is “deeply concerned about the increasing risks to the safety and security of our people” and the “increasingly challenging operating environment in Tanzania.”

His statement underscores the urgency of the situation for Acacia, which says it has been excluded from negotiations that parent Barrick is holding with the Tanzanian government.

Tanzania’s anti-corruption bureau on Wednesday filed 39 corruption charges against a senior Acacia executive, a former vice-president of the company, and three of the company’s subsidiaries. The charges include tax evasion, forgery, conspiracy and money laundering.

The executive and former vice-president pleaded not guilty, but were not granted bail after their arrests. Other Acacia employees and former employees have been detained and questioned in the same corruption investigation, which focuses on incidents dating back as far as 2008. The company says it is also facing “ad hoc reviews of historical environmental issues” at one of its mines.

The criminal charges this week are “significant escalations” of the government’s dispute with the mining company, Mr. Geleta said in a statement on Friday.

The deputy head of Tanzania’s anti-corruption bureau told a Tanzanian newspaper on Wednesday that the government is engaged in a “war” in the mineral resources sector.

Acacia shares, listed on the London Stock Exchange, closed down 6.5 per cent on Friday on worries that the dispute is worsening. Its shares have lost about three-quarters of their value since the export ban was imposed last year.

Acacia, the biggest gold miner in Tanzania, reported on Friday that it had produced 136,640 ounces of gold in the third quarter of this year, down 29 per cent from the same quarter of last year but slightly better than the 133,778 ounces that it produced in the second quarter of this year.

Acacia says it has paid more than US$1-billion in taxes and royalties to Tanzania over the past 15 years. But the government accuses it of dodging its full share of taxes. Last year it hit the company with a stunning tax bill of US$190-billion and a ban on the export of gold concentrate. The dispute has now dragged on for 19 months, and Acacia says it is unaware of any recent progress in the talks.

But on Friday, with tensions rising, there was a major change in this strategy: Acacia sent a letter to the government to request its own direct talks with the government on the tax dispute and other issues. Acacia also threatened to pursue claims under a bilateral investment treaty between Tanzania and Britain if the negotiations fail.

Mr. Geleta said the company is also trying to find out from Barrick whether the latest criminal charges are affecting the negotiations. In a separate action, Acacia’s mines are continuing to pursue the dispute in international arbitration.

Andy Lloyd, a Barrick spokesman, said the company did not have any comment on Acacia’s statements on Friday, but told The Globe and Mail that Barrick was in talks with the government "in an effort to reach a resolution that is agreeable to all parties.”

In a conference call with analysts, Mr. Geleta said the tax dispute and criminal charges have been “stressful” on the company’s employees. But he was hopeful that the new strategy would work. “We believe we’ll get an audience with the government at some point,” he said. “Obviously the current situation is not sustainable.”

Last month, Barrick announced plans for a merger with Randgold Resources, an Africa-focused mining company with operations in western and central Africa. The merger would create the world’s biggest gold company. Under the agreement, Randgold founder Mark Bristow would become Barrick’s CEO.

Mr. Geleta said he is “pretty positive” about the benefits of the merger. He said Mr. Bristow, with his many years of experience in African countries that are “similar” to Tanzania, could provide “fantastic support” to Acacia in the future.