In Summary
The mining giant made a net income of $175 million over the
same period last year. Barrick produced 1.243 million ounces of gold in the
third quarter, at a cost of sales of $820 per ounce compared to 1.381 million
ounces, at a cost of sales of $766 per ounce in the prior-year period.
Dar es Salaam. Barrick Gold Corporation has reported a net
loss of $11 million in the third quarter after increasing a tax provision
related to the “good will” payoff of $300 million agreed with Tanzania.
The mining giant made a net income
of $175 million over the same period last year. Barrick produced 1.243 million
ounces of gold in the third quarter, at a cost of sales of $820 per ounce
compared to 1.381 million ounces, at a cost of sales of $766 per ounce in the
prior-year period.
Barrick blamed the decrease in net
earnings on the impact of the concentrate export ban by the government and also
lower gold production and prices.
The company’s existing tax
provision was $128 million but the financial results announced on Wednesday
night indicated to have increased by $172 million to $300 million – the amount
it agreed would be paid by its subsidiary Acacia to Tanzania as part of the
proposed framework reached last week.
Barrick’s move is proof of
securing the money due to the government and puts to rest any fear that the
funds may not be released. However, the mining company appeared to place a
catch on the release of the funds, tying it with Acacia’s business flow and the
outcome of talks to lift the ban on concentrate export.
“Given Acacia’s current financial
position, these payments would be made over time, using Acacia’s ongoing cash
flows. As such, payment would be also conditional on Acacia’s ability to sell
doré (gold bars) and concentrate,” Barrick said in its statement.
Shares in Acacia were up 3 per cent
to 190.14p on Thursday morning, still down more than two thirds since 1 March
when the concentrate ban was imposed by the government to push for negotiations
of several tax income and other economic benefit issues.
Barrick’s tax provision
announcement drew the now familiar wait and see approach from its subsidiary in
London and who will be expected to shoulder part of the cost to pay Tanzania.
Barrack owns 63.9 per cent stake in Acacia.
In its rejoinder, Acacia which
operates Buzwagi, North Mara and Bulyankulu mines said it does not intend to
make any changes to its own provision of $128 million in likely back tax
charges as a result of Barrick’s own announcement.
“Once Acacia has received and had
the opportunity to assess a detailed proposal, Acacia will also be able to
assess the potential impact on Acacia’s historical uncertain tax positions,”
the London Stock Exchange-listed company said in its market updates.
Barrack Gold was locked in
negotiations with the government for about three months since two presidential
committees accused Acacia of cheating in taxes and reportedly operating
illegally in Tanzania.
In July this year, Tanzania
Revenue Authority (TRA) slapped Acacia with a jaw-dropping $190 billion (Sh418
trillion) in revised taxes, interests, and fines following the committees’
reports.
The two negotiating teams led by
the Minister for Justice and Constitutional Affairs Prof Palamagamba Kabudi on
the side of Tanzania and Barrick executive chairman John Thornton on the other
side, came out last week announcing to have struck a deal.
The Toronto-based company said it
will pay the government $300 million as part of the deal, give the government a
16 per cent stake in its mines, and will equally split “economic benefits” from
the mining operations.
Under the proposed 50/50 economic
benefit sharing, the government’s portion will be delivered in the form of
royalties, taxes, and a 16 per cent free carried interest in Acacia’s Tanzanian
operations, in line with the country’s new mining law, Barrick noted in
continuation of a line that is starkly different from that of the government.
Prof Kabudi has proffered that Tanzania’s share will be received after all
taxes, royalty and all other payments due are made.
The two parties have created a
working group to resolve outstanding tax matters relating to Acacia’s
operations even as the London-based firm says it will also push on with the
arbitration case it has filed at the international court against Tanzania move
to ban concentrate export.
“Barrick and the Government of
Tanzania will now work to complete detailed documentation and final agreements
for review and approval by Acacia. We expect this work to be completed in the
first half of 2018. Barrick has engaged with independent directors of Acacia
during this process, and will continue to do so,” Acacia said in the statement.
The Citizen
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