Shares in gold producer Acacia Mining (ACA) have dropped 5.5% to 151p after management of the company urged shareholders to ‘take no action’ after receiving a takeover approach.

The indicative buyout offer comes from New York-listed majority shareholder Barrick Gold, which owns roughly 64% of Acacia shares. The trouble is Acacia seems to feel that Barrick is trying to buy the rest of the stock on the cheap.

The Barrick deal would see it hand over 0.1.53 of new common stock in itself in exchange for each Acacia share.

This implies a value for Acacia at $787m, the equivalent of £621m at today's exchange rates, or 146p per share. Yet at yesterday's close Acacia shares were trading 8.5% higher at 159.5p, for a market cap of £654m.


Barrick chief executive Mark Bristow has previously criticised others in the mining industry for offering large premiums in company takeovers.


His low ball offer comes in response to the Tanzanian government's refusal to settle directly over a long running tax row with Acacia.

Tanzanian authorities imposed a ban on gold and copper concentrate exports in March 2017, a ruling that severely impacted Acacia. Around half of its combined production at its Bulyanhulu and Buzwagi mines were hit.

That led Acacia to close Bulyanhulu and change the set-up at Buzwagi to solely produce doré, a rough, unrefined gold that fell outside the export ban.

Barrick Gold detailed a proposal a few months ago to settle Acacia’s dispute with the Tanzanian government, including a $300m payment to resolve tax claims in the country. This would require the approval of minority Acacia shareholders.

Analysts Jefferies said the discounted offer for remaining Acacia shares reflects this payment Barrick has negotiated, and has a ‘hold’ rating on the stock with a price target of 170p.


While Shore Capital analyst Yuen Low thinks Barrick has been ‘setting the stage’ for a ‘cave-in’ to the Tanzanian government to effectively ‘stitch up Acacia minorities’.

He adds, ‘Following its victim-blaming efforts to tarnish Acacia’s reputation, Barick has now unveiled the next step in its cunning plan: making public a proposal to acquire Acacia for just $787m (minority share: $285m), versus yesterday’s closing market cap of £654m.’

Historically rather acquisitive, Barrick recently merged with former FTSE 100 miner Randgold Resources and in February launched a hostile $18bn all-share offer for Newmont Mining, which was later withdrawn.

According to market rules, by 18 June Barrick must either announce a firm intention to make an offer for Acacia or announce that it does not intend to make an offer.

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Issue Date: 22 May 2019