This Announcement Contains Inside Information
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN, INTO, OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT
JURISDICTION
FOR IMMEDIATE RELEASE
19 July 2019
RECOMMENDED FINAL OFFER
for
ACACIA MINING PLC
by
BARRICK GOLD CORPORATION
SUMMARY
Introduction
The Boards of Barrick Gold Corporation (“Barrick”) and Acacia Mining plc (“Acacia”) are
pleased to announce that they have reached agreement on the terms of a recommended offer
by Barrick for the ordinary share capital of Acacia that Barrick does not already own. It is
intended that the Acquisition will be implemented by means of a court-sanctioned scheme of
arrangement under Part 26 of the Companies Act (the “Scheme”).
Under the terms of the Acquisition, each Scheme Shareholder will receive:
For every Scheme Share: 0.168 New Barrick Shares (the “Share for Share Exchange
Ratio”) and any Acacia Exploration Properties Special Dividends and any Deferred
Cash Consideration Dividends, as described below.
On the basis of the market closing price of a Barrick Share on the NYSE on 18 July 2019
(being the last business day before this Announcement), the exchange rate of US$1.2479:£1
on that date and the total number of 410,085,499 Acacia Shares in issue on that date, the
terms of the Share for Share Exchange Ratio imply a value of approximately 232 pence per
Acacia Share, total consideration of approximately £343 million ($428 million) for Acacia
minority shareholders and a total value of approximately £951 million for Acacia.
On that basis, the terms of the Share for Share Exchange Ratio represent:
(a) a premium of 53.5% to the closing price of 151 pence per Acacia Share on 20 May
2019 (the last business day prior to the announcement of a possible offer by Barrick
for Acacia);
(b) a premium of 24.2% to the closing price of 187 pence per Acacia Share on 18 July
2019 (the last business day before this Announcement); and
(c) a premium of 28.2% to the volume-weighted average price per Acacia Share over the
twenty trading days ended on 18 July 2019 (the last business day before this
Announcement).
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In addition to the Share for Share Exchange Ratio, under the terms of the Acquisition, Acacia
Shareholders (including Barrick or any other member of the Barrick Group) whose names
appear on the register of members of Acacia at the Scheme Record Time (irrespective of
whether or not they attended and voted at the Court Meeting or the General Meeting (and if
they attended and voted, whether or not they voted in favour of the Acquisition)), will be
entitled to receive and retain the Acacia Exploration Properties Special Dividends and any
Deferred Cash Consideration Dividends (if applicable) paid as a consequence of the sales
process to realise value from the sale of certain of the Acacia Exploration Properties as
described under “Sale of the Sale Exploration Properties” below.
The Acacia Exploration Properties are Acacia’s exploration assets located in the Republic of
Tanzania, the Republic of Kenya, the Republic of Mali and Burkina Faso, including the
Excluded Assets (being Acacia Group’s interests in the Nyanzaga Gold Project in Tanzania
and the South Houndé Project in Burkina Faso), in respect of which sale processes have
already been commenced by Acacia and are well advanced. Value attributable to the
Excluded Assets of US$10 million has been reflected in the increased exchange ratio reflected
in the Share for Share Exchange Ratio.
The independent technical value (“ITV”) of the Acacia Exploration Properties set out in the
Competent Persons’ Report produced by SRK reflects an attributable value range for the
Acacia Exploration Properties of US$37 million (Low Value) to US$87 million (High Value),
with a Preferred Value of US$57 million.
Included in the Preferred Value is an amount of US$9 million which relates to the Excluded
Assets. The value of the Acacia Exploration Properties excluding the Excluded Assets (the
“Sale Exploration Properties”), as reported by SRK, amounts to US$48 million (the
“Exploration Value”). Whilst the ITV attributed a value of US$9 million to the Excluded
Assets; since publication of the ITV the value has increased to US$10 million as a result of
the renegotiation of the agreement in which there will be an increase in the upfront payment,
in lieu of the royalty, for the Nyanzaga Gold Project, as reflected in the Share for Share
Exchange Ratio.
Barrick and Acacia note that the value of the Sale Exploration Properties included in
the ITV is based on a number of assumptions which may or may not be supported and
there can be no certainty or any assurance given by Barrick or Acacia that any sale will
occur, or in the event that a sale does occur, that a realisation of such value will be
achieved through a sale. Scheme Shareholders should therefore not assume that the
Exploration Value will be achieved through the sale of the Sale Exploration Properties
and that Net Proceeds equivalent to the Exploration Value will be payable to Acacia
Shareholders as Acacia Exploration Properties Special Dividends.
Barrick currently owns 262,246,950 Acacia Shares, representing approximately 63.9 per cent
of the issued ordinary share capital of Acacia.
The terms of the Acquisition are final and therefore, in accordance with the Code, Barrick
will not be permitted to increase the terms of the Acquisition.
Sale of the Sale Exploration Properties
Under the terms of the Acquisition, Barrick has agreed, for the benefit of all Acacia
Shareholders, to undertake a sales process to realise value for the Sale Exploration Properties,
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whereby Barrick will, following a customary marketing process, dispose of the Sale
Exploration Properties in an arm’s length transaction or series of transactions at the best cash
price reasonably obtainable by Barrick in the market at the time (a “Sale” or “Sales”) during
the period of two years commencing on the Effective Date (the “Sale Period”).
In view of Barrick’s 63.9 per cent shareholding in Acacia, Barrick’s interests in the outcome
of the sales process to realise value for the Sale Exploration Properties are wholly aligned
with those of other Acacia Shareholders.
The Sale Exploration Properties may be sold by Barrick on an individual or combined basis
within the Sale Period. Individual sales of the Sale Exploration Properties may take place at
different times within the Sale Period, but Barrick intends to conclude the sales process in
respect of the Sale Exploration Properties on or before the end of the Sale Period. Further
details of the anticipated process for sale of the Sale Exploration Properties and the
arrangements that will be put in place will be set out in the Scheme Document.
The Net Proceeds of any Sale or Sales will be paid to Acacia Shareholders (including Barrick
or any other member of the Barrick Group) whose names appear on the register of members
of Acacia at the Scheme Record Time (irrespective of whether or not they attended and voted
at the Court Meeting or the General Meeting (and if they attended and voted, whether or not
they voted in favour of the Acquisition)) on a pro rata basis by reference to their existing
holdings of Acacia Shares at that time by way of a US Dollar cash payment payable on or
before 31 December in the relevant year such Sale or Sales are completed (the “Acacia
Exploration Properties Special Dividends”).
To the extent any Sale consummated prior to the end of the Sale Period involves the payment
of any escrow, holdback, deferred cash consideration or similar following that date
(“Deferred Cash Consideration”), any Net Deferred Cash Consideration will be paid to
Acacia Shareholders (including Barrick or any other member of the Barrick Group) whose
names appear on the register of members of Acacia at the Scheme Record Time in the manner
and on the basis described above (a “Deferred Cash Consideration Dividend”). Deferred
Cash Consideration Dividends (if any) will be payable by Acacia once such Deferred Cash
Consideration is actually received in cleared funds by Barrick or any Barrick subsidiary.
Barrick will make an announcement by no later than 31 December each year until all Net
Proceeds have been paid and all Deferred Cash Consideration has been received, as to any
Sale Exploration Properties sold or Deferred Cash Consideration received in the relevant year
and the gross and Net Proceeds attributable to such Sale or Sales and the amount of the
Acacia Exploration Properties Special Dividend and/or Deferred Cash Consideration
Dividend paid or payable to Acacia Shareholders as a result.
No statements made in this paragraph constitute “post-offer undertakings” for the purposes of
Rule 19.5 of the Code.
Background to and reasons for the Acquisition
Disputes with the Government of Tanzania
The business and operations of Acacia have been materially affected by the ongoing disputes
with the Government of Tanzania (“GoT”). In March 2017, the GoT announced a ban on the
export of metallic mineral concentrates (the “Export Ban”) and, as a consequence, in the
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second half of 2017, Acacia took the decision to place the Bulyanhulu mine on reduced
operations. The Export Ban remains in effect.
In addition, there are numerous ongoing unresolved disputes between the GoT and Acacia
Group companies, including disputes in relation to tax, environmental and criminal matters.
In October 2018, one of Acacia’s employees in Tanzania, was charged by the Tanzanian
Prevention and Combating of Corruption Bureau (“PCCB”) with an offence under the
Tanzanian Prevention and Combating of Corruption Act. The PCCB also charged two current
and one former employee of Acacia’s Tanzanian businesses, together with Bulyanhulu Gold
Mine Limited (“BGML”) and Pangea Minerals Limited (“PML”) and North Mara Gold Mine
Limited (“NMGML”) and a third party Canadian entity, Explorations Miniers du Nord Ltd.,
this being the former joint venture partner for the Tulawaka mine, with a number of different
offences, including breaches of the Tanzanian Anti-Money Laundering Act. A total of 39
charges were brought. Acacia and Barrick remain deeply concerned regarding the ongoing
risks to these individuals, who still remain in custody on criminal charges for a range of
allegations without committal for trial or access to bail.
Acacia continues to favour a negotiated resolution to the Company’s disputes with the GoT
but, as a fall back, the Acacia Group sought to protect the Company’s business through the
contractual arbitration proceedings commenced in 2017 by Acacia’s subsidiaries, BGML and
PML.
GoT Arrangements
Barrick and Acacia both believe that a negotiated settlement of Acacia’s disputes with the
GoT is necessary. Barrick, the Company’s majority shareholder, has been in discussions with
the GoT in an effort to identify and document a solution to the Company’s disputes which
would include a lifting of the Export Ban and settlement of all other outstanding disputes.
Acacia has co-operated and provided assistance to Barrick in relation to the discussions with
the GoT.
On 19 October 2017, Barrick and the GoT signed a set of framework documents which
envisaged a US$300 million settlement payment and subsequent 50/50 sharing of economic
benefits between Acacia and the GoT. As Acacia was not permitted to participate in the
discussion, Acacia was not a party to the framework documents and was not involved in
negotiating the terms included therein. There followed a lengthy period of time during which
Barrick and the GoT were discussing a set of agreements to implement the framework
documents.
In the course of May 2019, Barrick’s negotiations with the GoT advanced to the point where
draft Transaction Documents for a possible settlement had been extensively negotiated and
initialled by the GoT, albeit with a number of substantive issues still outstanding. The key
principle of the draft Transaction Documents under discussion is that going forward the GoT
and Acacia’s Tanzanian mine operating subsidiaries (the “TMCs”) will share the economic
benefits derived from the Tanzanian mines on a 50/50 basis, based on the life of mine plans of
the TMCs. The GoT will receive its share of economic benefits through taxes, royalties, fees
and other fiscal levies and through the GoT’s 16% free carried interest in all distributions
(including shareholder loan repayments) from the TMCs and a new Tanzanian management
company. The 50/50 sharing arrangement will be reviewed annually to ensure that the actual
and projected sharing of economic benefits is in accordance with the 50/50 principle. The
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draft Transaction Documents also provide for payment by the Acacia Group of an aggregate
sum of US$300 million in consideration for the full, final and comprehensive settlement of all
existing disputes between the GoT and the Acacia Group, including all liability to taxation
and a waiver of actual or potential claims on a mutual basis. This US$300 million payment is
outside of (and therefore not taken into account for the purposes of) the 50/50 sharing of the
economic benefits over time. The settlement envisaged by the draft Transaction Documents
involves a significant value transfer from Acacia to the GoT, but this has been critical to
agreeing draft settlement terms with the GoT and creating a viable operating framework for
the TMCs going forward. A summary of the material terms of the current draft Transaction
Documents under discussion is set out in Appendix 4.
Recent Developments
On 21 May 2019, Barrick informed Acacia that it had made significant progress towards
finalising a proposed resolution to the disputes between the GoT and Acacia and provided the
Transaction Documents to Acacia, noting their status. On the same date Barrick also provided
Acacia with a letter dated 19 May 2019 from the Acting Chairman of the GoT negotiating
team, and addressed to each of the TMCs. This letter (the “GoT Negotiating Team Letter”)
states that the GoT will not execute final agreements for the resolution of the Company’s
disputes if Acacia is one of the counterparties to the agreements and that it will only sign such
agreements “if satisfied that substantial changes have been made to the management style of
the Operating Companies and of their shareholders”. Acacia immediately reached out to the
most senior levels in the GoT to seek clarity on the letter received and to date has received no
response.
On 12 July 2019, Acacia announced that its North Mara mine had received a letter (the “No
Export Letter”) from the Mining Commission of the Tanzanian Ministry of Minerals
informing it that the Mining Commission is soon to conduct an inspection of North Mara’s
gold production. The No Export Letter stated that export permits for gold shipments from
North Mara would be issued following completion of this inspection. Until such time as
Acacia receives permits for gold shipments the Company cannot sell its product and
production will accrue to inventory. The Company anticipates that under a normal production
schedule it could operate for approximately one further week before running out of storage
capacity. Acacia is seeking clarification of the timing for completion of the inspection.
On 16 July 2019, the National Environment Management Council (“NEMC”) issued
NMGML with a prohibition notice (the “Prohibition Notice”) which orders the North Mara
mine to stop use of its tailings storage facility (the “TSF”) by 6.00 a.m. local time on 20 July
2019. The NEMC cited the North Mara mine’s failure to contain and prevent seepage from
the TSF as grounds for its issuance of the Prohibition Notice. The Prohibition Notice stated
that it shall remain effective until such time that NEMC were to be satisfied that the North
Mara mine has taken measures to contain seepage from the TSF. Acacia is seeking
clarification of the Prohibition Notice. The effect of the North Mara mine having to stop using
the TSF would be the immediate cessation of gold production, and in time, if the prohibition
is not lifted, cessation of mining operations at North Mara.
Transaction Committee observations on current status of operations
The Transaction Committee acknowledges that the GoT Negotiating Team Letter represented
a material development in respect of Acacia’s status with the GoT. Shortly following the GoT
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Negotiating Team Letter, an official spokesman of the GoT confirmed, in a press conference,
their position that they would not deal with Acacia going forward. Furthermore Acacia’s local
staff have engaged with their counterparts in government who have again confirmed that the
GoT will not engage with Acacia for the purposes of agreeing a settlement. As things stand
therefore, there is a serious question as to whether Acacia’s entry into the Transaction
Documents and the building of a long-term partnership with the GoT on which the future for
the business envisaged in the Transaction Documents necessarily relies, are a realisable
alternative for Acacia as an independent company.
Whilst Acacia has continued to operate its assets and achieve significant production despite
the deteriorating operating environment following the Export Ban, the Transaction Committee
views the No Export Letter and Prohibition Notice as a further material deterioration in the
operating environment. In particular the No Export Letter and the Prohibition Notice will
restrict the ability of Acacia to operate at North Mara until such time as the Company receives
export permits and the prohibition is lifted on use of the TSF.
Considering the impending loss of the ability of Acacia to produce gold and operate the mine
at North Mara, the Acacia Group’s cash flow from operations will be adversely impacted and
the Acacia Group will be required to meet its on-going working capital requirements and
other financial obligations from its existing cash balance. This position is not sustainable and
the liquidity of the Company will be constrained in the absence of a resolution.
In the absence of a settlement of its disputes with the GoT the Transaction Committee remain
concerned about the potential for the operating environment for the Acacia Group to further
deteriorate. Further actions from the GoT have the potential to negatively affect the
sustainability of the Acacia Group’s business and present risks to Acacia’s employees and
other stakeholders.
The Acacia Group has, to date, and only as a fall-back option, sought to protect its assets via
the arbitration proceedings commenced in July 2017. A s the Transaction Committee has
previously disclosed, however, there are significant collateral risks in PML and BGML
continuing to seek to protect their businesses through maintaining the arbitrations pending a
negotiated resolution. Accordingly, as announced on 17 July 2019, PML and BGML have
now sought a stay of those proceedings in the light of increasing risks and to allow more time
for a negotiated resolution. The Transaction Committee has also concluded that the value to
Scheme Shareholders of the Acacia Group pursuing these arbitration proceedings in the future
does not exceed the value of the Consideration.
As further explained in the section headed “Acacia Recommendation and Irrevocable
Undertakings” below, in light of this background and current circumstances, the Transaction
Committee, having considered, amongst other factors, the financial terms of the Scheme,
believes that the Acquisition is a fair outcome for the Scheme Shareholders. It i s also an
attractive solution for the Company’s other key stakeholders, as it may enable Barrick to
finalise the terms of a settlement with the GoT, thereby resolving the long-running disputes
and potentially allowing the Acacia Group’s Tanzanian business, and its employees in
Tanzania, who have provided exceptional and unstinting support in continuing operations in
country, to return to a normalised operating environment.
Background to the Acquisition
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It is against the background of the GoT's position as highlighted above that Barrick concluded
that the only way forward to preserve, to the extent possible, the value of Acacia’s assets was
for Barrick to make an offer to acquire all of the Acacia Shares not already owned by it and
on 21 May 2019, Barrick p resented Acacia with an indicative proposal to acquire all the
issued and to be issued share capital of Acacia not already owned or controlled by Barrick.
The consideration originally proposed by Barrick was in the form of new common shares in
Barrick, with Scheme Shareholders receiving 0.153 of a new common share of Barrick for
every ordinary share in Acacia (the “Possible Offer”). Acacia’s announcement confirming
Barrick’s indicative proposal stated that any firm intention to make an offer in accordance
with Rule 2.7 of the Code would be subject to a deadline of 5.00 p.m. on 18 June 2019 (the
“First PUSU Deadline”).
On 18 June 2019, Acacia announced that Barrick had requested that Acacia seek an extension
to the First PUSU Deadline in order to facilitate further engagement with Acacia and its
minority shareholders. In order to provide further time to determine a proposal that might
receive sufficient shareholder support, the Acacia Board requested that the Panel extend the
First PUSU Deadline and, in light of this request, an extension was granted by the Panel to
5.00 p.m. on 9 July 2019 (the “Second PUSU Deadline”).
On 24 June 2019, Acacia announced that in 2018 it had engaged SRK, an independent
technical consultancy, to carry out a comprehensive review of its geological and resource
modelling and preparation of its life of mine plans and mineral resource and mineral reserve
statements. SRK presented the results of this review in the form of a Competent Persons’
Report which was effective on 30 June 2019 and published by Acacia on 9 July 2019. The
Transaction Committee Directors confirm that SRK have confirmed that an updated valuation
of Acacia’s assets as at the date of this announcement would not be materially different from
the valuation thereof contained in the Competent Persons’ Report. The Competent Persons’
Report and an executive summary thereof can be found on Acacia’s website as follows:
https://www.acaciamining.com/media/press-releases/2019/2019-07-09.aspx.
On 9 July 2019, Acacia also announced that Barrick had requested that Acacia seek an
extension to the Second PUSU Deadline in order to allow Barrick more time to review the
Competent Persons’ Report and facilitate further engagement with Acacia on the terms of the
proposal. In order to further facilitate such discussions, the Acacia Board requested that the
Panel extend the Second PUSU Deadline and, in light of this request, an extension was
granted by the Panel to 5.00 p.m. on 19 July 2019.
Acacia has subsequently engaged with Barrick on the contents of the Competent Persons’
Report and other matters relating to the terms of the Possible Offer. Following these
discussions, Barrick informed the Transaction Committee that, while constructive, the
discussions with SRK and Acacia, and Barrick’s detailed review of the Competent Persons’
Report, did not result in Barrick attributing greater value to Acacia’s operating mines than
taken into account in connection with its Possible Offer. Barrick has informed the Transaction
Committee that the discussion did, however, lead it to conclude that it was in a position to
revise its proposal to take into account two additional value items unrelated to Acacia’s
operating mines as noted below.
Barrick’s revised proposal
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Barrick’s Possible Offer did not attribute any value to the Acacia Exploration Properties. The
Competent Persons’ Report ascribed an ITV to the Acacia Exploration Properties ranging
from US$37 million (Low Value) to US$87 million (High Value), with a Preferred Value of
US$57 million. Barrick has agreed with Acacia (i) to improve the exchange ratio upon which
Scheme Shares will be exchanged for Barrick Shares to reflect US$10 million in respect of
the disposal by Acacia of the Excluded Assets, and (ii) to undertake a sales process (for the
benefit of all Acacia Shareholders) to realise value for the Sale Exploration Properties, with
the Net Proceeds of any Sale or Sales being paid to all Acacia Shareholders by way of Acacia
Exploration Properties Special Dividends.
In a ddition, Barrick has agreed to further improve the exchange ratio upon which Scheme
Shares will be exchanged for Barrick Shares to reflect general and administrative expense
savings expected to be realised following the Effective Date through the office closures and
personnel reductions referred to under the section headed “Directors, management and
employees and locations of business” below.
The Transaction Committee has considered the terms of the Acacia Exploration Properties
Special Dividends and any Deferred Cash Consideration Dividends. The Transaction
Committee notes that the Competent Persons’ Report attributes a value of US$48 million to
the Sale Exploration Properties. However, the Transaction Committee notes that there is no
certainty around the outcome of any sales process and therefore the cash amount that may be
realised from the disposal of the Sale Exploration Properties may be materially lower (or
higher) and have taken this into account in assessing the value of the Consideration.
In considering the merits of these terms, the Transaction Committee has also taken the
following into account:
The terms of the Transaction Documents as summarised in Appendix 4 to this
Announcement and their likely impact on the operations, future financial results and
prospects for Acacia, based on the management’s long-term business plan for the Acacia
Group’s mines (while acknowledging at the same time that it is not known what the final
terms of such settlement may comprise)
The recent and continuing deterioration of the operating environment, as exemplified by
the No Export Letter and Prohibition Notice
The urgent need to create certainty and stability for Acacia, its people and the
communities in which it operates, which the Transaction Committee believes is more
likely to happen under the full ownership and control of Barrick given the current attitude
of the GoT towards Acacia
The statement in the GoT's Negotiating Team Letter as to the inability of Acacia to enter
into the Transaction Documents and the significant uncertainty as to the ability of Acacia
to build a long term partnership with the GoT
The risks and uncertainties associated with the fall-back alternative of continuing with the
outstanding arbitration, as described above
The Transaction Committee has also concluded that the value to Scheme Shareholders of
the Acacia Group pursuing these arbitration proceedings in the future does not exceed the
value of the Consideration