In an example of the new political risks Toronto-based Barrick Gold Corp. would face under its proposed merger with Africa-focused Randgold Resources Ltd., on Friday, a state-owned miner in the Democratic Republic of Congo took issue with the combination.
The proposed US$6 billion merger, announced Monday, would convert London-listed Randgold shares into Barrick stock and create the world’s largest gold miner. Randgold’s chief executive Mark Bristow would retain his role and title at the new company, which would continue to be called Barrick Gold.
In a statement translated from French, the DRC-state owned miner, Sokimo SA, which shares ownership of Randgold’s Kibali mine, said the deal would introduce a new partner to the mine, and yet it only learned about the deal from press reports.
Sokimo characterized the merger as another example of foreign companies “impos(ing) themselves, without any prior discussion, in the countries from which are extracted the resources that make their wealth.”
Sokimo owns 10 per cent of the Kibali mine, while Randgold and Johannesburg-based AngloGold Ashanti Ltd. each control a 45 per cent stake.
In 2017, Randgold said the Kibali mine produced roughly US$287 million in profits for its owners, from roughly 600,000 ounces of gold production, worth an estimated US$754 million.
Randgold responded by releasing a statement that the merger would have no impact on Kibali, and that Sokimo has no rights to assert in connection with its proposed merger with Barrick. It also said in its statement that it had “consulted comprehensively with Sokimo at board and executive level in the days following the announcement of the proposed merger.”
Still, the controversy may indicate what lies ahead for Bristow, who is often praised for his ability to work with politically volatile governments in Africa, where Randgold has four mines.
Analysts reviewing the deal have noted that the proposed merger allows him to prove his operating mettle on a larger scale, but also noted that Barrick’s political risk will increase as a result of having mines in Africa.
A Barrick spokesman declined to comment while neither Randgold nor Sokimo executives were available.
Kieron Hodgson, an analyst who covers Randgold for the London-based investment bank Panmure Gordon & Co., said he expects the dispute with Sokimo to blow over without any impact.
Although other state-owned miners in the DRC have used similar language to extract settlements from foreign miners, Hodgson said the circumstances were different and credited Bristow as being an astute operator in Africa.
“There’s the one advantage of Mr. Bristow,” said Hodgson. “If there’s one thing, he’s good at doing it’s engaging African governments — he fully appreciates the geopolitics and approach to governments and gold mining in Africa.”
Such traits are what Barrick’s executive chairman John Thornton praised about Bristow when announcing the proposed merger, tentatively scheduled for a shareholder vote in November.
Barrick, by contrast, has faced problems in Africa. Its majority-owned subsidiary Acacia Mining Plc. remains locked in a years-long tax dispute with Tanzanian authorities, where it has three mines.
In addition, since March 2017, Acacia’s operations have been hampered by a ban on the export of gold and copper concentrates in Tanzania, which the company said forced it to reduce operations at one of its mines.
Barrick has been taking the lead in negotiations to end the dispute, with Thornton even flying to the country to meet with government leaders at one point.
The dispute remains ongoing, and in conference calls announcing the Randgold merger, Bristow acknowledged that Acacia would require work.
Thornton also said his company remains committed to building its relationship with the Shandong Gold Group Ltd., and other Chinese partners. They carry political clout and can mitigate risks in Africa, he said.
“They have known everything we’re doing, every step of the way,” Thornton said about Barrick’s Chinese partners on the conference call earlier this week.