Who will buy Acacia Mining when the “dirty laundry” included in the deal is a whopping US$ 280 million?

A public letter to the CEO’s of Harmony Gold Mining, AngloGold Ashanti, RandGold and Gold Fields

By Samantha Cole of Tanzania Business Ethics

Last week, it became public that Barrick Gold reached out to Harmony Gold Mining, Sibanye Gold , AngloGold Ashanti, RandGold & Exploration and Gold Fields and others unnamed, to offer Acacia Mining on a golden platter for a mere US$ 1.9 billion…..
Kelvin Dushnisky, President of Barrick, was certain to exclude the fact or downplay the fact that the “dirty laundry” included in the deal amounts to about 15% of the price.

Is this the perfect time to acquire Acacia Mining? After all, timing is everything.

Just 10 months ago, the headlines focused on Acacia Mining shares plummeting due to ‘disappointing’ production.
Today, the headlines are shining for Acacia with reports their stock is up more than 200 percent since the start of the year. Talk about a rollercoaster ride.

In the case of Acacia Mining, potential buyers will need to be very sure not to focus on the stock exchange face value but rather to focus on the huge extent of problems within Tanzania.

The media, representative of the Nation and even more so, the explicit messages recently from the Tanzania President, John Magufuli, of clear and distinct disappointment and dissatisfaction regarding the multi-national mining companies and furthermore, the Tanzanian Parliament specifically lambasting Barrick Gold and Acacia Mining by name, for their involvement in fraud, corruption and worse in Tanzania.
Analysts are asking if the Acacia Mining volcano is on brink of eruption in Tanzania.

According to Acacia Mining’s recent online company report, they say:
> 45,000 Jobs supported through Acacia’s operations on average in 2015
> Over 95% of Acacia employees at our operations are Tanzanians
> For every Acacia Mining job, there are an additional 11 jobs are created elsewhere in the Tanzanian economy

What country could resist having the amazing benefits described above, within their economy?
But, on the flipside of the coin, one must ask, at what price?
Is there a price to justify all the negative “fall-out” that comes from the above benefits all of which is a result of the underhanded, scandalous and nefarious ways, the management of Acacia Mining handle their dealings in Tanzania.

The answer is “YES”, the price that the Tanzanian’s are paying for these benefits is VERY high…. most Tanzanian’s feel that the price is TOO HIGH.
Acacia reports in their website that they have approx US$ 280 million of legal disputes/claims in Tanzania.
US$ 280 million is a significant and material amount which one can neither argue against nor overlook.

As at 30 June 2016, Barrick Gold – Acacia Mining (and the companies in their group) were defendants in approximately 255 lawsuits.

255 legal claims against Barrick-Acacia to a value of US$ 280 million.

None of us need a MBA to know that there is a definite management crisis – or lack of skilled management altogether. In this day of efficient communications, meetings, conference calls, emails and attachments, etc. one has to ask how can the situation deteriorate so terribly?
Needless to say there are probably some “bogus” claims within the 255 lawsuits… so let’s remove a few percent of the 255 to look at the situation more objectively. Let’s remove 20 per cent and it’s still 200 legal disputes/claims which is totally insane. One claim for $115 million, is the result of Acacia not having delivered on their agreed obligations with a local partner, Bismark Hotels Mining which brought the Ministry of Mines to “head on collision” against the management of Acacia Mining. All the claimant’s can’t be wrong, can they?

What company’s management needs lawsuits and bad media coverage. Every company’s management knows that lawsuits and bad media coverage is counterproductive in every sense of the word. Barrick-Acacia have access to some of the best lawyers in the world. They know perfectly well that lawsuits can be prevented altogether, and those that can’t be prevented may be neutered by employing some simple practices.
Yet, in spite of this, Barrick-Acacia choose to allow their image and business relationship “building” to rather go into a spiraling downwards spin … out of control … to the detriment of their host countries in which they operate their mines.

What do they care? Why should they care? After all, they proudly publicize “45,000 jobs …. over 95% employees are Tanzanians ….. for every Acacia job, 11 more are created” …..
Do they think world will pat them on the back? Perhaps their shareholders will, but do they, the shareholders really know what’s happening in Tanzania?
Do Acacia and their shareholders think they can slap Tanzania on the cheek and we will turn and give them the other cheek?

The “dirty laundry” of Acacia Mining in Tanzania is a critical and crucial factor into which any prospective buyer will need to delve deeply and study to understand just how bad the situation really is and what is needed to turn the “pre-erupting volcano” into a simmering volcano then ultimately and thereafter, …… ideally into a tranquil oasis, which perfectly symbolises what Tanzania is all about.

A few days ago, Michael Erickson, senior vice president of AngloGold Ashanti, was quoted regarding their decision not to pursue the opportunity of buying into the Kalgoorlie mine in Australia. He brilliantly said: “Looking at the surface, there’s some complexity there to deal with and you wouldn’t want to be the last man standing”. This says it all.

There are huge complexities with Acacia Mining in Tanzania…. both shallow and deep. Any buyer will need effectively far more than a traditional mining Due Diligence Report in order to make the educated decisions to move forward, or walk away. Do not be fooled by smart Boardroom banter and sales talk in Toronto and London.

Come to Tanzania… see and feel the heat from the Acacia Mining volcano. Connect with the “45,000 jobs …. over 95% employees are Tanzanians ….. for every Acacia job, 11 more are created” ….. Tanzania is blessed with all the gold needed to make your hundreds of millions … but pay your taxes to our Government so that we may also have highways, hospitals, schools, electricity and water and all the other infrastructure elements that you might take for granted back home.

And just as important, please treat our local communities and local companies with the honor and respect that they deserve. After all, that is a 2-way fact of life.
What goes around, comes around…..