Barrick Gold Corp (ABX.TO) subsidiary Acacia Mining PLC and Tanzania agreed on Wednesday to hold talks aimed at resolving an escalating dispute over an export ban, after a meeting between Barrick's chairman and the country's president.
London-listed shares in Acacia, which is 63.9 percent owned by Barrick, jumped as much as 11 per cent, to 303 pence, after the news and closed 5.5 per cent higher, outpacing sector rivals.
Acacia's valuation has nearly been halved, to some US$1.4 billion, after it stopped gold and copper concentrate exports from Tanzania following a ban by the government on unprocessed ore exports in March as part of its push for the construction of a local smelter to add value to its exports.
"I feel very optimistic that we will reach a resolution which is a win-win," Barrick Chairman John Thornton said after meeting Tanzanian President John Magufuli on Wednesday. "We'll be sitting down soon with a team designated by the president and our own team."
A statement from the president's office said that Barrick is ready to discuss "the payment of compensation of losses incurred by Tanzania from the company's operations in the country." It also said Thornton agreed to cooperate with Tanzania to build a smelter in the country.
The government, which accuses Acacia of evading taxes, said its audit showed the miner had 10 times more gold in containers prepared for export than the company declared.
"We have never stolen, we have never evaded taxes, we have never forged documents to avoid paying royalties and we have never been unlawful," Acacia Chief Executive Brad Gordon said in a June 13 internal memo.
Acacia, which may provide further update on a previously-scheduled call Thursday morning, said that Barrick has agreed to begin talks, but no agreement has been reached.
Tanzania is Africa's fourth-largest gold producer, and Acacia its largest miner, with three gold mines that also produce copper in the East African country.
Two mines, accounting for some 6 percent of Barrick's 2017 production guidance, were affected by the ban, Barrick said in May. In total, Acacia accounts for approximately 10 per cent of Barrick's 2017 forecast output of 5.3-5.6 million ounces of gold.
Barrick, which reports second-quarter results on July 26, has said that if Acacia needs to revise its 2017 forecast, Barrick would evaluate adjustments to its own full-year outlook.
"With no concentrate exports since March, and assuming a worst case scenario of Acacia suspending operations for the remainder of 2017, that would equate to approximately 270,000 ounces of lost production for Barrick this year," said Scotiabank analyst Tanya Jakusconek in a note this week.