A Randgold Resources mine in the Democratic Republic of Congo.
In an example of the new political risks that Toronto-based Barrick Gold Corp. Under the proposed merger with Randgold Resources Ltd., focused on Africa, a coal miner in the Democratic Republic of Congo did not agree with the combination on Friday.
The proposed US $ 6 billion merger, announced on Monday, would convert London-listed Randgold shares into Barrick shares and create the world's largest gold miners. 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 mining miner in the DRC state, Sokimo SA, who owns Randgold's Kibali mine, said the deal would introduce a new partner in the mine, and yet it only the deal in the press reports.
Sokimo typified the merger as another example of foreign companies that impose themselves without prior discussion in the countries from which the riches are made that make their wealth.
Sokimo owns 10 percent of the Kibali mine, while Randgold and Johannesburg-based AngloGold Ashanti Ltd. each manage a 45 percent interest.
Randgold said in 2017 that the Kibali mine generated approximately US $ 287 million in profits for its owners, from approximately 600,000 ounces of gold production, valued at an estimated USD 754 million.
Randgold responded by issuing a statement that the merger would have no effect on Kibali and that Sokimo has no rights to claim in connection with the proposed merger with Barrick. It also said in its statement that it had "fully consulted with Sokimo at management and board level in the days following the announcement of the proposed merger."
Yet the controversy may point to what awaits us for Bristow, who is often praised for his ability to work with politically volatile governments in Africa, where Randgold has four mines.
Analysts who reviewed the deal have noted that the proposed merger allows him to prove his operational skills 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 London-based investment bank Panmure Gordon & Co., said he expects that the dispute with Sokimo will go without any impact.
Although other miners in citizens in the DRC used similar language to gather settlements from foreign miners, Hodgson said the circumstances were different and gave Bristow a smart operator in Africa.
"There is an advantage of Mr. Bristow," said Hodgson. "If there is one thing, he is good at doing the African governments involved – he fully appreciates geopolitics and the approach of governments and gold mining in Africa."
Such features are what Barrick's executive chairman John Thornton praised about Bristow at the announcement of the proposed merger, provisionally scheduled for a vote by the shareholders in November.
Barrick, on the other hand, has experienced problems in Africa. Its majority subsidiary, Acacia Mining Plc. continues to suffer from a years-long tax dispute with the Tanzanian authorities, where it has three mines.
Since March 2017, the activities of Acacia have also been hampered by a ban on the export of gold and copper concentrates in Tanzania, which the company claimed had to reduce the activities in one of its mines.
Barrick took the lead in negotiations to put an end to the dispute, with Thornton even flocking to the country to meet government representatives at some point.
The dispute continues and in conference calls announcing the Randgold merger, Bristow acknowledged that Acacia would require work.
Thornton also said that his company remains committed to building up its relationship with the Shandong Gold Group Ltd. and other Chinese partners. They carry political power and can limit risks in Africa, he said.
"They know everything we do, every step," Thornton said earlier this week about Barrick's Chinese partners during the conference call.
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With files from Thomson Reuters 2018