Barrick Gold Discovers Abnormal Accounting Procedure in Acacia’s 2018 Financial Report

By TZ Business News Staff.

Barrick Gold Corporation has discovered an abnormal accounting procedure used by its subsidiary Acacia Mining in its 2018 financial report.

As per Acacia’s 2018 Annual Report, Acacia has identified certain measures in its public disclosures that are not measures defined under [International Financial Reporting Standards (IFRS)],” Barrick Gold has said in a statement published in Toronto, Canada June 18, 2019.

Barrick Gold Corporation owns 63.9% shares in Acacia.

Experts define the IFRS as a set of accounting standards developed by international accounting experts to provide a global framework for how public companies should prepare and disclose their financial operations.

Having an international standard was seen as especially important for large companies that have subsidiaries in different countries to use one financial reporting language throughout their countries of operation to provide investors and auditors with a cohesive view of finances.  

“Non-IFRS financial measures disclosed by Acacia’s management are provided as additional information to investors in order to provide them with an alternative method for assessing Acacia’s financial condition and operating results, and reflects more relevant measures for the industry in which Acacia operates.

“These measures are not in accordance with, or a substitute for, IFRS, and may be different from or inconsistent with non-IFRS financial measures used by other companies. [‘All-in sustaining costs’] (AISC) per ounce is one such non-IFRS financial measure disclosed by Acacia. The measure is in accordance with the World Gold Council’s guidance issued in June 2013.

“It is calculated by taking cash cost per ounce sold (defined below) and adding corporate administration costs, share-based payments, reclamation and remediation costs for operating mines, corporate social responsibility expenses, mine exploration and study costs, realized gains and/or losses on operating hedges, capitalized stripping and underground development costs and sustaining capital expenditure. This is then divided by the total ounces sold. [‘Cash cost per ounce sold’] is also a non-IFRS financial measure,” Barrick have said in their statement.  

The statement was made as a follow-up to encourage Acacia to sell shares not currently owned by Barrick Gold, in a process meant to eliminate Acacia which has become ‘persona non grata’ in Tanzania. Acacia operates three gold mines in the country–Bulyanhulu gold mine, North Mara gold mine and Buzwagi gold mine all in northern Tanzania. It is listed on the London Stock Exchange with a cross-listing at the Dar es salaam Stock Exchange.

The Tanzania Government identified Acacia Mining in 2017 as a devious, corrupt, mining company which had allegedly operated in the country for 19 years without legal registration or certificate of compliance. The Government  has consequently refused to talk to the subsidiary, agreeing to settle only with the majority shareholder a myriad of disputes related to the distrustful company.

Barrick Gold has encouraged Acacia Mining to relinquish its minority shares and to sell them all to the majority shareholder as the only way to save assets in the country.

“Barrick believes that unless a solution is found to the current impasse in the short term there is the real risk of catastrophic loss of value for all stakeholders, and that the solution it has proposed to the Independent Directors of Acacia represents the only credible option to preserve, to the extent possible, the value of Acacia’s assets,” the statement reads in part and continues:

 “The operating environment in Tanzania is increasingly challenging for the TMCs and there are no signs that this situation is improving. Indeed, Barrick’s own assessment is that the situation may deteriorate further if no near-term settlement can be secured. Examples of how difficult the operating environment has become include:

Export ban: the continuing ban on the export of metallic mineral concentrates announced by the GoT in March 2017; Bulyanhulu on care & maintenance: Bulyanhulu remains on care and maintenance, other than some reprocessing of tailings; Criminal charges and detentions: Criminal charges have been brought against the TMCs in Tanzania and against three current Acacia employees and a former employee. Three of those individuals charged continue to be held in custody under non-bailable offences

Other challenges include the Acacia CEO being unable to enter Tanzania: Barrick understands that the Interim CEO of Acacia has not been able to visit Tanzania since October 2018 and that no one from the senior management or Board of the Company has been able to engage with the GoT at a senior governmental level regarding the issues in dispute between Acacia and the GoT

Then there is the question of nvironmental investigations: there remains the threat of additional environmental penalties and environmental protection orders being levied in relation to North Mara.

Acacia has responded to this statement with a 12-page reply published  on June 24. In the statement Acacia blames Barrick Gold for initiating dialogue with the Tanzania government to resolve the disputes.  Acacia’s reply to Barrick reads in part: “ Acacia believes the perception that Acacia has been the roadblock to the settlement has led to a material deterioration of Acacia’s operating position in Tanzania. For the record: ─ Acacia did not invite Barrick’s intervention into the Company’s negotiations with the GoT.   Acacia was continuing its own engagements with the highest levels of the GoT at the time and had no reason to believe that these engagements would not continue.”