Barrick offered a nine per cent discount to the London-listed Acacia’s closing price, valuing it at US$787 million

Earlier this month, Barrick Gold Corp. chief executive Mark Bristow had said his company would consider buying out minority shareholders in its embattled subsidiary, Acacia Mining Plc, but only at the right price.

“The problem is that we are not prepared to overpay for these assets,” Bristow said.

On Wednesday, the Toronto gold company made its price clear — proposing a share swap at 0.1533 of a Barrick share for each Acacia share in an offer that values the smaller company at US$787 million.

That’s a nine per cent discount to the London-listed company’s closing price on Tuesday, which comes on top of a 68 per cent decline since 2017 amid an ongoing dispute with Tanzanian authorities, which slapped a US$190 billion tax bill and banned the export of processed metals.

Acacia, which operates three mines in Tanzania, accounted for around seven per cent of Barrick’s 4.5 million ounces of gold production in 2018; and yet, Bristow told analysts earlier this month, the company’s problems have been a nagging frustration for Barrick.

During a presentation with analysts to discuss first quarter results in May, he laid blame for poor performance at Acacia at the doorstep of the company’s management, saying “it would be a lot easier if Acacia were more engaging in their discussion” with Tanzanian authorities.

“The Tanzanian government are very committed to trying to find a solution,” Bristow said. “The problem is, is there a commitment on both sides and enough courage to be able to close out?”

Acacia declined to comment, but says it’s excluded from the discussions Barrick is having with the Tanzanian government.

It urged shareholders to “take no action” and said the board was considering the developments. Barrick has so far made only an informal offer, and under U.K. law has until June 18 to formalize or walk away.

Alan Spence, an analyst with Jeffries International Ltd., wrote in a note to clients Wednesday that the low bid price for Acacia likely reflects the fact that Barrick is building in expected costs of a settlement. In February, it announced a proposed settlement that includes a US$300-million payment to Tanzania, plus a 50-50 split of any economic benefit from the mines.

Spence wrote that the situation recently worsened, with Barrick now saying that the Tanzanian negotiating team would not sign a final resolution with Acacia, and would only sign it when convinced that the operating style at the mines has changed.

“An outcome whereby (Acacia) could return to a normalized operating environment appears increasingly unlikely,” Spence wrote.

Indeed, last week, Acacia confirmed Tanzanian ministers had visited one of its mines in relation to concerns about “breaches of various environmental regulations and alleged discharges of a hazardous substance from the Mine.”

Tanzanian press reports suggested the government intended to issue a $2.4-million fine, and the company said it has received verbal notice but was seeking clarification.

Bristow also wound up in a heated exchange at the annual general meeting earlier this month after a representative from MiningWatch Canada raised questions about living conditions and human rights violations around several of the company’s mines, including one in Tanzania.

None of Acacia’s three mines appear to meet Barrick’s stated definition of a tier one mine, which means production of at least 500,000 ounces of gold at less than US$748 per ounce, and a mine life in excess of 10 years.

Acacia’s largest mine, North Mara, produced 323,607 in 2017 at US$803 per ounce and has eight years in mine life left, according to the company’s website.

Bristow has said Barrick plans to raise US$1.5 billion by selling mines, so the potential move to purchase Acacia received a mixed reception.

Josh Wolfsen, an analyst at Desjardins Capital Markets, wrote that adding the mines, which have “above-average” costs and “political risk,” would actually result in a two per cent decrease to cash flow per share. Still, the deal may allow Barrick to find a partner or sell the mines outright.

Bristow, who declined to comment for this article, said as much to analysts earlier this month.

“Right now, it’s really in a bad space,” he said about the company, “and we need to do a lot of work to get it back on an even keel.”