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Barrick`s billion dollar deal a dream to locals

Discussion in 'Habari na Hoja mchanganyiko' started by BAK, Feb 28, 2010.

  1. BAK

    BAK JF-Expert Member

    Feb 28, 2010
    Joined: Feb 11, 2007
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    Barrick`s billion dollar deal a dream to locals

    By Staff writer

    28th February 2010

    Tanzanian investors may miss the golden opportunity to own one of Africa's biggest gold mines, Africa Barrick Gold Company (ABGC), owing to a draconian law imposed by the Dar es Salaam Stock Exchange and Central Bank, The Guardian on Sunday has learnt.

    Last week Barrick Gold announced the intention to establish a new company - African Barrick Gold (ABG) - which will first list at the London Stock Exchange and later cross-list on the DSE. Barrick Tanzania chief executive officer Deo Mwanyika (pictured) told journalists that plans were under way for cross-listing by ABG this year.
    According to informed sources, in order for a company to list at DSE, it should have a track record of making profit for three consecutive years.
    As for the newly formed company, ABGC, it is understood that the company posted no profit during the past decade it has operated in Tanzania¬¨. "This is a disqualification for ABGC to list at Dar es Salaam Stock Exchange…what it means is that Tanzanians won't be able to buy shares of the country's biggest gold mine," a senior Tanzania Chamber of Mines official told The Guardian on Sunday.
    The official who declined to be named saying he is not the authorized spokesperson of the Chamber added:" In order for Barrick to have secondary listing at the Dar es Salaam bourse, the law or regulations need to be changed. Another obstacle, according to the official, is the BOT's regulations that bar Tanzanians from buying shares in a foreign listed company.
    The regulations were introduced to curb capital flight, and money laundering, but they have created more negative than positive impacts to Tanzanian investors.
    Bank of Tanzania Governor Benno Ndulu told The Guardian on Sunday that the Barrick listing would bolster the nation's bourse, which has only 15 companies listed on it. Meanwhile, the IPO on the gold mining's African operations - whose market capitalisation could be as high as $3.7 billion - would give Tanzanians the opportunity to profit directly from the minerals being extracted from their ground.
    Tanzanian law restricts citizens from investing in foreign companies that are not cross-listed on the nation's own stock exchange, as per regulations outlined by the Capital Market and Securities Authority (CMSA).
    The Dar es Salaam Stock Exchange (DSE) currently has a total market capitalisation of Sh4.968 trillion, with four foreign-based companies listed: Kenya Airways, KCB, East African Breweries and Jubilee Holdings Limited.
    It's the same regulations that denied Tanzanian investors a chance to own shares in East Africa's most profitable company in 2008 when Kenya's Safaricom issued an Initial Public Offerings to regional investors.
    With the draconian regulations still in place, it means Tanzanian investors interested to buy the company's shares at London Stock Exchange would be unable to make it.
    Some analysts have said Barrick's move to spin-off its African operations is an attempt to reduce risk in its portfolio. By listing separate from BCG in London and in Tanzania, analysts say, Barrick is reaching out to investors who may be more familiar and comfortable with African assets, which some people in the US and Canada see as more risky and more difficult to work with, given the drastic difference in time zone.
    Speaking to The Guardian on Sunday this week, ABGC's Public Relations Manager, Teweli Teweli said: "We are aware of the obstacles at DSE as well as within the BOT, but we hope that the authorities concerned will change the rules in order to allow local investors to benefit from the IPO."
    He added: "What I can emphasise here is that any decision to issue an IPO has a very clear motive - to give local investors a chance to invest in one of the biggest mining companies.
    "But so far it seems like some people are skeptical about the move…our intention is very clear and I would like to encourage institutional as well as individual investors to use that opportunity to invest in lucrative mining sector."
    Teweli clarified that his company was not cross-listing as reported this week, but would seek a secondary listing at DSE, pending the change of regulations at the local bourse.
    Currently, ABGC has operations in Tanzania and exploration as well as contractual rights in other parts of Africa. In the country, Barrick owns Bulyanhulu, Buzwagi, North Mara and Tulawaka gold mines.
    BGC will retain 75 percent ownership of the African outfit, and sell 25 percent through the LSE. Cross listing on the DSE would facilitate local ownership of the company.
    The chance to acquire a chunk of the newly formed mining giant, which owns the four largest mines in the country, has attracted immense public interest since the announcement, especially given that ABG's potential market capitalisation would trump that of all the companies on the DSE combined.
    African Barrick Gold is expected to produce between 800,000 and 850,000 ounces of gold this year. Barrick Tanzania produced 716,000 ounces of gold last year.
    In 2008, Barrick produced 7.66 million ounces of gold at cash cost of $443 per ounce.
    In addition, the company produced 370 million pounds of copper at a total cost of $1.19 per pound. The company shares are traded on Toronto and New York stock exchange.

  2. Geza Ulole

    Geza Ulole JF-Expert Member

    Jul 13, 2010
    Joined: Oct 31, 2009
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    what's up with this deal? any info. where is the cross listing happening?
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