Barrick cross listing: A boon or trick?

BAK · 2010-02-21T14:39:27+00:00

Barrick cross listing: A boon or trick? By Polycarp Machira 21st February 2010 BoT Governor Benno Ndullu Barrick Gold Corporation's plans to cross list its spin-off company African Barrick Gold on the Dar es Salaam Stock Exchange has stirred mixed feelings over whether an initial public offering (IPO) would truly benefit local investors or whether the company's first listing on the London Stock Exchange will give undue priority to foreigners. 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, and the IPO on the gold mining's African operations - whose market capitalisation could be as high as $3.7 billion will 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, and it has four foreign-based companies listed: Kenya Airways, KCB, East African Breweries, and Jubilee Holdings Limited. On Thursday 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 told journalists that plans were underway for cross-listing by ABG this year. Mwanyika said the cross listing of ABG on the DSE had not been influenced by the anticipated new mining bill, which will require mining firms to sell shares to the public. Some analysts have said that 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 in the United States and Canada see as more risky and more difficult to work with given the drastic difference in time zone. Governor Ndulu declined to elaborate further on Barrick's announcement and instead deferred to the CMSA, but he said on Friday that the cross listing should not scare potential investors as they stand to benefit off of the mining company's multi-billion dollar business. CMSA Chief Executive Officer Fratern Mboya was unreachable for comment as of press time. But Kigoma North MP Zitto Kabwe, on his part, warned that Tanzanians should not celebrate without first understanding what this move is all about. He said because the IPO is to be done in London and later cross-listed in Dar, Londoners will have an advantage because it is usually easier and cheaper for people to buy shares in the primary market. "The best thing for Tanzania would be a simultaneous IPO on the London Stock Exchange (LSE) and Dar es Salaam Stock Exchange (DSE). Tanzanians would be able to own up to 15 percent of the company I am sure if the IPO were held in Dar es Salaam," he said. Kabwe noted that because Barrick's assets are in Tanzania, Tanzanians should be given priority over foreign investors. He also noted that for taxation purposes this new company should have its headquarters of effective management in Dar or the gains for local investors will be minimal. ABG will be based in London and will acquire all Barrick Gold Corporation (BGC)'s African assets and seek to expand its operations throughout the continent. Currently, BGC has operations in Tanzania and exploration and other contractual rights in other parts of Africa. In Tanzania, 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. IPOs usually attract institutional investors like pension funds to buy many shares, Kabwe said, and if the IPO is held in Dar es Salaam, apart from normal citizens pension funds, STAMICO and even the government could stand to invest and profit. Deputy Minister for Energy and Minerals Adam Malima told The Guardian on Sunday that Barrick's listing would encourage further exploration for minerals in the country, as it will increase participation of local investors in the industry. Malima said that IPOs open another avenue for citizens to save, rather than relying on banks alone, and that in itself could be a blessing for local investors. Still, he was hesitant to wholeheartedly support the move without the full details of the future listing. "Let me say this as an expert in development finance and not a deputy minister. We should trade cautiously on the matter; the government has to do the necessary intervention before approving the move," Malima said. He said the listing would be subject to Africa Barrick Gold fulfilling the requirements of London Stock Exchange and those of the Dar es Salaam bourse. The chance to acquire a piece of the Canadian 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 capitalization 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. SOURCE: GUARDIAN ON SUNDAY

Thread starter BAK
Start date Feb 21, 2010

BAK

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Barrick cross listing: A boon or trick?

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