Mali to take control of key Barrick gold mine for six months

A Malian court ruled that Barrick Mining Corp’s Loulo-Gounkoto gold mining complex should be placed under provisional administration for six months, handing control of one of the Canadian company’s biggest operations to state-appointed management, according to Bloomberg.

The decision on Monday comes after Mali closed Barrick’s offices in the capital Bamako and warned it would take control of the mine, which has been shuttered owing to a months-long dispute over mine proceeds, unless it was reopened and tax payments made. The mine will be managed by Soumana Makadji, an accountant and former health minister, said Issa Aguibou Diallo, a judge at the Tribunal de Commerce.

Shares of Barrick closed 0.8 per cent lower in New York. A lawyer for the company said that Monday’s ruling could see operations, including exports, resume under the temporary state management.

A legal representative for Mali’s government did not respond to calls and a text seeking comment.Mali’s junta has argued that the transfer is necessary to ensure the continuity of operations and protect its national interests. Barrick has condemned the request, calling it unlawful and a violation of its contractual rights. “While the company has made a number of good faith concessions in the spirit of partnership, it cannot accept terms that would compromise the legal integrity or long-term viability of the operations,” it said in a Monday statement.

The company has turned to the World Bank’s arbitration tribunal as the standoff with Mali -- and threats to the firm’s control over the nine -- escalated.

“We view this scenario as the worst-case outcome for Barrick,” Royal Bank of Canada analyst Josh Wolfson said in a note. “In our view, it is most appropriate to assume zero go-forward production for Barrick, while some partial value recovery could be possible through a protracted arbitration process on a longer-dated basis.”

Barrick suspended operations at the site in January after authorities blocked its exports amid disagreements over taxes and royalties.The cash-strapped military junta running the West African nation has demanded payments for alleged back taxes from Barrick subsidiaries. It also wants the Canadian firm to adhere to new legislation that would give the state a larger stake in the mine and higher royalties.

Exports from Loulo-Gounkoto -- which produced 723,000 ounces of gold last year -- have been blocked since November. Barrick said that, although it signed an agreement to resolve disputes and reopen the mine in February, the authorities have not executed it.

In October, the company paid Mali $85 million as negotiations were ongoing. Mali has since seized three tonnes of gold from the mine and detained four Barrick employees.The owners of other operating gold mines in Mali including B2Gold Corp and Allied Gold Corp were able to reach financial settlements with Mali that ended disputes and govern the future of their assets in the country.