Ms. Kathy du Plessis reports

BARRICK GOLD CORPORATION ANNOUNCES UPDATE RE ACACIA MINING: TANZANIA AND MINE PLANS

Barrick Gold Corp. has provided an update in relation to Acacia Mining PLC.

Background

On May 21, 2019, Barrick announced that it had met with directors and senior management of Acacia and presented a proposal for consideration by the independent directors of Acacia to acquire all of the Acacia shares it does not already own through a share for share exchange of 0.153 Barrick share for each ordinary share of 10 pence each in Acacia. On the basis of the market closing price of a Barrick share on the New York Stock Exchange on June 17, 2019, and the 410,085,499 Acacia ordinary shares in issue on that date, this implies a value for Acacia of $887.8-million (U.S.) and total consideration to the minority shareholders of Acacia of $320.1-million (U.S.).

The proposal represents a premium of 14.4 per cent to the closing price of 151 pence per Acacia share on May 20, 2019 (the last trading day before announcement of the proposal). The value for Acacia implied by the proposal has increased from $787-million (U.S.) at the date of announcement of the proposal to $887.8-million (U.S.) as at June 17, 2019, an increase of 12.8 per cent based on movements in the share price.

As has been widely reported, for the past two years, Barrick has been endeavouring to seek a settlement of Acacia's disputes with the government of Tanzania, and to find a workable tax and regulatory framework for Acacia going forward. Due to requirements of the government of Tanzania, Acacia has not been able to participate in these meetings, but Barrick has been working in good faith with the consent and support of Acacia and the independent directors. Barrick has provided regular updates to the independent directors and Acacia management, as well as the opportunity to review and comment on documentation flowing from these negotiations. The negotiations with the government of Tanzania have advanced to the point where draft documentation now has been initialed by the government of Tanzania, albeit with a number of substantive issues still outstanding.

The government of Tanzania has, however, now made it clear that it is not prepared to enter into settlement agreements directly with Acacia. In Barrick's view, it is now clear that the relationship of Acacia with the government of Tanzania has been so damaged by the events that led to the concentrate ban being imposed by the government of Tanzania in March, 2017, and by the subsequent arbitration proceedings initiated by Acacia against the government of Tanzania, that it is no longer possible for Acacia to continue to function as an independent public company, with substantially all of its value represented by assets in Tanzania.

Barrick has therefore proposed a solution which Barrick believes represents fair value for Acacia and is in the best interests of Acacia and its minority shareholders. The proposal seeks to preserve, to the extent possible, the value of the Acacia assets and to give minority shareholders of Acacia the ability to benefit from any future potential upside in the Acacia assets and Barrick's broader portfolio through ownership of Barrick shares.

Update on the status of discussions

Barrick's discussions with the independent directors in relation to the proposal are continuing. Barrick considers that Acacia shareholders should be provided with further information in relation to the circumstances which led to Barrick presenting the proposal to the independent directors and why it considers that the proposal reflects fair value. In issuing this announcement Barrick is providing further information concerning the status of negotiations with the government of Tanzania and the detailed technical assessments of the Acacia mine plans that have been undertaken by Barrick, and which underpin Barrick's view on the fairness of the proposal.

Government of Tanzania unwilling to enter into settlement with Acacia

As set out in the announcements made by Barrick and Acacia on May 21 and 22, 2019, the government of Tanzania's negotiating team has written to Acacia's three Tanzanian operating companies (the TMCs) to indicate that the government of Tanzania is resolved that it will not proceed to execute final agreements for the resolution of Acacia's disputes if Acacia is one of the counterparties to the agreements. Whilst a basis for a settlement has been developed, the terms have not yet been finalized and therefore still carry significant risk. Importantly, as highlighted by statements made by a government of Tanzania spokesperson and prominently reported in Tanzanian press, "the government does not want the presence of Acacia in any form in the country" and "the government has demanded that under no circumstances can Acacia be party to the agreements."

Draft settlement and sustainable framework for future operations are expected to result in significant value transfer to the government of Tanzania

The key principle of the draft settlement agreements under discussion is that going forward the government of Tanzania and the TMCs will share the economic benefits derived from the Tanzanian mines on a 50/50 basis, based on the life-of-mine plans of the TMCs. The government of Tanzania will receive its share of economic benefits through taxes, royalties, fees and other fiscal levies, and through the government of Tanzania's 16-per-cent free-carried interest in all distributions (including shareholder loan repayments) from the TMCs and a new Tanzanian management company. The 50/50 sharing arrangement will be reviewed annually to seek to ensure that the actual and projected sharing of economic benefits is in accordance with the 50/50 principle. The agreements also provide for payment by the Acacia group of the aggregate sum of $300-million (U.S.) in consideration for the full, final and comprehensive settlement of all existing disputes between the government of Tanzania and the Acacia group including all liability to taxation and a waiver of actual or potential claims on a mutual basis. This $300-million (U.S.) payment is outside of (and therefore not taken into account for the purposes of) the 50/50 sharing of the economic benefits over time. The draft settlement does involve a significant value transfer from Acacia to the government of Tanzania but this has been critical to agreeing potential draft settlement terms with the government of Tanzania and the creation of a viable operating framework for the TMCs going forward.

Operating environment and loss of social licence

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: There is a continuing ban on the export of metallic mineral concentrates, announced by the government of Tanzania in March, 2017.
• Bulyanhulu on care and 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.
• Chief executive officer 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 government of Tanzania at a senior governmental level regarding the issues in dispute between Acacia and the government of Tanzania.
• Environmental investigations: There remains the threat of additional environmental penalties and environmental protection orders being levied in relation to North Mara.

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.

Barrick's view of Acacia's mine plans

As part of the negotiations with the government of Tanzania, and, specifically, to ensure a thorough understanding of the economic implications of the settlement terms and resulting fiscal regime, Barrick has had the opportunity to undertake detailed due diligence on the Acacia assets. As part of this, Barrick's technical team reviewed Acacia's current mine plans including the mine plan supporting the Bulyanhulu optimization study and related financial models, examined the mines' historic performance, and conducted site visits to all three mines. As a result of this work, the Barrick technical team, which comprised several qualified persons (as defined in National Instrument 43-101), has identified significant risks inherent in these operations and concluded that certain assumptions made by Acacia were not appropriately risked or supportable and that adjustments should be made.

Bulyanhulu:

• Resource uncertainty: Resource uncertainty has been identified as a key area of concern. The Acacia mine plan for Bulyanhulu relies upon the Deep West zone, the majority of which is currently classified as inferred resources, and assumes substantial conversion of these inferred resources and homogeneity of the ore body. These assumptions have been made using an average of 200-metre-spaced drill data, with no physical drill core made available to Barrick to confirm assumptions made. Given minimal drill data, significant uncertainties remain around size, grade, homogeneity and the geotechnical stress regime of this Deep West portion of the ore body. Barrick considers that it would be more appropriate to assume a 50-per-cent conversion rate and 20-per-cent dilution of the Deep West inferred resources, which reflects the expected variability based upon the historic conversion rate of inferred resources to reserves in the upper areas of the orebody.
• Grade continuity: Acacia's mine plan assumes there is a high continuity of grade in the Deep West orebody with insufficient drill data to support this assumption. Barrick considers it appropriate to reduce the average grade of the Deep West zone, resulting in a LOM grade of 8.6 grams per tonne to reflect what has been achieved historically in the upper zone, given the low intensity of drilling (average 200-metre drill spacing) and the fact that no drill core from the Deep West zone was made available to Barrick to geologically support a significant uplift in grade.
• Throughput rates: Acacia's mine plan also assumes that Bulyanhulu can achieve underground ore hoisting rates of 1,000 to 1,100 kilotonnes per year. This throughput is significantly higher than the annual average of 928 kt over the last five full years of operation, which was achieved at significantly shallower depths mainly above the base of the shaft. Barrick considers it would be appropriate to cap underground ore production rates at 850 to 900 kt/year (during steady-state underground production) due to the risks presented by the primary underground production area being situated at 1.7 kilometres to 2.6 km below surface, well below historic production levels and below the current mine shaft (1.1 km depth). In Barrick's view, this poses underground trucking bottlenecks and geotechnical stress restrictions which Barrick understands have not yet been fully modelled by Acacia. Despite producing at deeper levels, this adjusted rate proposed by Barrick is only slightly below the annual average achieved over the last five full years of operation, a period which includes some of the best underground production levels ever achieved at Bulyanhulu, and from shallower production levels proximal to the base of the shaft.
• Production and costs: The reduction in tonnes and grade impacts both production and costs, and therefore Barrick considers that it would be appropriate to reduce the average annual production presented by Acacia and to increase the fixed unit cost component accordingly.
• Capital expenditures: Barrick believes upfront capital spend will be higher than the $140-million (U.S.) to $160-million (U.S.) startup costs assumed in Acacia's optimization study due to additional conversion drilling requirements and the refurbishment of the Bulyanhulu plant prior to restart from care and maintenance, offset by lower overall LOM capital spend as a consequence of lower throughput.

The included table sets out a comparison between Acacia's publicly disclosed parameters for Bulyanhulu, the mine's five-year historic performance and the adjustments made by Barrick to Acacia's mine plan.

   
Parameter                    Indicative optimization      Historic average --                Barrick adjusted
                                       study results      previous five years                              [5]
                                                            of full operation 
                                                                           [3]

LOM feed                    18.9 Mt [1] (18-year LOM)                      NA            16.3 Mt (18-year LOM)
Head grade (g/t)                   10.6 g/t (LOM) [2]              8.5 g/t [4]                   8.6 g/t (LOM)
Ore hoisted                       1,000-1,100 kt per                928 kt pa     850-900 kt pa (steady state)
                                 annum (steady state)
Gold produced                    300-350 kilo ounces            230 koz pa [4]   250-289 koz pa (steady state)
                             per annum (steady state)
All-in sustaining costs       $700 (U.S.)-$750 (U.S.)        $1,233 (U.S.)/oz          $840 (U.S.)-$860 (U.S.)
                             per ounce (steady state)                                 per ounce (steady state)
Startup capital expenditure     $140-million (U.S.)-                       NA            $190-million (U.S.)- 
                                  $160-million (U.S.)                                      $210-million (U.S.) 
 
[1] 18.9 megatonnes calculated using 1,050 kt per annum (median of steady state optimization study guidance) 
over 18 years. 
[2] 10.6 g/t calculated using 325 kilo-ounces gold produced (median of steady state optimization study guidance) 
at 91-per-cent recovery (based on historical performance at Bulyanhulu) from 1,050 kt feed per annum for the LOM 
inclusive of the tailings storage facility feed. 
[3] Last five full years of operation are 2012 to 2016 (inclusive) given the export ban was announced in 
March, 2017.
[4] Excludes reprocessed tailings.
[5] Barrick-adjusted steady state figures based on 12 full calendar years of underground production, subsequent 
to the first two years of tailings storage facility feed during underground ramp-up.

North Mara:

• Grade of inferred/unclassified underground material: Acacia's mine plan for North Mara assumes higher grades for the inferred and unclassified underground material than the current grade of its measured and indicated resource. The Barrick technical team has aligned the assumption with measured and indicated grades, resulting in a reduction of the grade of the inferred and unclassified underground material from 6.8 g/t to 5.6 g/t.
• General and administrative expenses, and underground mining costs: The Barrick technical team has made an upward adjustment to costs to represent what Barrick considers to be more realistic general and administrative expenses, and underground mining costs, benchmarked against historical levels achieved by Acacia and its own similar-sized underground operations in Africa; these adjustments increase average all-in sustaining costs to $877 per ounce.
• Capital expenditures: Barrick has identified a need for higher upfront capital spend at North Mara (increasing near-term capital spend to $385-million) to address additional grade control drilling, the need to upgrade from a cemented aggregate fill to a paste filling plant, and costs to expand the lined tailing storage facility and improve the water management to conclusively address environmental risks.

The proposal reflects fair value

The adjustments Barrick considers should be made to Acacia's mine plans, together with the transfer of value to the government of Tanzania as a consequence of the tax settlement terms, and new tax and regulatory framework for Acacia in Tanzania going forward, underpin Barrick's view of the value of Acacia. Barrick continues to believe that the terms of the proposal reflect the fair value of Acacia, not taking into account any further discount which could be applied to reflect the significant risks inherent in the Acacia business and remaining uncertainties of the settlement with the government of Tanzania.

Comments have been made as to the difference between Acacia's carrying value in Barrick's books as at Dec. 31, 2018, and the value of its proposal to Acacia. For the preparation of its 2018 accounts, the carrying value on Barrick's books is based on the book value as disclosed by Acacia but also includes an intercompany asset held in the direct holding company of Acacia (which would not be part of any impairment assessment) and other minor adjustments. During the first half of 2019, Acacia updated its LOM models and, subsequent to that, the Barrick team has had an opportunity to conduct the diligence review described herein and risk adjust the value of the assets. Given the value implied by Barrick's adjusted LOM plans, this represents an indicator of impairment and Barrick expects to record a material impairment to its carrying value of Acacia in the current quarter.

Barrick believes that there is no other credible alternative solution

In the absence of a take-private transaction, Barrick does not consider there is any credible alternative solution which will preserve, to the extent possible, value for all stakeholders and no such alternative has been presented by Acacia. In Barrick's view the continuance of the arbitration proceedings involves significant risk. Barrick notes that Acacia has consistently stated that it would prefer a negotiated solution to its disputes with the government of Tanzania, whilst noting the risk of continuing and further legal or regulatory action by the government of Tanzania.

Takeover Code notes

The proposal is subject to the satisfaction of a number of customary conditions including receiving the recommendation of the Acacia board. Barrick reserves the right to waive all or any of such conditions at its discretion. The proposal does not constitute an offer or impose any obligation on Barrick to make an offer. There can be no certainty that neither any offer for Acacia will ultimately take place, nor as to the structure of any such offer, should one be forthcoming, even if the preconditions are satisfied or waived. Barrick reserves the right to: (a) vary the form and/or mix of consideration referred to in this announcement and/or introduce other forms of consideration; and (b) make an offer or other proposal on less-favourable terms than an exchange ratio of 0.153 Barrick share for each ordinary share of Acacia referred to in this announcement with the agreement, recommendation or consent of the board of Acacia.

Barrick will have the right to reduce the number of new Barrick shares that Acacia minority shareholders will receive under the terms of the proposal by the amount of any dividend (or other distribution) which is declared, paid or made by Acacia to Acacia shareholders.

This announcement does not amount to a firm intention to make an offer under Rule 2.7 of the code, which regulates the making of offers for public companies listed in the United Kingdom. There can be no certainty any offer will be made, even if the preconditions referred to are satisfied or waived.

In accordance with Rule 2.6(a) of the code, Barrick must, by not later than 5 p.m. on June 18, 2019, either announce a firm intention to make an offer for Acacia in accordance with Rule 2.7 of the code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the code applies. This deadline will only be extended with the consent of the U.K. takeover panel in accordance with Rule 2.6(c) of the code.

We seek Safe Harbor.