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Acacia deal with Tanzania would be boon to Solo Oil and other oil and mining firms in country, says analyst

Published: 05:01 20 Oct 2017 EDT

Tanzania
There may be gold at the end of the rainbow for miners

Acacia Mining PLC’s (LON:ACA) announcement that it is nearing a deal to resolve a bitter dispute with the Tanzania government could have positive ramifications for other mining and oil companies operating in the country, according to analysts at Beaufort Securities.  

The company’s majority owner Barrick Gold Corporation said it had signed a tentative deal with the government on Thursday that would lift a ban imposed on Acacia’s exports of gold and copper concentrates.

READ: Acacia confirms deal to end dispute with Tanzania government as it posts quarterly revenue slump

Under the deal, Acacia would form a new joint venture with the Tanzanian government to operate its three mines in the country, including Bulyanhulu and Buzwagi and North Mara.

The government would take a 16% free carry stake in the mines to receive a bigger share of royalties from the mines.

However, Acacia still needs to approve the deal and said it was seeking further clarification as it is yet to receive a formal proposal. 

In March the government banned Acacia from exporting gold and copper concentrates from it mines in Tanzania. The government claimed that the miner owed royalties on undeclared exports and owed back taxes up to US$190bn.

Tanzanian miners should see a postive re-rating if deal approved, says Beaufort

“Tanzania has rightly received bad press recently, and an agreement with African Barrick/Acacia Mining is essential for Tanzania's future as a destination for foreign investment,” said Beaufort.

“If indeed the agreement reached is a 16% (mine level) equity stake for Tanzania, investors will breathe a sigh of relief. And all Tanzanian based resources companies should see a positive rerating.”

Beaufort remarks were made in a broker note on Solo Oil PLC (LON:SOLO), which is expected to be among the Tanzania-focused explorers to benefit on the back of Acacia’s news.

The stockbroker has a ‘speculative buy’ recommendation on Solo Oil, adding that Surrey County Council approval of planning permission for new programme of drilling at the Horse Hill oil field was good news for the company. Solo Oil is invested in the project, located in the vicinity of Gatwick airport, along with UK Oil & Gas Investments PLC (LON:UKOG) and Doriemus PLC (LON:DOR).

Other Tanzanian companies that could gain from the government’s deal on Acacia include Shanta Gold Limited (LON:SHG), Capital Drilling Ltd (LON:CAPD), Aminex plc (LON:AEX) and Kibo Mining (LON:CAPD).

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on 21/7/17