Barrick Gold Warns About Production Suspension In Mali

Barrick Gold Corp GOLD warned about a potential suspension of operations at its Loulo-Gounkoto mining complex in Mali following the Malian government's decision to restrict gold shipments.

The West African nation's ruling junta extended its export ban to include on-site gold stocks, which Barrick's CEO Mark Bristow called "unwarranted and contrary to agreed dispute resolution mechanisms."

"The inability to ship gold not only affects operations but has broader implications for the local economy, the 8,000 employees, and the many local service providers," Bristow said in a statement. If the situation is not resolved within a week, Barrick may be forced to temporarily halt operations, which he described as a "deeply regrettable but necessary" step.

Loulo-Gounkoto is one of Barrick's top assets. In 2023, the complex produced 547,000 ounces, with all-in-sustaining costs of $1,166 per ounce. Over the past 29 years, Barrick invested more than $10 billion in Mali, making the company one of the country's largest taxpayers and employers. Almost all 8,000 on-site workers are Malian nationals, with more than 70% of the economic benefits flowing directly to the Malian state.

The dispute escalated when the junta claimed Barrick owed $500 million in back taxes, and tensions further deepened with the detention of several Malian employees on what Barrick describes as unfounded charges. In response, Barrick initiated arbitration proceedings with the International Centre for the Settlement of Investment Disputes and is simultaneously negotiating a memorandum of agreement with Mali to redefine their partnership and increase the state's share of benefits from Loulo-Gounkoto.

As the fourth largest producer on the continent, Mali has attracted several foreign miners besides Barrick, including B2Gold, AngloGold Ashanti, Hummingbird Resources and Resolute Mining, which recently faced a serious issue of its own.

Its CEO, Terry Holohan, and two other executives were detained for several days as the junta sought a $162 million tax settlement. They were released following the first payment tranche of $80 million.

Although increasingly complex, previous regional examples show that sliding royalties might be a solution. In 2019, Zambia introduced a sliding-scale royalty for its copper production that moved in increments of 1.5 percentage points. Beyond a pre-determined threshold, the tax rate was capped, protecting the mining firms from escalating taxation while adequately compensating the local community.

GOLD Price Watch: Barrick Gold has declined 0.95%, trading around $15.69 Monday morning.

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