Canadian foreign aid was discussed during Barrick tax dispute in Tanzania, internal e-mails show

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A newly obtained cache of e-mails has shed light on the anger and anxiety at Barrick Gold Corp. ABX-T and the federal trade department after a Barrick subsidiary was hit with a disastrous export ban and massive tax claim in Tanzania.

The ban on gold concentrate exports triggered one of the worst crises in the history of Barrick’s operations in Africa, with its subsidiary losing two-thirds of its share value as the tax dispute deteriorated.

The internal e-mails reveal how Barrick sought emergency help from Ottawa to resolve the crisis in 2017, with Canada’s multibillion-dollar foreign aid budget among the items on the table for discussion.

The battle began in March, 2017, when the Tanzanian government announced a ban on the export of gold and copper concentrates, in an attempt to pressure mining companies into doing more smelting and refining in the country.

The export ban soon spiralled into a series of allegations against Barrick’s main African subsidiary, Acacia Mining, including accusations from the government that the company was avoiding taxes by underreporting the value of its mineral exports from Tanzania.

Within months, the dispute had climaxed in a demand for US$190-billion in unpaid taxes, penalties and interest. It took years of negotiations to persuade the Tanzanian government to end the export ban.

The newly obtained e-mails cast a spotlight on the friendly relationship between Toronto-based Barrick and the Canadian government, despite human-rights issues that have dogged Barrick’s mining operations in Tanzania for many years.

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As the dispute deepened, Barrick reminded the trade officials that Tanzania was the fourth-biggest recipient of Canadian foreign aid at the time, including $2.9-million in Canadian funding for a Tanzanian audit agency at the heart of the tax dispute, the e-mails show. The federal officials seemed ready to cite this funding in their discussions with the Tanzanian government, although the details are redacted from the released e-mails.

In one e-mail, a Barrick executive complained that the Canadian government was financing the “arbitrary and punitive” actions of the Tanzanian audit agency.

Another e-mail shows a senior Canadian diplomat telling Tanzania’s Mining Minister the export ban should be lifted because it would allow Barrick to proceed with a promised US$300-million payment to the government. At the same meeting, the diplomat discussed Canada’s foreign aid to Tanzania.

The internal e-mails were obtained by Ottawa-based researcher Ken Rubin under federal access-to-information legislation and were reviewed by The Globe and Mail.

Barrick did not respond to messages from The Globe with questions about the Tanzania-related e-mails.

The internal e-mails show the Tanzania export ban triggered a swift response from Barrick’s subsidiary, beginning on March 7, 2017, just four days after the ban was announced, when Acacia Mining’s chief executive wrote a lengthy letter to the Tanzanian Minerals Minister, Sospeter Muhongo, pleading for the ban to be reversed.

In the letter, Acacia said the ban was inflicting damage on the company and other mining firms in Tanzania, affecting their ability to raise exploration funds. It said Acacia’s share price had dropped by about 20 per cent, equivalent to a US$650-million loss in the company’s stock market value, and it warned Acacia might be forced to start “adjusting the operation of our business.”

About two weeks later, Canada’s high commissioner secured a meeting with Mr. Muhongo, and Acacia was on the agenda. Talking points for the meeting, prepared by a Canadian trade commissioner, suggested the high commissioner could try to resolve the tax dispute by promoting Acacia’s offer to pay for a study of a possible copper smelter in Tanzania, and by urging the minister to consider using a Canadian-funded legal support facility to settle the tax issue.

Knowing the minister might raise the human-rights issue, including the deaths of Tanzanian villagers at the hands of security guards and police at Acacia’s North Mara mine, the talking points suggested the high commissioner could say Acacia had taken “important steps” to address the alleged abuses and the situation had “normalized.”

But the dispute dragged on, and in May, 2017, it took a sharp turn for the worse when the government accused Acacia of evading taxes by failing to declare most of the value of its mineral exports. In e-mails, Canadian diplomats said the government was accusing the company of “theft.”

Barrick swiftly sought a meeting with senior Canadian trade officials to discuss a strategy for responding. Barrick vice-president Dave Forestell e-mailed a senior policy adviser in the office of the federal Trade Minister, saying Acacia’s stock had now fallen by 40 per cent and Barrick was “quite alarmed.” The dispute had “seriously affected investor confidence,” he said, citing the collapse of talks on a potential US$4-billion merger between Acacia and Endeavour Mining Corp.

The policy adviser, Pascale Massot, told the Barrick executive he would “welcome” the company’s advice. The e-mailed response from Mr. Forestell is partly redacted by federal access to information officials, but it shows Mr. Forestell was eager to call attention to Canadian aid to the country. “Tanzania is the fourth-largest recipient of Canadian foreign aid,” he told Mr. Massot.

He also cited the $2.9-million in federal aid to the Tanzania Minerals Audit Agency. “Canadian tax dollars are supporting the very agency that is advising the Tanzanian government to take arbitrary and punitive actions against a Canadian-owned company,” he said.

A day after this e-mail, Mr. Forestell spoke by phone to Ian Myles, the Canadian high commissioner in Tanzania. On the same day, Mr. Myles e-mailed his colleagues and suggested that their discussions on the tax dispute could include the fact that the Tanzanian audit agency “has benefitted from significant Canadian development support.”

In another e-mail on that day, Mr. Forestell said the Canadian high commissioner had provided “very useful suggestions” on the Tanzania dispute. He said the diplomat had advised Barrick to collect evidence to cast doubt on the accuracy of Tanzania’s tax assessment.

The following day, the dispute was on the agenda for a meeting between Barrick president Kelvin Dushnisky and deputy trade minister Timothy Sargent. In preparation for the meeting, Canadian officials said Mr. Sargent could suggest that Barrick should “spell out” to Tanzania that the dispute might cause a loss of jobs and revenue and could damage Tanzania’s reputation as an investment destination.

The officials also discussed whether Acacia could invoke the terms of a Canada-Tanzania foreign investment protection agreement in its response to the dispute.

After the meeting, an e-mail from a trade official showed the Global Affairs department had agreed to pursue some “fairly urgent action items” to help Barrick. But the details of the planned “next steps” by the government were redacted from the released e-mail.

In a separate e-mail, Canadian officials disclosed they were seeking a meeting with then Tanzanian president John Magufuli “to advocate on Acacia’s behalf.”

A day after the Barrick meeting, however, Canadian officials raised questions about Barrick’s corporate social responsibility and whether its Tanzania subsidiary should qualify for Canadian government help.

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“If the Canada brand is to accompany this project, along with any other work we do on behalf of Barrick, we’ll need to do some serious work on the CSR front,” one official said in an e-mail.

Another official agreed the CSR issue was “important.” But details of their concerns were redacted from the e-mails.

Over the following months, Canadian diplomats and trade officials continued to lobby for Barrick in meetings with Tanzanian officials. They expressed doubt about the tax claims and warned of potential damage to Tanzania’s business reputation.

In July, 2017, Tanzania announced it was seeking US$190-billion from Acacia in unpaid taxes, penalties and interest. The amount was nearly four times as big as Tanzania’s entire GDP.

By October, Barrick had agreed to pay US$300-million to the Tanzanian government, and Acacia agreed to form a new joint venture with the government to allow a sharing of revenue. But the export ban continued.

In November, 2017, the Canadian high commissioner met Tanzania’s new Mining Minister, Angellah Kairuki. According to a federal e-mail summarizing the meeting, the high commissioner urged the minister to lift the export ban so the US$300-million payment could go ahead.

In the same meeting, he also emphasized Canada’s foreign aid to Tanzania, including its aid to the minerals audit agency.

The export ban was finally lifted in January, 2020.

Global Affairs department spokesperson Sabrina Williams, in response to questions from The Globe, confirmed Canada’s aid to the minerals audit agency. But she did not respond to a question about whether Canada had used this aid as leverage during the tax dispute. Barrick also did not respond to questions.

Catherine Coumans, research co-ordinator at independent advocacy group MiningWatch Canada, said it was “deeply disappointing” the Canadian officials seemed more focused on helping Barrick’s tax issues than they were on the widely reported human-rights problems at the Barrick-owned gold mine in Tanzania.

The officials showed “questionable ethics” by discussing Canadian foreign aid in the context of the Barrick tax dispute, she told The Globe.

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