In negotiation, there’s a concept called hosing. It derives from the verb “hose” which means to take (near) complete advantage of the other.
Judging by the outcome of Barrick Gold’s negotiation with the government of Mali, it’s clear that the company has been hosed.
How so? You wonder.
In early October 2024, the junta (the illegal transitional government run by generals) claimed Barrick owed it US $512 million in “outstanding taxes and dividends” — an eyebrow-raising sum considering that last year Barrick paid the government $460 million in taxes and royalties that year.
To informed observers, the claim is nothing more than extortion. The shakedown smacks of desperation.
So how do you face down a challenge like this? Of course, if you were Mark Bristow, the maverick CEO who built Randgold from nothing into a major producer before merging it with Barrick in early 2019, you had no choice but to face off against the truculent generals on an uneven playing field.
And here we are, four months later, the outcome is lopsided. Barrick reportedly will pay $438 million. But given the $85 million paid to the government just months earlier, the total amount adds up to $523 million.
This was not a face-saving deal for the company!
Looking back, the generals have proven to be way more adversarial and unyielding than imagined. (Just ask the Resolute Mining executives who were locked up when they arrived to negotiate a deal or the Barrick employees who were arrested, released, and only to be arrested again.)
Clearly, the junta was not interested in win-win negotiating. And Barrick, the weaker player, folded after four months.
However, going into the negotiation, I thought Barrick has a lot of leverage as well. More than a decade of continuous conflict with the Islamists and Tuareg tribes in the north is putting a strain on the economy. War is expensive. Gold exports account for 80% of foreign exchange earnings. Without the foreign currencies to pay for essential imports, weapons and Russian mercenaries, the junta would be in trouble. If Barrick’s mine was idled, then the government stood to lose a key source of revenue expected to be $550 million this year.
International arbitration may take a few years, but a win could yield billions of dollars. The award could not be appealed and the country would be forced to pay up.
In the end, soaring gold prices mitigates the blow for Barrick. If gold continues its upward trend, it will recover the loss soon enough. But as the country’s security situation worsens (insecurity has spread to the central region) and the economy teeters on the brink of collapse, the real question is: How long before the junta targets Barrick—and other miners like B2Gold and Resolute—once again for a shakedown?
Hai Van Le is the author of Into the Unknown, a work of fiction about a geologist held hostage by Islamic fundamentalists in Mali.
