“Worst Case Outcome”: Mali Places Barrick Gold’s Loulo-Gounkoto Mine Into State Control

A Malian court has ordered Barrick Gold Corp.’s Loulo-Gounkoto mine into six months of provisional administration, transferring control of one of the Canadian firm’s key assets to a state-appointed manager. Judge Issa Aguibou Diallo said Soumana Makadji, an accountant and former health minister, will oversee operations, according to Bloomberg.

The ruling follows months of tensions. In January, Barrick suspended operations after authorities blocked exports over a tax and royalty dispute. Though the company agreed to a resolution in February, it says Malian officials have yet to act. Meanwhile, exports from the mine—responsible for 723,000 ounces of gold last year—have been halted since November.

Mali’s junta, facing financial strain, demands back taxes and adherence to laws that would grant the state a larger stake and higher royalties. In October, Barrick paid $85 million as part of ongoing negotiations. The government has since seized 3 tons of gold and detained four Barrick employees.

Bloomberg writes that Barrick called the court move illegal and a breach of its contractual rights. “While the company has made a number of good faith concessions in the spirit of partnership, it cannot accept terms that would compromise the legal integrity or long-term viability of the operations,” it said in a Monday statement.

Last month, the company turned to the World Bank’s arbitration tribunal to block the provisional administration. A legal representative for Mali’s government did not respond to requests for comment.

Mali defends the takeover as necessary “to ensure the continuity of operations and protect its national interests.”

“This scenario [is] the worst-case outcome for Barrick,” said RBC analyst Josh Wolfson. “In our view, it is most appropriate to assume zero go-forward production for Barrick, while some partial value recovery could be possible through a protracted arbitration process on a longer-dated basis.”