More violence at Barrick’s North Mara

The problems continue for Barrick Gold (ABX-T, ABX-N) in Tanzania, only now the Toronto-based miner is slightly shielded by the company it spun the assets into – African Barrick Gold (ABG-L).

While the parent Barrick holds a 74% stake in its African subsidiary, it is up to an entirely different management team to wrestle with the ongoing issues at its mines in the country.

The latest bad news comes from the North Mara mine in the country’s northeast, as seven people are reported dead after a brazen attempt by a mob to steal gold from the mine’s crusher.

And while African Barrick says there was no material impact on the mine’s operation or production, the incident speaks to the depth of the problems the mine’s management continues to face.

The animosity between community and mining company can be traced to the days when Placer Dome put the mine into production in 2003. It was then that many of the locals apparently felt they were not adequately compensated, and when Barrick took over the operation in 2006, their ire was simply re-directed at the new miner.

Adding to hostility was an acid rock drainage problem in 2009 that contaminated a nearby river. Barrick insisted that the problem was due to locals vandalizing and stealing parts of the tailing-pond liner. The river was said to be contaminant-free one year later, but the situation only further strained community relations.

The mine was also overrun in January 2009, as an angry mob damaged mining equipment and one person was killed.

Barrick has said in the past that much of the trouble is being caused by loosely organized gangs made up of transients that reside around the Kenyan and Tanzanian border.

Others have opined that the mine was destined for complications when Placer was building it because of its proximity to impoverished villagers.

And while the mine was never big enough to have a significant impact on Barrick’s overall valuation, now that it sits in African Gold’s portfolio, its significance has grown. With roughly 213,000 oz. of gold production last year, North Mara is the company’s third-largest mine.

Reuters reported that the mine was attacked by between 800 and 1,200 people armed with machetes and hammers in mid-May. It represented the third attack in a week.

Police representatives in the country say that warning shots and tear gas were fired first, but when they failed to stop the intruders, the security personnel were forced to use live ammunition to protect themselves.

Shares in African Barrick began trading in London last March, and it has been far from a smooth ride for the miner since then. In London on May 17, the first day of trading after the attack, the company’s shares fell 3.25% to 481.45 pence on 1.14 million shares traded.

That drop in price came after shares had already fallen the day before following word of a malfunction in a mill motor at its Buzwagi mine. The problem at Buzwagi mine, also in Tanzania, forced the company to reduce second-quarter production estimates by 10,000 oz. gold.

Buzwagi made headlines for the wrong reasons last October when the company suspended 60 workers at Buzwagi for being affiliated with criminal gangs.

Last year African Barrick reduced its forecasted production targets twice and wound up producing 700,934 oz. gold. It had initially targeted producing between 800,000 and 850,000 oz.

The continued strife at North Mara comes as the mineral prospectiveness for the deposit continues to improve. The company announced at the end of last year that it planned to access recently discovered gold mineralization under the current four open pits via an underground operation.