Allied Gold (TSX: AAUC) has walked away from its planned sale to Zijin Gold International, ending a deal that would have taken the miner private and instead settling for a far smaller cash infusion from the same suitor.
The two companies terminated their arrangement agreement on July 29, citing “broader external factors applicable to cross-border transactions” that made the closing conditions unlikely to be met. In its place, Zijin has agreed to buy roughly 12.8 million Allied shares through a private placement, a US$295 million investment that leaves it as a minority holder rather than an owner.
The shares are priced at C$32.55 each, based on a 30 day volume-weighted average, and will give Zijin about 9.2% of the company once the deal closes on or around August 10. It is a considerable step down from where the relationship started.
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Back in January, Zijin had offered C$44 a share in an all cash bid valuing Allied at about C$5.5 billion. That price marked a roughly 27% premium and, at the time, an all time high for the stock. Chief Executive Peter Marrone called it “a highly attractive all-cash offer” and “a testament to the exceptional efforts” of his team. The transaction required a long list of approvals across multiple jurisdictions, including Canadian courts, the Investment Canada Act and regulators in China.
Those cross border hurdles ultimately proved too high. Rather than let the courtship collapse entirely, the parties restructured it into a stake, with proceeds earmarked for the completion of the Kurmuk mine, a phased expansion at Sadiola and higher output across the company’s Côte d’Ivoire operations.
The reset lands as Allied posts steady preliminary operating numbers. The company produced 97,429 ounces of gold in the second quarter, a 7% increase over the same period last year and a slight gain on the first quarter’s 96,016 ounces. Half-year production reached 193,445 ounces.
Sadiola led the way with 48,080 ounces, up 9% from the prior quarter as a new crushing circuit hit full stride, followed by Bonikro and Agbaou. All in sustaining costs came in below US$2,200 an ounce against a realized gold price near US$4,380.
Management said its mines had operated “without interruption to supply chains or otherwise,” playing down concerns about regional security. Allied still expects its producing assets to deliver 385,000 to 425,000 ounces for the full year, with the long-awaited Kurmuk mine due to start up in August.
Allied Gold last traded at $29.50 on the TSX.
