Listed on the Toronto Stock Exchange in the fall of 2023 and led by industry veterans Justin Dibb and Peter Marrone - formerly of Yamana Gold - Allied announced its annual results yesterday alongside a shareholder vote in favor of a buyout by China's Zijin Gold.
A subsidiary of the Zijin Mining group, which itself went public in Hong Kong just six months ago, Zijin Gold is completing its first major, fully self-funded acquisition against a backdrop of gold prices hovering near record highs.
While speculation is rife, some interpret this development as a premonitory vote of no confidence from investors regarding Donald Trump's fiscal policy and its likely dire consequences for the value of the dollar.
Operating in Ivory Coast and Mali, where it has historically run its primary asset, Allied managed to avoid the wrath of the junta by bringing the Emirati group Ambrosia Investments Holdings into its capital. However, it is the Kurmuk site in Ethiopia that has drawn Zijin's interest.
This high-quality mining asset - at least on paper - boasts considerable reserves and offers highly competitive extraction costs. More importantly, its production is expected to quadruple within two years to nearly 700,000 ounces of gold, three times the output of the Sadiola site in Mali.
Brimming with cash following its IPO and a record year in the gold market, Zijin is executing a transformative acquisition. Allied, meanwhile, is demonstrating sound opportunism following the start of production in Ethiopia, in what is undoubtedly a seller's market.
However, note that Allied was sold at an affordable valuation multiple - $6,900 per ounce of expected 2027 production - provided gold prices remain elevated. Clearly, the Dibb-Marrone duo appears to have no intention of betting further on a continued rally in the yellow metal.
MarketScreener analysts estimate that Allied's enterprise value represents a multiple of 3.5x expected 2027 EBITDA if gold remains at $4,000. Should it retreat toward $3,000, which would still be high relative to historical averages, the acquisition multiple would settle at just under 6x EBITDA.
It is also significant - though part of a long-standing trend - that non-Western capital is taking the lead across Africa. Sadiola was rescued by the Emiratis, while with the acquisition of Allied, the Chinese are securing the Kurmuk mega-site.
The Canadian group had only begun generating distributable free cash flow for its shareholders this year, albeit in extremely modest proportions. For them, this represents a providential exit. Tellingly, 99.5% of votes were cast in favor of the sale.
