Allied to become "Africa champion"

Favourable investment conditions in many African countries mean the gold miners active there do not deserve the discount the market gives them compared to their North American-focused counterparts, Allied Gold executive chair and chief executive, Peter Marrone told Mining Journal.

Allied produced 343,817oz in 2023 from its Sadiola mine in Mali and Bonkiro and Agbaou in Cote d'Ivoire, and its 2024 guidance said it could top 400,000oz this year, with further growth to come later this decade, helped by the relative speed miners can advance projects in the continent.

"With how quickly we can advance, the level of competency of the people and the ability, based on the geological endowment, to extend mine life, means there are very few places in the world that deliver the types of returns that one can get in Africa. … We have to get rid of the systemic colonial bias that exists regarding certain places in the world that we as North Americans and Europeans, which is where a lot of the investment dollars [come from], have. We have to recognise that there is history, but we can't treat every country and culture as [the same]. … We must put that behind us and look at it country-by-country and return. … If a place delivers a better return than another, it should be valued better than one that delivers a lower return. Geopolitics is just a part of that equation," said Marrone.

Marrone, who gave a presentation in Toronto, Canada, in early March about why gold mining investors should be looking at Africa, said that one of the reasons projects can advance rapidly is what he labelled the Africa Model, a "superior" means of alignment in which it is common for governments to have direct ownership and/or royalties ranging of 10-20%.

"If the state owns as much as 20% of an operation and cash flows from that operation, there's an element of alignment that can't be overlooked. [Government's] have a vested interest in the profitability and longevity of that operation. Admittedly, all models need to be fit for purpose, … but I think in the developing parts of the world, certainly in countries in Africa, to be able to see there's a direct ownership interest provides greater assurance to me as an executive and as an investor that we will maintain that social licence to operate," said Marrone.

Marrone said that this approach also means greater transparency regarding cash flows from a mine to government. "If you're a public company and 10% of the cash flow goes to the state, it's obvious looking at a public record what the cash flows are. It seems to me that it's a more transparent model," said Marrone.

Consolidation

Marrone has long advocated for consolidation in the gold sector, for producers to obtain a scale and valuation that allows generalist investors to notice them. While producers such as Gold Fields, Anglogold Ashanti, Barrick Gold, Endeavour Mining and B2Gold obtain a meaningful part of their African production, Marrone believes there is a need, or space, for a bone fide Africa champion.

"There is more to it than bigger is better consolidation as it is not just about the assets or resources in the ground, but about the people doing it. To say we have multiple operations and jurisdictional diversification allows us to attract better talent and move that to different places with better opportunities for promotion. We certainly saw that in Yamana. As we became bigger, with more diversity in our operations and in different countries, we were in a better position to attract and retain and then to promote quality talent internally. There are impressive, high-quality mining operators, engineers and geologists in Africa, and that is what we are trying to encourage. Size and scale allow us to not only attract a different sort of institutional investor, but also to be able to attract considerably more talent into the organization," said Marrone.

While glancing at other assets in Africa, Allied's priority is maximising the value of its existing assets. "We need to demonstrate that we can optimise operations to which includes increasing the number of ounces of production and cutting the costs. We're beginning to demonstrate more line of sight on growth, including the asset in Ethiopia. As we get closer to that, it becomes imperative to look at what's outside the company that can be brought in. What I find interesting about this company, unlike Yamana is that I'm seeing nothing presently inside the portfolio that would not be fit for purpose even when we are a 1Mozpa producer," said Marrone.

The next big step for Allied is bringing its Kurmuk project in Ethiopia into production in 2026, which will add 175,000ozpa of production and take the overall output towards 600,000ozpa. From there, the next milestone is to more than 800,000ozpa in 2029 with the development of a second phase at Sadiola. Growth will help drop the company's all-in sustaining costs below the US$1569/oz level it achieved in 2023.

Exploration could ultimately see that grow further, particularly at Kurmuk. "We started with 2.7Moz of proven and probable reserves, and there are areas we are exploring and getting results. We will provide an update within the next six weeks, and what we intend to be able to demonstrate is that we have 5Moz of inventory, which is significant," said Marrone

Shares in Allied Gold are trading at C$3.60, valuing the company at C$903 million.