Allied Gold Corp. AAUC-T has agreed to be acquired by China’s Zijin Gold International Co. in a $5.5-billion deal that will test Ottawa’s appetite for Chinese investment in the mining sector, during a period of renewed tension with the United States over Canada’s relations with the Asian superpower.
Zijin Gold, which is indirectly owned by the Chinese government, intends to pay $44 a share in cash for Toronto-based Allied, a 5.4-per-cent premium to Friday’s close, representing an all-time high for the stock.
The Zijin takeover of Allied will undergo national security and net benefit reviews by the Canadian federal government, which could last as little as 45 days, or drag on for several months.
Canada’s trade relations with China were brought to the fore on the weekend when U.S. President Donald Trump threatened to put 100-per-cent tariffs on Canada if this country strikes a deal with China, although it is unclear what exactly he was referring to.
Canada doesn’t have a free-trade deal with China, and Prime Minister Mark Carney on Sunday reiterated that he has no intention of striking one.
However, since taking office, Mr. Carney has improved Canada’s relationship with China in a bid to diversify trade away from reliance on the U.S. during the trade war.
Earlier this month, he announced a major reduction in tariffs on Canadian imports of Chinese electric cars. He also made it clear that this country is open to significantly more inbound investment from China in an array of sectors, although mining wasn’t mentioned specifically.
Allied Gold operates mines in Mali and Côte d’Ivoire, producing about 375,000 ounces of gold a year, and it has a project in Ethiopia. The company went public in 2023 with significant financial backing by Peter Marrone, Allied’s chairman and chief executive officer. He previously served as executive chairman of Yamana Gold Inc., which he founded in 2003.
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Mr. Marrone, who has invested at least US$50-million of his own money in Allied, said he expects the deal will close in April. He isn’t overly concerned about all the noise Mr. Trump is making about Canada’s relations with China, and doubts that a transaction of this kind would be on his radar.
“I’m not even sure that we qualify as a small company in the context of the big picture of what is the United States in the world,” Mr. Marrone said on Monday.
Zijin Gold trades on the Hong Kong Stock Exchange and is controlled by Zijin Mining Group Co. Ltd., which is partly state-owned.
Under former prime minister Justin Trudeau, Ottawa significantly cracked down on Chinese ownership in the Canadian critical minerals sector. That’s in large part owing to national security concerns about China controlling so much of the global critical minerals sector, particularly in EV metals like lithium, cobalt and rare earth elements.
Canada, however, has mostly permitted Chinese investment in domestic gold assets, because bullion isn’t a critical mineral. One exception was in 2020 when the government blocked Shandong Gold Mining Co. Ltd.’s attempted acquisition of TMAC Resources Ltd. The deal was rejected owing to national security concerns stemming from TMAC’s mine being located in the highly strategic Canadian Arctic.
Zijin Gold and its parent company have by and large been given free rein by Ottawa to acquire multiple Canadian mining companies over the years, including Nevsun Resources Ltd. in 2018, Continental Gold Inc. in 2020 and Guyana Goldfields in 2020.
“This company has done it before,” Mr. Marrone said.
“We also looked at the professionalism of the organization, the type of due diligence that they did, the level of sophistication of their management on matters, including around required approvals. And the conclusion that we reached was that we’re confident that they know what they’re doing.”
In addition to the approvals needed from Ottawa, the Allied transaction also requires at least two-thirds of votes cast by shareholders to be in favour for it to proceed.
If the Allied Gold deal closes, this will be the second high-profile sale for Mr. Marrone in the Canadian gold sector. He sold Yamana to Agnico Eagle Mines Ltd. and Pan American Silver Corp. for US$4.8-billion in 2023, during a period when gold was trading at a substantially lower level.
Bullion is currently in an epic bull market, fuelled in large part by geopolitical uncertainty caused by U.S. President Mr. Trump. Gold over the past 24 hours has traded above US$5,000 an ounce for the first time.