The KCD open pit gold mine at the Kibali mining site in northeast Democratic Republic of Congo, May 1, 2014.Reuters Staff/Reuters
Barrick Gold Corp., the operator of Congo’s biggest gold mine, has issued a cease-and-desist notice to junior miner AJN Resources Inc. as it moves to block its acquisition of a 10-per-cent stake in the project, which it says the deal undervalues.
Barrick and AngloGold Ashanti Ltd., which each own 45 per cent of the Kibali mine, said they had not been consulted about the acquisition even though the stake’s owner Société Minière de Kilo-Moto (SOKIMO) may not transfer or sell its Kibali shares without their approval.
The two companies and the chair of state-owned SOKIMO say AJN’s planned acquisition was prematurely announced to the market, without notifying stakeholders or securing approval from SOKIMO’s board.
Barrick has issued a cease-and-desist notice to AJN, and its executives in Congo are currently engaged with the government on the matter, chief executive Mark Bristow said.
The miner won’t support the sale for reasons of valuation as well as process, he said.
“From what little we know, it’s a deeply discounted transaction,” he said. “It’s cheeky at best.”
AJN CEO Klaus Eckhof confirmed the previously unreported cease-and-desist notice from Barrick, which he said instructed AJN to stop pursuing the asset because Barrick has first right of refusal if SOKIMO chooses to sell.
However, his firm can still go ahead with due diligence, he said. He declined to comment on what value the deal gives the Kibali stake.
AJN announced a memorandum of understanding with SOKIMO on Feb. 6 under which the state-owned firm’s 10-per-cent stake in Kibali, plus stakes of between 30 per cent and 35 per cent in five other gold assets, would be exchanged for a 60-per-cent stake in AJN.
Investec in 2014 valued 45 per cent of Kibali, one of the world’s biggest mines, at US$2.1-billion, meaning a 10-per-cent stake would have been worth US$467-million.
AJN Resources, listed on Canadian Securities Exchange, currently has a market capitalization of just $11.93-million, according to Thomson Reuters Eikon.
Asked about the gap between AJN’s valuation and the valuation of the mine, Mr. Eckhof said: “The market will adjust. The share price will be different and actually value the project.”
The deal would also give SOKIMO access to capital markets, he added.
‘SURPRISED’
On Tuesday, AJN said it had closed a $2-million equity issue. Mr. Eckhof said he aims to raise $20-million “at minimum” by the time the deal is signed.
At the close of the deal, AJN said its board would consist of two nominees from SOKIMO and three current directors of AJN, making SOKIMO board members a minority even though the firm would hold 60 per cent of the shares.
SOKIMO chair Annie Kithima said she was “surprised” by AJN’s statement and that the make-up of the board was still to be negotiated.
“The way AJN rushed to make this public is quite puzzling to me because at the board level we were still waiting for the full report from our management,” she said.
Mr. Eckhof said the memorandum of understanding had been approved by the Minister of Portfolio, who manages state-owned enterprises.
Barrick said it believes SOKIMO should maintain its stake.
“We don’t believe the state should be selling that asset because it’s got so much value,” he said. “They should be participating in it.”
AJN shares spiked 140 per cent on the day of the statement and hit a record high of $1.34 the day after.
A representative with the British Columbia Securities Commission declined to comment on AJN’s announcement of the stake sale, citing a policy of not discussing interactions with issuers.
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