Allied’s Marrone targets consolidation of African gold

THERE’S a new kid on the block in African gold mining – Allied Gold – and the company is looking to fundamentally change the sector, according to CEO Peter Marrone who was previously CEO of North American gold producer Yamana Gold.

Yamana was bought by North American major Agnico-Eagle after a takeover battle with Gold Fields for the company. Marrone with his former principal management team at Yamana then bought into Allied Gold and listed the company on the Toronto Stock Exchange at the end of last year.

The listing raised $267m of which $40m was contributed by the former Yamana management that had joined Allied.

Addressing the Mining Indaba being held in Cape Town last week Marrone laid out a highly ambitious strategy to grow Allied Gold’s operations in Africa from its present three mines in Mali, Cote d’Ivoire and Ethiopia.

He also laid out his intention to consolidate a number of the continent’s small gold producers into an African “champion” producing up to two million ounces of gold annually.

Marrone stressed the benefits of going mining in Africa compared to North and South America where Yamana had operated for the past 20 years. He pointed out that – on his watch – the gold price had gone up four times but the value of Yamana shares had increased eleven-fold. Marrone said he was confident that performance could be replicated at Allied Gold.

Marrone listed the permitting processes and the convention that African governments usually took an equity stake in the mines in their countries as benefits to mining in Africa.

“In most African countries the permitting process is facilitated and expedited. We have operated in developed parts of the world where there is more geo-political certainty but the permitting process can be infinite because you have to deal with national governments and provincial governments and indigenous communities – First Nations and the like.

“Also, in many countries in Africa, the State owns a part of the mine so there’s an interest in making sure it continues to develop.”

Allied Gold currently produces around 375,000 ounces of gold annually and has an organic growth plan to get to 620,000 oz in 2026 while it is targeting output of 700,000 oz to 800,000 oz by 2029.

Turning to the “broader landscape” of African mining Marrone said he believed the sector was “ripe for consolidation” because of the number of junior and intermediate companies.

“Why do we have so many single asset companies producing between 100,000 oz and 200,000 oz of gold annually? Why should this continent not have a champion producing a couple of million ounces a year?” he asked.

“Assuming the quality of assets to be there then size matters more than it did in the past. Money goes to where there is opportunity and money needs liquidity.

“There should be more consolidation. We want to be one of those proponents of consolidation and an agent of change,” he said.