Barrick issues cease and desist notice to AJN over Kibali stake purchase
Barrick Gold, the operator of the largest gold mine in the Congo, has given junior miner AJN Resources an injunction to block the acquisition of a 10% stake in the project, which it claims is undervalued.
Barrick and AngloGold Ashanti, who each own 45% of the Kibali mine, said they had not been consulted on the acquisition, although the stake holder, Societe Minière de Kilo-Moto (Sokimo), sold their Kibali shares without their approval may not transfer or sell.
The two companies and the chairman of the state-owned company Sokimo state that the proposed acquisition of AJN was announced early on the market without notifying stakeholders or obtaining approval from Sokimo’s board of directors.
Barrick has given AJN an injunction and his Congo executives are currently working with the government on the matter, said CEO Mark Bristow.
The miner will not support the sale for valuation and process reasons, he said.
“As far as we know, this is a greatly reduced transaction,” he told Reuters. “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 which value the deal gives the Kibali stake.
AJN announced a memorandum of understanding with Sokimo on February 6 under which the state-owned firm’s 10% stake in Kibali, plus stakes of between 30% and 35% in five other gold assets, would be exchanged for a 60% stake in AJN.
Investec in 2014 valued 45% of Kibali, one of the world’s biggest mines, at $2.1-billion, meaning a 10% stake would have been worth $467-million.
Canada-listed AJN Resources currently has a market capitalization of just C$11.93-million, according to Thomson Reuters Eikon.
Asked about the gap between AJN’s valuation and the valuation of the mine, 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.
On Tuesday AJN said it had closed a C$2-million equity issue. Eckhof said he aims to raise C$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% 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 told Reuters.
Eckhof said the MoU 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% on the day of the statement, and hit a record high of C$1.34 the following day.
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.
Source: mining weekly
