Allied Gold unveils $175 million streaming deal with Wheaton
Allied Gold Corp. [AAUC-TSX, AAUCF-OTCQX] has announced details of a $175 million streaming agreement with Wheaton Precious Metals Corp. (WPM-TSX, WPM-NYSE), a move that secures financing for Allied’s Kurmuk gold project in Ethiopia.
Allied is a Canadian gold producer. It operates a portfolio of three producing assets and development projects located in Cote d’Ivoire, Mali and Ethiopa.
Under the agreement, Allied will receive a $175 million upfront cash payment to support funding of its growth strategy, which is underpinned by the low-cost, fully permitted Kurmuk project.
Wheaton will have to right to purchase 6.7% of payable gold from the Kurmuk mine (the stream). The gold stream will step down to 4.8% of payable gold after the delivery of 220,000 ounces of gold.
Wheaton will make ongoing payments of 15% of the spot gold price for each ounce delivered under the stream, which will cover the existing Kurmuk mining license and until 255,000 ounces of gold have been delivered to Wheaton, and any mineral interests located within a 50 kilometre radius of the mining license, which are processed at the Kurmuk plant.
In the event of a change of control of Allied prior to the earlier of January 1, 2027 and achievement of completion, Allied has the option to buyback one third of the Kurmuk Stream.
Allied Gold shares advanced on the news, rising 2.3% or $0.08 to $3.51. The shares trade in a 52-week range of $4.50 and $2.69.
The Kurmuk project is an advanced stage development project in the Benishangul-Gumuz region of Ethiopia. The project involves a two-phase development plan requiring a total capital investment of approximately $500 million. The initial phase has begun, and will require $155 million in 2024. Phase 2.0 will start in 2025 with production expected to begin by the second quarter of 2026.
The all-in sustaining costs are estimated at US$844 an ounce due to the low power price ($0.04 per kWh), low diesel price ($0.75/L) and competitive labour force.
A 2022 feasibility study envisages a 12-year mine life based on a currently defined proven and probable mineral reserves of 2.6 million ounces, producing 240,000 ounces annually in the first five years. It will be a conventional open pit operation.
Under a development agreement, the Ethiopian Government will receive a 5.0% royalty and a 7.0% equity stake by upgrading the road network and building a 132 kV powerline to connect the site to the national grid, which is 95% supplied by hydroelectric power.
Wheaton has been granted the right of first refusal on any future precious metal streams, royalties, prepays or similar transactions on the Kurmuk project.
It is also worth noting that Wheaton participated in Allied’s equity financing completed on October 18, 2024, in the amount of $20.15 million, with gross proceeds totalling $221 million.
Allied is advancing an aggressive exploration program at Kurmuk, with a 2024 exploration budget of $7.5 million.