Allied Gold Corporation has officially announced final documentation for a streaming transaction with Wheaton Precious Metals International Ltd. (WPMI), a wholly-owned subsidiary of Wheaton Precious Metals Corp.
Under the agreed terms, Allied will receive an aggregate $175 million upfront cash payment to support the funding of its growth strategy, which is currently headlined by the development of its low-cost, fully permitted, and highly prolific Kurmuk project.
More on the same would reveal how this stream transaction with WPMI delivers a rather critical validation for the quality and significant value boasted by Kurmuk project, as well as several other ongoing execution and exploration efforts being carried out by the company.
Beyond that, the transaction in question builds upon Allied’s financial strategy during its transformative growth phase, and that too, at an attractive cost of capital. Such a development, like you can guess, should tread up a long distance to unlock further upside potential, and therefore, maximize shareholder value.
Talk about the benefits of this agreement on a slightly deeper level, we begin from its potential in regards to reinforcing significant inherent value in Kurmuk. On top of that, the streaming agreement also implies valuation multiple significantly higher than that at which the company’s shares currently trade in the market, or even the price at which the Allied went public.
Next up, we did refer to the agreement’s attempt to provide attractive cost of capital, but what we haven’t mentioned yet is that it offers a competitive cost of capital based on Kurmuk’s Proven & Probable Mineral Reserves, and at the same time, remains favorable when assuming Mineral Resources conversion and exploration upside within the mining license. Markedly enough, Allied evaluated different financing options as part of an exhaustive process before concluding that this transaction provides much better cost of capital than any other alternative.
“We are delighted to partner with Wheaton on this streaming financing. This began as a multi-party process although it soon became apparent to us that Wheaton would be our partner of choice. They conducted detailed and extensive diligence, were supportive of our efforts, worked with us in evaluating and considering optimization opportunities and recognized the inherent value of our Kurmuk project, a value that we believe significantly exceeds the value implied in our share price,” said Peter Marrone, Chairman and CEO of Allied Gold Corporation.
The streaming agreement’s impact on Allied’s financial strategy included contemplation of cash on hand, cash flow from operations, the advance amount and a gold prepay. The gold prepay component is also expected to be led by the lending syndicate for the company’s revolving credit facility with proceeds available to Allied following the completion of the stream transaction.
Another detail worth a mention here is rooted in the agreement’s exploration upside. This translates to how it will support Kurmuk in achieving a multi-decade mine life at production levels equal or above the average life of mine of 240,000 ounces of gold per year, something it will do by leveraging on the project’s highly prospective land package.
Furthermore, the stream agreement allows Allied to retain full exposure to the significant exploration upside beyond the mining license, include the Tsenge, Agu and Dull Mountain targets among others. The company, at the moment, is set to advance a $7.5 million exploration program at Kurmuk focused on near mine extensions and regional targets where Allied sees the best potential to increase mineral inventories.
Rounding up highlights would be the agreement’s promise to generate flexibility in stream deliveries. You see, Allied can now accelerate the step-down stream rate through dedicated support for planned deliveries with ounces produced from outside the Large-Scale Mining License.
“The stream financing now allows us to complete the gold prepay which is the final component of our planned comprehensive financing package for the development of the Kurmuk project. The gold prepay is expected to be led by the lending syndicate for the Company’s revolving credit facility with proceeds available to Allied following the completion of the stream financing. We expect the Kurmuk mine will become one of the more significant precious metal mines in the world,” said Marrone.
