Barrick issues cease and desist notice to AJN over Kibali stake purchase

DRC Gold

26/02/2020 14:25

* MoU announced on Feb 6 that AJN would buy SOKIMO's 10%
stake 
    * Majority owners Barrick, AngloGold Ashanti say not
notified
    * Barrick issued cease and desist notice to AJN 

    By Hereward Holland, Jeff Lewis and Helen Reid
    KINSHASA/TORONTO/JOHANNESBURG, Feb 26 (Reuters) - Barrick
Gold  ABX.TO , the operator of Congo's biggest gold mine, has
issued a cease and desist notice to junior miner AJN Resources
as it moves to block its acquisition of a 10% stake in the
project, which it says the deal undervalues. 
    Barrick and AngloGold Ashanti  ANGJ.J , which each own 45%
of the Kibali mine, said they had not been consulted about the
acquisition even though the stake's owner Societe Miniere 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
 AJN.CD , 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 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 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% 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
capitalisation of just C$11.93 million ($8.98 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.
    
    "SURPRISED"
    On Tuesday AJN said it had closed a C$2 million equity
issue. Eckhof said he aims to raise C$20 million ($15.05
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. 

($1 = 1.3286 Canadian dollars)

 (Reporting by Hereward Holland, Jeff Lewis, and Helen Reid;
Writing by Helen Reid; Editing by Jan Harvey)
 ((Helen.Reid@thomsonreuters.com; +27 11 595 2852;))