Ex-Yamana CEO Marrone leads Allied in Africa in search of investor ‘torque’

Peter Marrone, who led Yamana Gold in Canada from a small producer two decades ago to a US$4.8 billion sale this year, is seeking faster returns in conflict-plagued Mali and Ethiopia as well as Ivory Coast, which has its own democratic challenges.

The CEO and four colleagues from Yamana now lead Allied Gold (TSX: AAUC) and its three producing mines after a reverse takeover this year. It operated as a private company for a decade. The new management plans to invest around US$950 million to more than double output to 800,000 oz. per year by 2029.

After starting to trade this week on the Toronto stock exchange, Allied says it’s attracted to Africa because of higher grades that can be mined with less expensive open-pit operations vs underground mining, the relatively unexplored geology when compared with Canada or Australia, and permit times that can take a project from inception to production in four years. That’s half the time of the developed world but with the same environmental standards, Marrone said in a phone interview on Thursday in Toronto.

“I take the security and geopolitical side into account in the sense that it’s a factor that goes into the returns but not the exclusive factor to be looking at,” he said. “Emerging markets have a lot of the juice that investors are looking for, that’s where the torque is.”

Toronto-based Allied, which raised US$267 million this year including US$40 million from management, operates Sadiola in Mali, and Bonikro and Agbaou in Ivory Coast. Total annual output is 375,000 ounces. The company has already passed a billion-dollar valuation, Marrone says, with its shares up nearly 1% on Friday to $5.50 apiece.

The CEO wants to cut all-in sustaining costs (AISC) by as much as US$200 an oz. to around US$1,100 an ounce. He’s targeting a doubling or tripling of last year’s US$160 million in earnings before interest, tax, depreciation and amortization when the company was still private.

Allied Gold’s Sadiola mine in Mali where output is planned to double by 2029. Credit: Allied Gold

Veteran team

Carey MacRury, a mining analyst with Canaccord Genuity, rates the company a buy and says the experienced management team can make formerly overlooked assets highly profitable.

“Geopolitical risk in West Africa is likely a concern for many investors,” MacRury wrote in a note on Friday. “However, West Africa is the fastest-growing gold-producing region globally, is relatively underexplored and has higher grade potential than more established mining jurisdictions such as Canada or Australia.”

The company intends to spend US$500 million in two phases to expand its main development project, Kurmuk in Ethiopia. It’s located 500 km west of the capital, Addis Ababa, near the border with Sudan. Allied plans annual output at 240,000 oz. over a 15-year mine life. First gold is planned for second-quarter 2026 at an AISC of less than US$950 per ounce.

Marrone is optimistic about Ethiopia even as a new conflict, with the Amhara ethnic group, is threatening to replace the previous civil war. That fighting with Tigrayans killed about half a million people before a peace deal last November.

“Here’s a government that is publicly saying one of the five pillars for growth in our country is mining. And why? Because every part of the developed world has looked at extractive industries so why wouldn’t they?” Marrone said. “Among the Amharans and Tigrayans and others there’s strong support across the country for the development of the economy with those five pillars including mining.”

First gold at the Kurmuk project is planned for second-quarter 2026. Credit: Allied Gold

Sadiola in Mali

In Mali, Allied is spending US$61.6 million to increase Sadiola’s annual output by 25,000 oz. to 200,000 oz. by 2028. St. Louis-based analyst Stifel Investments estimates a second phase would cost US$378 million to build although Allied hasn’t stated the expense yet. It would double production starting in 2029 before easing to 300,000 oz. a year after 2033 during the mine’s 19-year life, the miner says.

Near Sadiola, it’s spending US$12 million over this year and next to develop the newly acquired Diba project that will feed into the Sadiola plant. It plans to issue a reserve estimate for Diba by June 30.

Mali, under military control and United Nations sanctions after two coups in 2020-21, is nonetheless the continent’s fourth-largest producer with Barrick Gold (TSX: ABX; NYSE: GOLD), B2Gold (TSX:BTO; NYSE: BTG) and Resolute Mining (ASX: RSG; LSE: RSG) among operators. The junta has kicked out troops from colonial ruler France as well as the U.N., and brought in Russian mercenary group Wagner in its battle against jihadist insurgents and northern secessionists.

“They are looking at ensuring that their country does not become a jihadist focal point,” Marrone said. “That’s not different from what a lot of other places in the world are trying to do. There is a less developed geopolitics, less developed democratic process. But interestingly, even that military government in Mali has indicated that it’s looking to re-establish civilian rule as early as next year.”

Allied Gold is combining its Bonikro and Agbaou mines in Ivory Coast into one complex. Credit: Allied Gold

Coup surge

The unrest in Mali marked the start of series of recent coups in the Sahel region, with Burkina Faso, Chad, Guinea, Sudan, and the latest, Niger, in July. Even so, Iamgold (TSX: IMG; NYSE: IAG), Kinross Gold (TSX: K, NYSE: KGC) and Endeavour Mining (TSX: EDV; LSE: EDV) are some of the 44 Canadian miners that held $15.6 billion in assets in West Africa in 2021, according to Natural Resources Canada. However, Endeavour sold its Burkina Faso mines in June.

Marrone, who experienced some difficult places with Yamana such as Nicaragua, led by authoritarian Daniel Ortega since 2007, says Allied follows conventional security arrangements and consultants similar to how Barrick and Endeavour operate.

“It’s very conventional and very, very normal for us. There is security, but I would venture to say that it’s not different from some parts of Mexico or some parts of Brazil.”

Ivory Coast has one of Africa’s stronger economies with 6.7% gross domestic product growth last year, according to the World Bank. Still, it’s had two civil wars since 2002 and President Alassane Ouattara has remained in power since 2011 by amending the constitution.

Allied is combining its Bonikro and Agbaou mines there into one complex with 190,000 oz. annual production. Across the operations including Sadiola, the company is applying other efficiency measures such as digitization, fuel conservation and better contractor management. The company is also reducing financial risk by redeploying some equipment to lower capital costs.

Marrone turned from steadfastness amid African insecurity to similarly consider the uncertainty of financial markets. Prices for gold equities and bullion are near record divergence even though economies are wavering amid high government debt and inflation while strong job reports knock recession forecasts. Perhaps predictably, he said gold stocks must surge soon.

“The gold price will do well, but the gold equities will outperform the metal because they’re going to be playing a lot of catch up. That will take into account how they performed relatively poorly to the metal over the course of the last several years.”