Big mining deals struck near the top of a cycle rarely age well. Beijing appears to think so, too. Zijin Gold International (2259.HK) has dropped a $4 billion takeover of Canada's Allied Gold (AAUC.TO) after regulators' concerns over capital discipline and geopolitical risk trumped the government's global ambitions in resources and finance. It's a timely warning for other miners hunting for foreign acquisitions in a commodity bull market.
The takeover was originally slated to close by May 29 but was delayed after Zijin struggled to secure all the necessary regulatory approvals. The miner finally pulled the plug on Thursday after concluding there was “no reasonable likelihood” that all conditions to seal the deal would be met.
The transaction got the backing of shareholders as well as regulators in Canada and several African jurisdictions. But it stalled in China: the National Development and Reform Commission (NDRC) questioned whether the acquisition's risks justified its price. Allied Gold's exposure in Mali was a particular concern. The country faces a worsening security crisis,and the embattled military government has arrested several foreign mining executives in recent years while pushing to renegotiate contracts.
Capital discipline may be a growing concern, too. The Allied takeover would have exhausted Zijin Gold's $3.6 billion cash pile, mostly amassed after its Hong Kong listing in September. Meanwhile, parent company Zijin Mining (601899.SS) agreed in May to spend another $2.6 billion to take control of domestic rival Chifeng Jilong. The group has been China's most acquisitive, advancing Beijing's push to secure strategic resources from copper to lithium to gold. The yellow metal has gained particular importance as central banks diversify reserves away from dollar assets.
But official backing is no longer unconditional for resources deals. State media reported in June plans for a new state-backed company to coordinate overseas mining investments and manage geopolitical risks, while the NDRC is assuming a larger role in vetting major outbound acquisitions.
Yet Zijin is not walking away from Allied entirely. It will pay about $295 million for a 9.2% stake in the Africa-focused miner. Keeping a foothold while abandoning full control preserves relationships and future supply at a fraction of the cost. Buying influence, not the whole company, may become the new playbook for Chinese miners abroad.
