Allied Gold's shares slumped after an almost $4 billion planned takeover by Zijin Gold International was dropped in favor of a much smaller investment in the Canadian gold producer.

In early trading, Allied's shares dropped 22% to C$24.82 in Toronto and fell 23% to $17.72 in New York.

Allied Gold earlier Wednesday said its agreement with Zijin Gold was terminated since both companies concluded there was no reasonable likelihood that a deal could be completed.

The pair cited broader external factors that applied to a cross-border transaction of this scale. The takeover had been approved in Canada and Africa, where Allied operates, but was waiting on the go ahead from authorities in China. The companies mutually agreed not to extend the deadline for the agreement further, since it wasn't likely to meet the closing conditions in a reasonable time.

With the tie-up scrapped, Allied said Zijin Gold has agreed to make a strategic investment of about $295 million, which will secure it a stake of roughly 9.2% in Allied.

Allied and Zijin Gold, a unit of China's largest mining company Zijin Mining Group, struck a definitive agreement in January that would see the Canadian company bought in deal then valued at 5.5 billion Canadian dollars, the equivalent of about $3.9 billion. Zijin Gold under the deal would have picked up Allied's shares for cash at C$44 apiece.

Instead, Zijin Gold will now buy some 12.8 million Allied shares at a price of C$32.55 each.

Allied said the proceeds from the investment would be used to continue advancing its growth initiatives, including the completion and ramp-up of its Kurmuk gold project in Ethiopia and the phased expansion of the Sadiola mine in Mali. Completion of the strategic investment is subject to the approval of the Toronto and New York stock exchanges and scheduled to occur on or about Aug. 10.