Looks like Goldman Sachs will be left holding the bag from the Ashanti mess:
<<"The nightmare continues and it can be only bad news
for minority shareholders and possibly the bank
creditors too," says Charles Kernot, London-based
mining analyst at Paribas.
This horror gold mining story takes place in a rare
boomlet for the metal. What irony! Growing numbers of
fund managers are beginning to conclude that there's a
squeeze on Ashanti and several other producers. So it
would not be surprising if they did not attempt to
drive the gold price higher, thus intensifying the
squeeze even further. >>
egroups.com
10:45p EST Monday, February 14, 2000
Dear Friend of GATA and Gold:
Here's an important article from www.TheMiningWeb.com,
a new and very good site. It confirms that the Ashanti
debacle could explode against the gold shorts and the
bullion banks at any moment and that the government of
Ghana has the established legal right to reclaim Ashanti's
assets if the company fails.
GATA believes that Ghana's gold mines are more that
country's patrimony than prey for Goldman Sachs and its
colleagues in conflict of interest, plunder, and fraud.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
ASHANTI'S SHARES PLUNGE
AS ITS DIRECTORS RESIGN
By Neil Behrmann
www.TheMiningWeb.com
February 14, 2000
Ashanti's shares plunged following the resignation of
key members of the board, including Mark Keatley, chief
financial officer.
Crunch time looms as the mine struggles under the
burden of its huge short gold position. If Ashanti
fails, there is a clause in the 1994 prospectus that
the mine's lease reverts back to the Ghanaian
government, which owns 20 percent of the company's
shares. The government stresses that it doesn't want to
re-nationalise, but that effectively is what the clause
means. Thus in New York Monday the shares collapsed 26
percent to $1.75, a new nadir compared with the 12-
month peak of $10.50.
"The nightmare continues and it can be only bad news
for minority shareholders and possibly the bank
creditors too," says Charles Kernot, London-based
mining analyst at Paribas.
This horror gold mining story takes place in a rare
boomlet for the metal. What irony! Growing numbers of
fund managers are beginning to conclude that there's a
squeeze on Ashanti and several other producers. So it
would not be surprising if they did not attempt to
drive the gold price higher, thus intensifying the
squeeze even further.
Latest casualties in the debacle are Ghana's finance
minister, Richard Kwame Peprah, who has resigned as
chairman of the board. Cynical analysts are wondering
whether he's jumping the punctured paddle boat because
he doesn't want to be associated with a potential
bankruptcy.
He is replaced by Phillip Tarsh, a non-executive
director and a retired former executive of the old
Lonrho under the late Tiny Rowland. Fortunately, Tarsh
is liked and respected by the mining analyst community.
Keatley, who is probably resigning because of pressure
from the Adryx minority shareholders, was bamboozled by
the complex hedge advice that he accepted from the
bullion bank rocket scientists. Some non-executive
directors will also "retire" at the next board meeting.
Previous attempts at solvency, notably sales of assets,
backing by an independent central bank, pleas for aid
from the World Bank, offers of takeovers by Lonmin (the
biggest shareholder), and other mining groups fell by
the wayside.
Now the Ashanti board is proposing a "solution" that it
believes "should be acceptable to all stakeholders." It
proposes to secure a new debt facility of up to $100
million for Ashanti to complete the Geita gold mining
project in Tanzania; delay the proposed sale of a 50
percent joint venture interest in Geita; and
restructure the board with experienced independent
directors.
None of this covers all the debts.
The big question is what happens to the 17 bullion bank
creditors that are eager to roll over the hedge forward
sale positions of the mine. Analysts estimate that they
were struck at an effective spot price of $260 an
ounce.
In the complex scenario, Ashanti's creditors haven't
disclosed what changes have been made to the hedge
book. But T. Hoare Cannacord, advisers to the Ghanaian
government, estimated in October last year that 11
million ounces had been sold via futures and put
options (limited risk) derivatives, and a further 3
million were written call options (a very dangerous
hedge).
Losses on the hedge book were then $570 million with
banks calling for margin or deposits of $270 million.
Ashanti agreed to issue to the creditors five-year
warrants (long-term options) of 15 percent of its
issued capital. If all goes well in the restructuring,
the bullion banks won't call in the margins for three
years.
But there is still a long way to go and if some
creditors are unhappy when the short-term margin
deadline expires February 17, they may break away,
cut their losses, and buy back the gold.
-END- |
