FOCUS-Ashanti clinches rescue deal, gold falls
Reuters Story - February 16, 2000 04:27
Copyright 2000 Reuters Limited. All rights reserved.
By Ben Hirschler
LONDON, Feb 16 (Reuters) - Troubled Ghanaian mining group Ashanti Goldfields Co Ltd was saved from collapse on Wednesday after reaching a deal with key shareholders, its bankers and the government on major board changes.
The move paves the way for it to secure a badly needed $100 million loan.
"It would have been difficult for the company to have survived without this deal," said Martin Potts, mining analyst at Williams de Broe.
Gold prices fell on the news as the prospect receded that Ashanti would be forced to buy bullion in the market to unwind its loss-making hedges.
The company said in a statement released in London that five members of the board would resign, in addition to chief financial officer Mark Keatley whose resignation at the next annual general meeting was announced earlier.
Chief Executive Sam Jonah is to stay, despite a tense relationship with Ghana's President Jerry Rawlings. The government holds a 20 percent stake and golden share in the group.
Ashanti said it expected to move swiftly to complete the drawdown of a $100 million working capital loan needed to pay for work on its promising Geita project in Tanzania.
FAST-TRACK GEITA AUCTION
The group intends to fast-track the auction of a 50 percent stake in Geita. Barrick and AngloGold are seen among frontrunners to acquire the stake for some $200 million.
A source close to talks in the Ghanaian capital Accra had earlier told Reuters that dissident shareholders who brought legal action in an Accra court to force board changes had agreed to drop the suit against Africa's third largest gold producer, in exchange for the board reforms.
The five directors retiring for the board at the next AGM on April 26 are: Kofi Ansah, Ferdinand Ohene-Kena, Henry Otoo, William Ryrie and Philip Tarsh, who is currently acting chairman.
The deal resolves the immediate problems stemming from gold hedging losses of $570 million run up last year following a spike in gold prices in September 1999 which brought the company to the verge of default.
The company's hedging counterparty banks are now expected to rollover a deadline for it to pay margin calls on derivatives contracts which falls due on February 17.
"The company is pleased that it has put a difficult period behind it and looks forward to securing and drawing down the $100 million new debt facility need to complete the Geita project," Ashanti said.
It added that the dissident shareholders, led by Adryx Mining and Metals Ltd, had agreed to drop their legal action.
The parties have agreed on a joint application to the Ghana high court to lift its earlier order restraining Ashanti from entering into any financial arrangements and to drop an order convening a court-sanctioned extraordinary general meeting, scheduled for March 3.
GOLD BELOW $300 AN OUNCE
Gold bullion prices, which had already fallen in New York trade amid expectations that a deal was close, fell further in early European trade, dipping below $300 an ounce.
The metal, which had traded as high as $307.75 on Tuesday, was last at $298.75/299.75.
"As the Ashanti situation is resolved, the tension in the market seems to be easing -- it's taking away a bit of pressure," said one bullion dealer.
Meanhwile, Ashanti's shares were indicated one-third higher at $2.35 in London, having gained $5/8 to $2-1/4 in New York.
The stock, which was floated at $20 in 1994, has underperformed dismally since the hedging crisis became apparent last year, falling to a low of $1-5/8 earlier this week.
LONMIN STAKE UNCERTAIN
Mining analysts said the Ashanti rescue deal and the appointment of a new, independent board left the future of Lonmin Plc's 32 percent stake in the group uncertain.
Lonmin, formerly Lonrho, had proposed a merger with Ashanti but the deal was blocked by the Ghana government.
Since then Lonmin has announced its intention to refocus as a platinum company, suggesting it may be keen to sell its stake in Ashanti. However, the government's block on a foreign takeover of Ghana's biggest company could make it hard to find a buyer, analysts believe
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