(on topic) Africa's Ashanti Goldfields, facing an uncertain future.
Bob, below is today's Cafe e-mail to me which includes mention
of an article, part of which I include next as I can not understand
what is being say. Please in you way to just speak in plain English
in your objective way the situation you see this company being in.
My impression is that the past present and future of this gold company
will be a lesson in how misguided human behavior ran a company
rather than well established solid business practices that conclude
with a result that the employees, shareholders and consumer
all benefit.
Thanks, Doug
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Not everyone is so sure.
Mitsui's Smith believes that several of the banks have
already been reducing their exposure to Ashanti.
"The belief that Ashanti still has a huge skeleton in its cupboard
has been buoying the gold price recently. But once it emerges that
this not the case, a cold dose of reality will hit the market,"
he says.
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Subj: London's Sunday Mail - Gold Gamble Leaves Miner In Deep Hole
Date: 2/13/00 12:52:49 PM EST
From: LePatron@LeMetropoleCafe.com
Le Metropole members,
Is Ashanti on the brink of collapse?
So asks Matthew Fletcher of the Sunday Mail in London.
GOLD GAMBLE LEAVES MINER IN DEEP HOLE
By Matthew Fletcher
Sunday Mail, Britain
www.financialmail.co.uk
Sunday, February 13, 2000
The price of gold has made a surprise rally lately,
yet one of Africa's premier miners, Ashanti Goldfields,
is facing an uncertain future.
Shareholders in Europe and America have launched court actions
to oust senior executives from the company, which is based in Ghana
but quoted in London.
They blame the board for presiding over a complex financial strategy
that has left the company with liabilities estimated to be as much as
$450 million (280 million pounds) and on the brink of collapse --
just as the gold price appears to be recovering after a turbulent decade.
Last week gold hit $312.7 an ounce, the highest since October.
It hit a 20-year low of $252.8 last July.
Ashanti was holding emergency talks with its shareholders and creditors
last week to find a way out of the problems that came to light last October.
Analysts warn that other mining companies could be facing similar problems.
"There may be several other Ashantis waiting to happen,
which could set off a chain reaction in the market,"
says Bill Murphy, a Dallas-based commentator on financial markets.
Ashanti's problems arose because it made a wrong bet on the price of gold.
Believing that it would continue to slip because of selling by European
central banks and the International Monetary Fund, it borrowed 10 million
ounces of bullion from central banks and sold it on to protect against
a further drop in gold prices.
Instead, the price recovered on renewed buying from investors
and consumers in Asia. At the same time, the central banks also
agreed to scale down their sales, which shored up prices.
The trouble was that Ashanti was unable to meet its commitments
to replace the gold it borrowed.
Analysts believe that a dozen bullion banks, which acted as middlemen
when Ashanti borrowed the gold, want it replaced now because they too
are losing out from the rising price.
"These banks want to stop their losses getting any bigger.
The effect on the gold price could be explosive," says Murphy.
Ashanti Goldfields is one of Africa's top producers, with some of the
lowest-running costs in the world. It counts among its shareholders
the UK mining and metals company Lonmin and the government of Ghana.
Unsurprisingly, its problems have caused political controversy in the country.
If Ashanti collapses, gold prices could soar because production
from its mines would be hit and the bullion banks would be forced
to buy in the market. It could also cost thousands of jobs in Africa.
The rally has left Ashanti facing demands from bullion banks
to pay the $150 million in deposits that it was required to stump up
if the value of its "hedge" book -- the bets against movements
in the gold price -- went into the red.
The banks, which have so far suspended their demands for repayment,
have until next Thursday to decide whether to suspend them further.
However, they will face even bigger losses if Ashanti collapses,
and so are unlikely to demand payment yet.
But Ashanti has faced a rear-guard action from shareholders unhappy
that bad management led the company, under chief executive Sam Jonah,
into trouble in the first place. They want new blood at the top,
and disposals.
Last Wednesday a Ghanaian court gave the green light for an extraordinary
general meeting to decide the fate of board members, particularly finance
director Mark Keatley.
"This is primarily a corporate governance issue. We are determined
to see change quickly for the benefit of all investors,"
says Michael Martineau of Adryx Mining,
which represents a group of disgruntled shareholders.
Meanwhile, big international investors and central banks are being
forced to reassess whether they should retain their gold reserves,
long seen as a safe store of value against inflation.
With the spectre of inflation tamed, they have been offloading
the metal and investing for better returns.
Market watchers believe the gold price has rallied recently
because major producers, including Canadian miners Placer Dome
and Barrick Gold, are abandoning hedge strategies that counted
on a fall in the commodity's value.
The vote of confidence in gold has bolstered the price but perplexed
many analysts. "It is a crazy situation when you have central banks
acting as sellers and producers effectively buying gold,"
says Andy Smith, a respected London-based gold analyst at Mitsui Bank.
The fallout from Ashanti could add upward pressure on the price.
And with the company's future in the balance, and fears mounting
that Ghana may even consider renationalising the company and
walking away from its commitments, some believe the bullion banks
are desperate to cut their losses and buy back gold to cover their
positions before the price rises higher.
Not everyone is so sure.
Mitsui's Smith believes that several of the banks have
already been reducing their exposure to Ashanti.
"The belief that Ashanti still has a huge skeleton in its cupboard
has been buoying the gold price recently. But once it emerges that
this not the case, a cold dose of reality will hit the market,"
he says.
Whatever the outcome, gold investors are likely
to face a rollercoaster ride in the next few weeks.
The Internet URL link for the Sunday mail story is:
financialmail.co.uk
All the best, Bill Murphy
Chairman, Gold Anti Trust Action (GATA) gata.org
Le Patron, Le Metropole Cafe lemetropolecafe.com
The above mention of GATA is as follows.
Bill Murphy, Chairman, Gold Anti Trust Action (GATA) gata.org
Also, GATA related articles can be obtained at the pay for view site.
Bill Murphy, Le Patron, Le Metropole Cafe lemetropolecafe.com |
