Business News Fri, 30 May 2003

Anglogold To Sink $1bn In Obuasi

Anglogold of South Africa has proposed to invest about $1 billion in the Obuasi Mine if the merger talks between it and Ashanti Goldfields Company (AGC) is successfully concluded. The amount represents the largest single foreign investment in the country’s history and in the mining sector and could provide the catalyst for development which the country urgently needs.

Very reliable sources close to the merger discussions indicate that the South African gold giants have confidence in the government and people of Ghana and want to help place Ghana firmly on the world map as one of Africa’s leading destinations for foreign direct investment. More importantly, AngloGold is prepared for the government to keep its ''golden share'' which gives Ghana a major say in any decision that concerns the disposal of AGC’s Ghanaian assets.

They have equally agreed to retain Ashanti in the name of the merged company since they recognise that Ashanti is a matter of pride for many Ghanaians. The Obuasi Mine is seen by experts in the industry as one that has been continuously producing gold for the longest period of time in the world.

Production has, however, stalled around 500,000 ounces annually and analysts say that without a major injection of capital, it will be impossible to increase production.

Shareholders of the AGC have in recent times complained about the inability of the board to recommend payment of dividend. However, the sources explained that AngloGold has assured the government that it will bring to the merger, its trade record of being a high dividend-paying company, thus assuring investors of dividend payments.

It is believed that the money that AngloGold will provide will enable the Obuasi Mine to replace its underground fleet, modernise its ventilation system and allow the miners to reach new depths. They said AngloGold has extensive experience in building and bringing to production deep level mines, with some of its existing mines as deep as 4,000 metres whereas the deepest mine at Obuasi presently is 1,000 metres.

Given the enormousness of the challenges facing the country, many development experts see the AngloGold proposed investment as an example of what developing countries need if they are to break through the cycle of poverty and underdevelopment. ''It is about time we started attracting real money. Forasmuch as we appreciate the support provided by bilateral and multilateral partners, we cannot continue to rely on them,'' a source close to government said.

The source emphasised that the amounts that donors provide are not enough to turn things around and that what Ghana requires are large amounts of capital injection which can only be found in the private sector. Earlier in the year, Newmont Mining, presently the world’s leading gold-producer, announced its intention to invest above $400 million towards the development of two new mines in Ghana.

The merger between Ashanti and AngloGold will make them the largest gold producing company and place Newmont second. The government recently gave the approval for the merger talks between Ashanti and AngloGold to go on. However, there were some Ghanaians who expressed concerns about what could happen to the golden share and the possible loss of the name Ashanti.

''Once these issues have been resolved positively in favour of Ghana, it is our hope that the discussions could be concluded as early as possible,'' our source pointed out.

Source: Graphic
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