Saudi prince pledges to back Ashanti

The Saudi Arabian investor, Prince Al-Waleed Bin Talal Bin Abdulaziz Al Saud, yesterday pledged financial support for the Ghanaian government, which owns 20 per cent of the troubled gold miner Ashanti, in a move that could block Lonmin's bid for the company.

The surprise development came shortly after Lonmin, which owns 32 per cent of Ashanti, had reduced its bid for the company, but before a banking consortium, entitled to ask Ashanti for $270m (?161.6m) in margin deposits, had decided to renew the existing moratorium for 72 hours.

Prince Al-Waleed has made several investments in Africa in the past two years. He has a holding in CAL Merchant Bank in Ghana, whose managing director, Kofi Bucknor, is co-ordinating the financial experts advising the government on the Ashanti. Last November he bought a stake in United Bank for Africa, Nigeria's third largest bank.

Someone with knowledge of the situation said: "The Prince has informed us of his interest in supporting the Ghana government. We are very happy to have his support."

Earlier in the day Ashanti had announced that Lonmin, the mining rump of former conglomerate Lonrho, had reduced its conditional share exchange offer from 32 Lonmin shares for every 43 Ashanti to 16 Lonmin shares for every 27 Ashanti (plus a fraction of a warrant).

The reduced offer is rests on five conditions: the irrevocable commitment of the Ghanaian government, the written consent of the Minister of Mines, the unanimous agreement of Ashanti's hedge counterparties to a standstill covering its existing obligations, the support of lenders under its $270m revolving credit facility and appropriate shareholder approvals.

With Lonmin shares at around 600p, the revised offer values Ashanti shares at around 355p ($5.33) compared with yesterday's market price of $4.50.

Some stockbrokers have become so confused by the Ashanti situation that they have stopped offering an investment view on the shares.

The Ghanaian government, which has asked for a one month extension of the standstill agreement, has begun a detailed review of the situation.

The review includes discussions with Lonmin and other Ashanti shareholders, as well as potential investors which have expressed an interest in the company, hedge book counterparties and creditors.

The government is also working with Ashanti's management to address the liquidity situation.

Ghanaian government advisers have talked to AngloGold, the South African gold producer and Barrick Resources, the Canadian group, in an effort to rescue Ashanti from the liquidity problems in its hedge book of derivatives resulting from the sudden recovery in the gold price last month.