Ashanti in merger talks

Recent contacts between AngloGold, the world number two gold producer, and Ashanti Goldfields ? when the South African group was given time to do due diligent work on the Ghanaian company's assets ? apparently have yet to produce any tangible results.

In answer to rumours about the possible take-over of Ashanti by AngloGold, Dr Sam Jonah said, "It is only when I come to Johannesburg that I learnt of what is happening about Ashanti.


"Under normal circumstances, I will not respond to speculation about corporate activities, but because of the persistent rumours, specifically in relation to AngloGold, I want to tell you that Ashanti is in discussion with a number of parties of all sizes, including AngloGold about possible corporate activity. Not much has materialised so far. Really, I have nothing to report to the market, but of course when the situation changes, our shareholders will be the first to know," Dr Jonah explained.


He made it clear again that Ashanti is very keen to become embroiled in the consolidation that has been a feature of the global gold mining industry for the past few years. Dr Jonah recalled ruefully that Ashanti was at the forefront of gold industry consolidation, before consolidation gained currency. Before that, Ashanti had, in the space of three years, acquired four listed companies and showed its determination to spread its influence beyond Ghana to the rest of Africa.


Dr Jonah insisted that Ashanti had not changed its attitude towards consolidation. "We have now positioned ourselves to ensure that Ashanti looks attractive to parties who might want to enter into relationships with us. And we can now do this from a position of strength."


Ashanti has indeed come a long way since 1999. Last year, it escaped from the clutches of the banks on the other side of its hedging programme when they gave up their rights to make margin calls. Ashanti's debt has been reduced from a peak of US$700m as at last 1999 to $257m as of December 31, 2002. The group last year completed a refinancing ahead of schedule and on better terms than originally set out.

Nevertheless, although Ashanti has been for some time making "come hither" noises - with South Africa's Gold Fields as well as AngloGold being mentioned by analysts as a potential suitor at present it still seems more likely that the Ghanaian group will be doing some acquiring of its own, rather than becoming part of a big pan-African merger.


The major obstacle to any merger in which Ashanti might be seen to be the party taken over remains the Ghanaian Government's 20 per cent holding and the "golden share." As Dr Jonah pointed out again, this did not prevent Ashanti making acquisitions but the government still has the right not only to stop a take-over of Ashanti but also to prevent any Ashanti asset being sold without its permission.


Dr Jonah said, however, that the Ghanaian mining code is at present under review and there are indications that the government might revise these restrictions.


Even if some changes are made, analysts point out that would still leave the government in a tricky political situation because a great many Ghanaians see Ashanti as a national treasure and would not want it to be owned by a foreign group.


On the acquisition front, some analysts expect Ashanti to have another attempt at persuading Red Back, the Australian company, to do a deal over the Chirano project, which is only 20 km away from Ashanti's Bibiani gold mine. Bibiani is expected to reach the end of its life soon. However, Ashanti has approached Red Back at least three times so far and the two companies could not reach agreement.

Ashanti has a very clear focus as far as its expansion plans are concerned: it is focusing on Africa and on precious metals.


Jonah was clearly excited about Ashanti's first, tentative step into platinum group metals (pgm) mining. The group owns 40 per cent of Tameng Mining & Exploration that has been awarded, after competitive bidding, pgm exploration rights on the M'phatlele farm in the north-eastern part of South Africa's Bushveld complex, where most of the world's platinum is produced. A sub-outcrop of the Merensky and UG2 Reefs, which contain most of the pgm mineralisation, has been mapped on M'phatlele's location over a strike length of 8 km. The Messina pgm mine is not far away.


Asked how Lonmin, the London listed platinum group that owns 32 per cent of Ashanti, reacted to this move into its industry by his company, Jonah said: "So far they have not voiced any opposition." He pointed out, too, that Lonmin, as part of its determination to be completely focused on PGMs, intends to sell the Ashanti stake at some stage.