Ashanti is not yet a done deal

Johannesburg - AngloGold, the country's largest gold producer, remains optimistic that its $1.4 billion merger with Ashanti Goldfields will be implemented by the first quarter of 2004, but the questions being raised in Accra about the legality of the transaction mean the deal is by no means a fait accompli.

AngloGold said at the weekend that it and the Ghanaian government had agreed to the definitive terms of a stability agreement, which secured certain fiscal and regulatory working conditions for it to proceed with its investment.

All that stands between this agreement and consummation of the all-share deal is approval by the parliment of Ghana and the blessing of Ashanti's shareholders, which AngloGold anticipated would happen in the new year.

But Ghana's main opposition party said last week that the agreement by the government to sell its stake in Ashanti was "in breach of the law" and that parliamentary approval should not be taken for granted.

According to parliamentarian John Mahama, the communications director for the opposition National Democratic Congress (NDC), the merger violated Ghana's mineral and mining law, which requires a mandatory 10 percent participation by the government in every mining company operating there.

Ghana's government is both regulator and shareholder of Ashanti, in which it holds a 16.9 percent stake. Under the terms of the AngloGold offer, this shareholding will shrivel to 3.3 percent in the merged entity, despite AngloGold's issue of additional shares over and above those the government receives in terms of the scheme of arrangement.

"As it stands now, the AngloGold offer is in breach of the law," Mahama said.

Feeling that the issue was not one for the company to comment on, AngloGold said it would be up to the government of Ghana to respond to the opposition's contentions.

The NDC, a minority in Ghana's parliament, has called on the government to make public its justification for accepting a lower offer for Ashanti.

The government decided to vote in AngloGold's favour at the end of October, shunning Randgold Resources' $1.7 billion offer.

Under the terms of the stability agreement, the government promised to extend the terms of the lease on the Obuasi mine until 2054.

It has also frozen the royalties payable by Ashanti on its mining operations in Ghana at 3 percent for 15 years and has maintained the corporate tax rate for Ashanti at 30 percent for 15 years.