Colossus Angologold Ashanti is born

Accra, Oct 28, GNA - The birth throes of Colossus Angologold Ashanti was hipped to dizzying heights when the Minority in Parliament released its statement of caution few hours before Cabinet came out with its decision giving the merger the nod.

The Minority on Tuesday asked Government to be cautious on the intended Ashanti Goldfields Company (AGC) merger with Anglogold or Randgold because the transaction could have major consequences for the nation.

It said reported industry assessment suggested that the value being proposed for acquiring the shares of AGC were under-valued under its current assets and potential for deep mining.

A statement Mr Seidu Paakuna Adamu, Minority Spokesman on Energy, issued in Accra on the proposed AGC merger said Obuasi was touted as having the largest unexploited deep ore potential in the world.

"Following its initial offer Anglogold repeatedly emphasised that it was not going to increase its offer price even in the face of the higher price offer by Randgold Resources. Lonmin had already undertaken to back the Anglogold ofer."

The statement said "eventually Anglogold did increase its price from about 1.1 billion dollars to about 1.4 billion dollars, after which Randgold had further increased its offer to 1.7 billion dollars." "It will be recalled that the market capitalisation of AGC at the 20 dollar price during the stock flotation came to 1.68 billion dollars - the deeper levels of the Obuasi Mine were not factored into the value of the mine at the time."

The statement said it was not surprising that in 1999 when Lonmin offered 800 million dollars for a similar "merger" the NDC government refused to oblige in the national interest.

The NDC said following a recovery of AGC from the hedge book crisis after Ghanaians had purchased shares at the Initial Public Offer (IPO) in 1999, investors have not been paid any dividend.

"It would appear that just at the time AGC is recovering its financial health after that near disaster, it is being subjected to a takeover, which reportedly undervalues it."

The Minority said in their view: "It will be simply unacceptable for the control of AGC to be handed over cheaply to anyone.

"The Government of Ghana must use its control of the Golden Share to ensure that the national interest is served and that Ghanaian shareholders derive the maximum benefit for their loyal but so far un-rewarded investment in AGC."

It said a Board dominated by Lonmin could not provide the last word on the national interest of Ghana.

The Minority warned that any attempt to stampede the Government of Ghana into a quick decision on the merger offer with claims about level of planned investments at Obuasi must be resisted, especially as there was no firm commitment on the part of the potential partners to undertake those investments.

The statement said the Government was entitled to examine carefully the price offer in respect of the proposed AGC merger and that the six-month period provided under the Minerals and Mining Law, 1986, to the Minister of Mines to review such transactions once formal notice was provided by an incoming controlling shareholder was by no means unreasonable in industry terms.

The Minority expressed regret that in respect of such a major international transaction the Parliament of Ghana had not had the benefit of even a briefing from the Executive.

Parliamentary consideration would provide an opportunity to gain useful consensus in what might be one of the most important financial transactions that the Government would be called upon to enter into.

The statement said Government would do well to place all the available information on this proposed transaction before Parliament so that the representatives of the people were actively involved in the assessment of the various options.

However, the Government said it had in the last few months "considered the competing offers for merger with Ashanti Goldfields Company (AGC) from Anglogold Limited and Randgold Resources Limited.

"The Government has also taken note of the decision of the Board of Ashanti to recommend to its shareholders to accept the offer of Anglogold Limited.

"The Government has subsequently reviewed with its advisors, Societe Generale, all the alternatives and possible outcomes to the State, AGC and its employees of the various offers and recommendation. "Government has decided to support the decision of the AGC Board recommending acceptance of the merger with Anglogold Limited.

"Government arrived at this decision based on Anglogold's superior operational experience in deep level mining, capital endowment and its record of highest dividend payout of all major mining companies in the last five years.

"Government also noted that the new company Anglogold Ashanti- would be the leading gold producing company in the world whose listing on the Ghana Stock Exchange will trade at levels comparable to Johannesburg, London and New York.

"Government is confident that in both the short and long term, the Anglogold offer for Ashanti offers superior benefit for Ashanti and Ghana and its people.

With the Cabinet's decision all the necessary documents have now been signed for the doctors to go ahead with the caesarean operation to deliver the Colossus called Anglogold Ashanti.

The current largest mining company in the world is Newmont of Australia.

The Anglogold Ashanti would produce 7.6 million ounces of gold a year. Anglogold was producing 6 million ounces of gold annually. The new company would have 82 million ounces of reserves making it one of the largest reserves in the mining world.

When the GNA asked a Source involved in the negotiations, which preferred anonymity, if there was any arm-twisting or some pressure from any quarter considering the 15 million dollars break fee claim by Anglogold, it said:

"There was nothing like that. Usually when there is a merger deal in the pipeline for too long, it creates room for speculation and could affect your share price. Hence a decision was to be taken on time to enable the company to move on."

On the issue of how the merger would affect Ashanti on the Ghana Stock Exchange, the Source said: "It would obviously affect it. For instance, Ashanti sells for 11.35 dollars on the New York Stock Exchange, but sells rather cheap on the GSE, at about 28,000 cedis. The price difference is too big and I do not think it would be wise to keep things as they are now.

"Most probably, the new enlarged business would sweep everything away from the GSE to New York."

The new arrangement would make Mr Sam Jonah, current Chief Executive of Ashanti, the first black President of the new business, which is predominantly white. He would be sharing duties with Mr Bobby Godsell, Chief Executive of Anglogold.

The Ashanti Board met on Monday to reaffirm its support for the 1.4 billion dollar merger offer from Anglogold despite Randgold's revised all-share bid last week Friday, which valued Ashanti at 300 billion dollars more than Anglogold's offer.

South Africa's Randgold last week Friday, increased its offer for Ashanti, valuing it at 1.7 billion dollars, but Ashanti responded saying, the Board had resolved unanimously to continue to recommend the merger proposal from Anglogold.