Life After Ashanti: Randgold's Plan B

Plan B is about to swing into action for Randgold Resources, the small but combative mining company that has just lost a long bidding war against AngloGold for control of Ashanti Goldfields.

Randgold, which releases its quarterly results today, may have lost the battle for Ghana's largest company, but it has been revitalised by the higher profile gained and the international exposure received during the fight.

The London and Nasdaq-listed Randgold is now keen to proceed with its strategy of building "a pan-African gold business with a first-world listing".

"I always had a Plan B in case we were not successful in our bid for Ashanti," says Mark Bristow, Randgold chief executive. He now intends to "pursue opportunities to consolidate with our peers, creating a company focused on Africa but without a South African discount".

The first step is taking over or merging with strong but small African-focused companies like Iamgold, Resolute Mining or Golden Star Resources. "They are the only exploration companies left in countries like Ghana or Mali," says Mr Bristow. "All the other discoverers have been bought out by the big players. There is demand in the market, because investors look for growth and we can offer them a consistent growth story."

When Randgold first announced its intention to bid for Ashanti, a company twice its size, it was not taken seriously. Analysts wondered where it would get the necessary financial firepower and shook their heads at the prospect of a battle between such uneven contestants.

Firmly stuck with a "David and Goliath" tag, the battle continued for months and became a fully-fledged bidding war. Randgold offered $1.4bn in shares, $300m more than AngloGold, eventually forcing the South African colossus to sweeten its bid. Undeterred, Rand-gold improved its offer to $1.7bn.

AngloGold won last month, after receiving the approval of the Ghanaian government, the Ashanti board and Lonmin, Ashanti's largest shareholder. But by then Randgold had confounded the critics, analysts say.

It had mounted a credible bid and fought what Bobby Godsell, AngloGold chief executive, described as a "gallant battle".

"Randgold has come out of this better and stronger," says one Johannesburg-based precious metals analyst. "It has increased its profile very successfully and found a large audience of fund managers. Dr Bristow can now easily afford to tempt other companies' shareholders."

Analysts' and investors' perception of Randgold changed as the company showed its marketing prowess, courting skills and sheer determination.

Banks such as HSBC offered funding for $250m. Its shares, which listed on Nasdaq at $6.50 in 2002, shot up and now trade at about $22.

"The company is now taken more seriously, has a higher profile in the gold sector and can raise money more easily," says another Johannesburg-based analyst. "An acquisition is the logical next step."

Mr Bristow, who enjoys a solid reputation in African gold circles as an expert geologist, says the bid cost the company "between $2m and $3m. Not an extravagant amount. We spend $10bn to $15bn on exploration, hunting new ounces which are essential for the future, because gold mines are ageing and dying and are not being replaced".

"Randgold did not need Ashanti, it was a good opportunity that came up," says Victor Flores, gold analyst at HSBC in New York.

"Now it will settle for a smaller African company with good assets and the power of the capital markets of London and New York. The company has a lot going for it."