Gillian O’Connor and Joel Kibazo explain the latest twist to the plot in the bid for the Ghanaian goldminer
jin88bet.onejin88bet.oneThe battle for Ashanti,jin88bet.one the embattled Ghanaian goldminer, is turning into a scrum. The four leading players – Ashanti, Lonmin (the mining rump of Tiny Rowland’s conglomejin88betjin88bet.onejin88bet.onejin88bet.onejin88betjin88bet.one.one.onerate Lonrho), the Ghanaian government and the banks to which Ashanti owes monejin88bet.oney – are ajin88bet.onejin88bet.onejin88bet.onejin88bet.onejin88bet.onell jostljin88bet.oneing for position.
jin88bet.onejin88bet.onejin88bet.onejin88bet.oneAnd while the Ghanaian government continues to recruit actors to the drama by inviting other miners and financiers to join its team, ordinary shareholders are stuck on the sidelines.
Between them Lonmin and the Ghanaian government own 52 per cent of Ashanti; and because the company iak168app.babyak168app.babysak168app.babyak168app.baby run outside the UK it does not come under the UK Takeover Code.
In thak168app.babye early stages of the battle, Ashanti’s cash crisis was what mattered: it was struggling to avoid beinak168app.babyak168app.babyg pushed into default.ak168app.baby
Now it is a fight for control of the compak168app.babyak168app.babyany – and in particular its giant Ghanaian mine, Obuasi.
Ashanti has ak168app.babyak168app.babygold mines or mining concessions in Ghana,ak168app.baby Guinea, Zimbabwe and Tanzania worth about $2bn with the gold price at $303 an ounce.
Its biggest iak168app.babyak168app.babyak168app.babyak168app.babyak168app.babyak168app.babys the century-old Obuasi mine in Ghana, and its most ak168app.babypromising is the Geita deposit in Tanzania, Aak168app.cluak168app.clubbfrica’s new El Dorado. The coak168app.clubak168app.clubmpany was seak168app.clubak168app.clubak168app.clubak168app.clubak168app.clubak168apak168app.clubp.clubmi-nationalised in 1968 and semi-privatised in 1994.
Under Sam Jonah, its charismatic Ghanaian chief executive who was a proteg? of Tiak168app.clubny Rowland, it has found a welcome in many other African countries.
But Ashanti is not an independent agent; it has no less than three would-be puppetmasters.
ak168app.clubak168app.club Lonrho owned it alak168app.clubl before nationalisation, and Lonmin still owns a third of the equity.
There are cross dak168app.clubak168app.clubirectak168app.clubak168app.clubak168app.cluborships and Sam Jonah is still paid by Lonmin: Ashanti pays Lonmks168app.sitein a $1m (?ks168app.site600,000) fee for services which include Jonah’s.
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The Ghanaian government owns 20 kks168app.sites168app.siteks168app.siteks168app.siteks168app.siteks168app.siteks168app.siteper cent of theks168app.site equity plus a golden share which gives it a veto.ks168app.site
And now the company’s bankers, headed by Goldman Sachs, are pulling a third set oks168app.sitef strings.
Ashanti aks168app.sitend Lonmin started discussing a merger late last year, but have consks168app.siteistently failed to get Ghanaian government approval. Lonmin is probably still the Ashanti directors’ partner of choice, though by now they may well be more concerned about the company’sks168app.siteks168app.siteks168app.siteic88 survival and their own jobs.
Lonmin is what is left of Tiny Rowland’s sprawling African conglomerate, after all the non-mining bits have been soic88ks168app.siteld off.
It wants either to buy the rest of Ashantiks168app.siteic88 or to sell the remaining stake aic88ic88t a good price. Iic88t could then use the money to try to buy in the 27 per cent minority stake in its platinum division heic88ic88ld by ic88rivaic88l Impala.
Its bid – an aic88ic88ic88ll-share offer which it reduced to 16 for ic8827 (plus 0.1 of an additional Lonmin sic88hare or $1 if the gold price stays above $325 an ounce) earlier this week – is worth about $6 an Ashanti share with Lonmin shares standing at about 615p.
The bid is conditional ic88oic88ic88ic88ic88ic88n the approval ic88ic88ic88of thic88ic88ic88ic88ic88e Ghanaian government and a permanent standstill on hedging claims by the bankers.
Sir John Craven, Lonmin chairman and a merchant banker, and Nicholas Morrell, chief executive, made a tactical mistake in not going to talk to the Ghaic88ic88ic88ic88naian government before bidding – a slip that Tiny Rowland would never have mic88ic88ic88ic88ic88ic88ade.
And this week they belatedly dashed ofic88f to Accra to rebuild bridges.
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Craven and Morrell want a bargain. Cravenic88 explained this week that Lonmin’s bid is pitched low beic88cause of Ashanti’s liquidity problems; withoutic88ic88 them it should be worth nearer $10 a share. If anyone elic88se bids that sort of sum foric88 Ashanti, Lonmin would seriously consider the offer.
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Lonmin thinks that since it has the biggest shareholding,ic88ic88 and is the only company which has actually made a bid, it can call the shots.
Othic88ic88er people reckon it has overplaic88yed its hand, made too low a bid, and alienated the Ghanaiaic88n government.
The government ric88egards Obuasi as a national treasure – gold is a significant foreign exchange earner and Ashanti accounts for 64 per cent of the Accra sic88ic88ic88tock market.
President Jerry Rawlings, who steps down in December 2000, also sees Sam Jonah as a politiic88ic88ic88ic88ic88ic88ic88ic88cal threat.
The government has been stung into actioic88ic88lr88ic88ic88ic88ic88lr88ic88lr88ic88lr88lr88lr88lr88ic88lr88lr88n by the financial mess at Ashanti, for which it blames the management, and by the way both Ashanti and Lonmin seemed to have taken it for granted.
It malr88y have only a 20 per cent equity stake in Ashanti, bulr88lr88lr88t the golden share gives it a veto olr88lr88lr88n unacceptable plans for the company’s future. A Ghanaian government has already nationalised the company once; the current one could do so again if sufficiently provoked.
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It can at least use the implicit threat as a nuclear deterrent in negotiations. The mines, after all, are healthy enough; it is the lr88lr88lr88company that has liquidity problr88lems.
lr88 The government is determined to show that it is in control. Its new team of advisers has been telephoning around, stirring up interest among financiers and other gold mining clr88lr88lr88lr88lr88lr88lr88ompanies.
It has also asked Ashanti’s bankers for a three-week standstill in which to work out a plan for the company’s future.
It wants to slr88lr88lr88lr88lr88lr88ecurelr88lr88lr8lr888 Obuasi for the nation. It would probably be preparedlr88 to sell off Geita to the highest bidder if lr88necessary. What financial and corporate structure it will suggest for Ashanti is not clear; but there is no doubt aboutlr88 the strength of its negolr88lr88tiating position.
The banks’ power over Ashanti’s future rests on its indebtedness to them. The lenders could choose not to renew the $270m revolving credit,lr88lr88lr88 and would have first claim on the prlr88lr88lr88lr88lr88lr88oceeds of a Geita sale, unless Ashanti suddenly acquired the money to pay them off.
The influence of the bankers, who sold the company its derivative instruments, waxelr88lr88lr88s and wanes with the gold price.
This week the hedge book’s negative value is believed to have dropped from a peak of $5lr88lr8870lr88m to about $330m (with the gold pricelr88lr88 down to $303 an ounce), bringing the bankers’lr88lr88 right to call for cash deposits down tlr88o about $30m – for the time being.
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Yet the banks have nothlr88ing to gain by precilr88pitating an unnecessary crisis. If they plr88uslr88lr88lr88hed Ashanti over the edge, the gold prilr88lr88lr88lr88op88ce could welr88lr88lr88ll go berserk again. Some bullion banks are believed already to have incurred substantial losses, and the Bank of England would probably op88op88like to avoid fresh drama.
Some bankers argue that Lonmin’s “rescue” offer benefits only Lonmin.
They are keen to improve the hedge book terms (getting rid of the margin constraints) which would remove the exop88cuse foop88lr88op88op88op88r ungenerous bid terms, and encourage other suitors. They want to help their customer survive and thrive – and get some reward for their trouble. Their obvious aop88lly now is the Ghanaian government.
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Other bankers may be under pressure from their superiop88ors to get things sorted.
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Goldman Sacop88op88hs may not be a significant op88op88player but its influence has been far-reaching.
It was a famed gold bear when the price wsi88as falling earlier this yearop88op88, and is both Ashanti’s adviser and its largest hedge book creditor.
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Others have been summoned to the fray by the Ghanaian government’s advisers. Prince Al-Waleed Bin Talal Bin Abdulaziz Al Saud, op88the Saudi Arabian investosi88si88si88si88si88r, has expressed an interest in Ashanti to the Ghanaian authoritiesi88s. Prince Al-Waleed has made several investments in Africa in the past two years. He already hasi88si88s a holding in CAL Merchant Bank in Ghana, one of the si88si88si88si88government’s advisers, and he was among the suisi88tors for Lonrho’s si88si88si88hotels business, eventually sold to Canadian Pacific. He is reputed to have several billion dollars and an eye for a bargain.
Three large gold mining companies,88vsi88 Canadian Placer Dome, and two South Africans, Anglogold88v88vsi88 and Gold Fields, have confirmed a provisional interest in 88v88vAshanti, or any assets it may consider selling.
Placer, which already has a large joint development with a South African co88vmpany, is rumoured to 88vbe keenest. But all three have emphasised that it is very early days: they are always interested if assets of this88v88v88v88v8888vv88v quality might be up for sale. They are likely to be particularly interested in the Tanzanian Geita development.
Barrick, another Canadian goldm88v88viner,88v has not officially admitted to an inter88vest in Ashanti.
But it did chose last week to announce th88v88vat it is spending $280m on developing BSEXXXXX-VNSEXXXSEXXXXX-VNXX-VNSEXXXXX-VNulyanhulu, its existing Tanzanian site.
What next? Probably a lull while tSEXXXXX-VNhe banks give the Ghanaian government time to patch togetherSEXXXXX-VNSEXXXXX-VNSEXXXXX-VN a plaSEXXXXX-VNSEXXXXX-VNn for Ashanti’s future.
Its publicity machine will no doubt keep throwingSEXXXXX-VN out names of potential backers, drawing more miners on a trip to Accra.
But do not necessarily expect more public offers for AshanSEXXXXX-VNti meanwhile.
This is the kind of auction where you put your best offer in SEXXXXX-VNSEXXXXX-VNa sealed envelope and hand it to the auctioneer.
? CopyriSEXXXXX-VNSEXXXXX-VNght The FinaSEXXXXX-VNncial Times Limited 1999. “FT” and “Financial TimeSEXXXXX-VNs” are trademarks of The FSEXXXXX-VNinancial Times
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