Ashanti Goldfields on sound footing, Jonah says

The past year was challenging for all gold companies, but Ashanti Goldfields (ASL-N) had the added task of rebuilding after a failed hedging program splashed red ink over its balance sheet in the fall of 1999. Sam Jonah, president, told delegates attending the recent Indaba conference in Cape Town, South Africa, that Ashanti’s “well-publicized liquidity problems” have largely been resolved.

“On the hedge front, we have made significant progress restructuring our book. To date, we have already reduced the level of our committed ounces by more than two million ounces — over and above those that have matured normally — and reduced our lease rate exposure by over three million ounces.”

Next, the company hopes to reduce the level of committed ounces to less than 75% of annual production over the next three years, and, over the same period, increase protection levels to 40% of annual production.

“Finally, we have pegged our lease rate exposure to less than 60% of planned protection levels,” Jonah added. “The goal we have set is to achieve balance in our hedging, which for us, is vital to succeeding in the current gold environment.”

Ashanti also secured a US$100-million bridge facility to finance the completion of the Geita gold mine in Tanzania. “Tight cash management and ongoing cost-reduction initiatives allowed us to draw-down only US$75 million of the bridge facility, which saved us considerable interest fees,” Jonah explained. “Finally, we secured adequate working capital facilities for 2001.”

As part of the restructuring, Ashanti sold half of Geita (see separate story) for gross proceeds of US$335 million. “Geita got off to an impressive start, and our joint venture with AngloGold is working well,” Jonah added.

Ashanti produced 1.74 million oz. last year, up from 1.5 million oz. produced in 1999. Cash costs fell to US$190 from US$205 per oz. over the same period.

“All our mines, with the exception of Ayanfuri in Ghana, which is slated for closure in 2001, registered strong or record performance,” Jonah said.

The cornerstone Obuasi mine in Ghana turned out 640,000 oz. at a cash cost of US$205 per oz. in 2000, compared with 743,111 oz. at US$222 per oz. a year earlier.

At Iduapriem, also in Ghana, production reached a record 160,000 oz., even as cash costs fell to US$233 per oz. from US$248 a year earlier. The adjoining Teberebie mine, acquired from the Pioneer group last year, produced an additional 27,000 oz. from previously stacked leach pads. This acquisition is expected to extend Iduapriem’s mine life by up to 10 years.

The Bibiani mine in Ghana also had a good year. It turned out 273,000 oz. at a cash operating cost of US$152 per oz., compared with 262,000 oz. at US$162 per oz. in 1999.

“Our priority for Bibiani in the next few years is to extend the life of the mine,” Jonah said. “We are drilling the orebody to test its extension at depth for the possibility of underground operations in the future. We’re also looking in the outlying region for additional opportunities from which to continue to feed the mill.”

Ashanti’s Siguiri mine in Guinea cranked out a record 303,000 oz. at a cash operating cost of US$184 per oz., which represents a 27% increase over 1999 production of 239,000 oz.

On the exploration front, Ashanti intends to focus on ground near its existing operations — a strategy that is expected to yield maximum results at Geita.

“In the past twelve months, largely as a result of infill drilling at Nyankanga, our reserve base has increased 41% to 7.8 million ounces from 5.5 million ounces,” Jonah said.

“At Obuasi, we continue to see exciting intersections below the 5,000-ft. level, and we plan to focus on proving up those resources in 2001. We have replaced Siguiri’s reserves for the third consecutive year. The Teberebie acquisition has brought us a resource in excess of five million ounces, and we have reason to believe there is potential for more.”

In Ivory Coast, Ashanti is drilling its wholly owned Allangoau concession, near the border with Ghana. Jonah described the results from RAB drilling as “encouraging.”

Encouraging results are also being reported from a prospect near the company’s Freda gold mine, in Zimbabwe. Ashanti produced 112,000 oz. gold last year from its Freda-Rebecca mine, despite political and economic turmoil that has already shut down many other mining operations.

Ashanti has yet to get on-site at its Kimin concession in the Democratic Republic of Congo, owing to political instability in that country.

“Over the past year, we have taken many of the necessary steps to consolidate our position there,” Jonah said, “and we look forward to the day when we can participate in the development of one of the most prospective gold districts in Africa.”