A deal between
Under the agreement, the company’s lenders will be advancing a US$100-million line-of-credit for Ashanti to develop the Geita project and to provide general working capital, and an existing US$270-million revolving credit arrangement has been renegotiated at higher interest rates. As well, 2-party agreements between Ashanti and lenders or hedging counterparties have all been consolidated as part of the existing revolving credit agreement.
The new loan bears interest at 2.5% above the London Interbank Offer Rate for the first month, rising to 3.5% above LIBOR from April to June, and then 4.5% from July to September. Loans made under the revolving credit agreement bear interest at 2% to 2.5% above LIBOR. A loan of US$151 million under the revolving credit facility comes due at the end of 2000, with the rest — about US$175 million — due in January 2003.
The lenders also agreed to revise a deal, signed in late October 1999, under which Ashanti would have issued warrants covering 15% of its share capital to the lenders in exchange for the elimination of requirements to post margin against hedge contracts. The revised deal sees the exercise price of the warrants, originally US$4.75, reduced to US$3. Ashanti can enter margin-free hedge contracts for three years but must then post margin against hedges for the next two years. Those limits will be higher than the margin limits that caused Ashanti’s October 1999 debt crisis.
Ashanti was caught offside by the sudden run-up in the gold price last October, which turned its hedge book from a US$290-million asset into a US$570-million liability. The company reached a standstill agreement with its creditors that month, but the crisis scotched a proposed merger with U.K.-based Lonmin.
The agreement between Ashanti and its lenders follows an out-of-court deal between the company and dissident shareholders led by holding company Adryx Mining & Metals, which also involved the Ghanaian government and Lonmin as major shareholders. Adryx held a large block of Ashanti shares from the takeover of former Geita owner Samax Gold, and with allied shareholders had secured an order from the Ghanaian High Court on Feb. 9 for an extraordinary general meeting of shareholders to consider removing the present board of directors. The High Court’s order for a March 3 meeting was rescinded on Feb. 16 on the joint application of the company and the dissident shareholders.
The order had also enjoined Ashanti’s management not to enter any new financing deals, preventing the company from arranging the deal with its lenders.
The settlement of the court action also secured the government’s approval for asset sales and debt restructuring, which are linchpins in Ashanti’s plan to fix its books. The government, with a 20% direct interest and a “golden share,” which gives it a veto over any measure requiring shareholder approval, had first supported the Lonmin merger but then sought to have Ashanti restructured as an independent company.
The High Court’s Feb. 9 order would have prevented an early sale of a 50% interest in Ashanti’s Geita project in Tanzania, which was mandated by Ashanti’s lenders as a condition for participating in a debt-restructuring plan. Chief Executive Officer Sam Jonah said the company was expecting to receive several binding bids on the Geita stake by the end of February.
Several companies are thought to be bidding on the Geita interest, including
The final feasibility study estimated Geita’s capital costs at US$165 million and its cash costs at US$180 per oz.
The settlement with the shareholders and the government also forced a management shakeup at Ashanti. Seven directors will be resigning at the company’s next annual general meeting, including Chief Financial Officer Mark Keatley, who has felt much of the heat from shareholders and lenders over Ashanti’s mistimed hedging activity. They are to be replaced by a board nominated by management, Lonmin, the government of Ghana and the dissident shareholders.
Chairman Richard Kwame Peprah announced he would be resigning immediately as chairman of the board. Peprah, who is Ghana’s finance minister, said he needed to devote his time to implementing the country’s new budget, tabled in Parliament on Feb. 10. Independent director Phillip Tarsh, who also will be resigning, was named Peprah’s interim successor.
The other directors leaving the board are Kofi Ansah, former mines minister Ferdinand Ohene-Kena, Henry Otoo, William Ryrie and Eleanor Ofori Atta. Merene Botsio-Phillips, the company’s general counsel, is the only new director nominated so far.
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