Lonmin, which owns 32% of the Ghanaian-based miner, increased its bid of 16 shares for every 27 Ashanti shares (valued at US$6 per share) to include a warrant worth another US$1 per share, conditional on the final size of the Geita gold deposit in Tanzania.
The proposal, which works out to US$7 per share, represents a 51% premium over Ashanti’s share price on Oct. 22.
As part of the deal, Lonmin would lend Ashanti US$100 million to complete construction at Geita.
Meanwhile, Ashanti says it has received proposals from other companies interested in pursuing joint ventures and asset sales. No names have been mentioned, though
The government of Ghana, which owns a 20% stake in Ashanti, insists on evaluating any merger proposals. As company president Jerry Rawlings says: “The gold of Ashanti is a symbol of our national sovereignty, and we will not do anything that is tantamount to a betrayal of posterity.”
In October, the company announced it was facing some US$280 million in margin calls from its hedging activities because of the recent spike in the gold price. However, it recently won a 3-year reprieve on the payments.
The company’s hedgebook stands at 8.9 million oz. of future production at an average price of US$374 per oz., representing 35% of its gold reserves.
Meanwhile, construction at the US$165-million Geita project is well under way and should be completed by the end of September 2000. The company says it requires US$110 million to finish the job and has therefore entered negotiations with international banks.
Since January of this year, Ashanti has boosted resources at Geita by 82%, to 91.6 million tonnes grading 4.1 grams gold per tonne, equivalent to 12.1 million oz. It hopes to expand this figure further (mostly at the Nyankanga deposit) and is aiming for an annual production target of 500,000 oz. at a cash cost of US$180 per oz.
Ashanti earned US$8 million (or 7 cents per share) in the third quarter, during which time it took a US$10-million charge against earnings owing to a strike at the Obuasi complex in Ghana.
The company produced 379,543 oz. during the 3-month period, compared with 420,162 oz. a year ago. Cash operating costs were slightly higher, at US$218 per oz.
Heavy rains hampered production at Obuasi and at the Siguiri mine in Guinea. However, output from the Ayanfuri and Iduapriem mines in Ghana and the Freda-Rebecca mine in Zimbabwe proved better than expected.
Recent work at Iduapriem has extended the life of the operation another 18 months, and annual production should continue at 150,000 oz. at a cost of US$260 per oz. through to mid-2001.
The company’s net debt climbed to US$460 million during the third quarter. Cash and liquid assets total US$95.2 million.
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