In early 1997, mining analysts from the London branch of Banque Paribas estimated that it would be a year before the benefits of a restructuring undertaken by Ashanti Goldfields (AHD.U-T) would be felt. While the depressed gold price delayed that timetable, the firm believes Ashanti is a more focused company as a result of the changes, and is well-positioned for growth.
The analysts were particularly impressed with Ashanti’s performance at the Freda-Rebecca gold mine in Zimbabwe, which the company acquired through the 1996 takeover of Cluff Resources. Cluff produced 62,300 oz. gold from the mine during its first full year of open-pit production in 1989. Ashanti brought to the table additional technical expertise, as well as a cash infusion that enabled it to complete the move underground at the Rebecca deposit. The Freda deposit will move underground when open-pit reserves are exhausted by June of this year. “Indeed, since the acquisition by Ashanti, and the alleviation of its financial pressures, the mine has increased output to over 100,000 oz. per year, and is set to remain at this level for the forseeable future,” the firm’s analysts note. “As a result, the future of the Freda-Rebecca mine has been secured, notwithstanding the low current level of the gold price.”
While costs at the mine have fluctuated since 1986, they fell to US$133 per oz. in the fourth quarter of 1997. Further gains in efficiency are expected.
Meanwhile, exploration work is attempting to upgrade resources and to test several gold anomalies in the region.
Paribas notes that Ashanti’s acquisitons were halted in 1997 and that the company is now concentrating on meeting and exceeding production targets.
The company has a hedging program and expects to receive US$390 per oz. for all of the 1.4 million oz. it expects to produce this year. Ashanti is rated as a buy, with a target price of US$11 per share.
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