Lonmin freezes plans to boost stake in Ashanti

Denver — British-based platinum producer Lonmin says it has no plans to increase its stake in Ashanti Goldfields (ASL-N), despite reports that the government of Ghana may be willing to sell some of its 20% stake in the company.

According to Reuters, Finance Minister Yaw Osafo-Maafo said his government has proposed selling at least part of its stake in Ashanti to help reduce the national debt.

“We’ll definitely not offload everything in Ashanti,” Osafo-Maafo is quoted as saying. “If for nothing else, for sentimental reasons we’ll keep some of the shares.”

Although Lonmin is Ashanti’s biggest shareholder, it prefers to focus on its platinum business, and, toward that end, is even considering selling its 32% stake in the Ghanaian company.

In late 1999, Lonmin had offered to take over Ashanti at US$7 per share. Shortly thereafter, the share price plunged to US$2 per share, and the generally depressed gold market took its toll on Ashanti’s over-aggressive hedgebook. Development of the Geita mine in Tanzania suffered as a result.

“As far as Lonmin and its shareholders are concerned, Ashanti is really not important,” says Lonmin’s chief executive officer, Edward Haslam. “We’re platinum . . . and we will stay that way for the time being.”

Lonmin is the world’s third-largest platinum producer outside of Russia, having cranked out 568,289 oz. in the six months ended March 31, 2001. Annual production could top 1 million oz. platinum (2 million oz. platinum group metals) by 2007, reflecting the company’s share in the Pandora project in South Africa.

Lonmin posted a pretax profit of US$252 million for the six months ended March 31, nearly twice that of the corresponding period last year.

The company has US$447 million in the bank and is considering expanding further into Australia. In particular, it intends to invest US$27 million in Sydney-listed Platinum Australia.