British-based platinum producer Lonmin says it has ruled out the possibility of a merger with Ashanti Goldfields (ASL-N), but it is in no hurry to sell its 32% stake in the gold miner.
According to Reuters, Lonmin Chairman Sir John Craven says he was in Ghana for talks with the country’s government, which owns a 20% stake in Ashanti. The company is Ghana’s largest gold producer.
"We’ve come to compare notes and offer support and commitment to the company," Craven says.
He says his company would reject a merger offer.
"We would say no because it doesn’t fit into our current corporate strategy," he says. "We’ve moved on. Eighteen months ago, Ashanti fit into our vision. It would have been tremendously value-creating for everyone. But, when circumstances change, one changes one’s mind."
After the talks, Ghanian President John Kufuor pledged that there would be no political interference in the company’s management.
In addition to its 20% stake, the government of Ghana holds a "golden share" — a single-share voting class that permits it to veto any significant change in Ashanti.
Many analysts blamed the “golden share” for disrupting the October 1999 takeover bid by Lonmin, which is Ashanti’s majority shareholder with 32% of its shares.
Lonmin offered US$7 per share for the remaining stake in the company, just as the price of gold shot up to US$325 per oz. from 20-year lows, pushing Ashanti’s aggressive hedging policy underwater and driving Ashanti shares to US$2.
Banks got nervous and demanded margin calls, which hurt Ashanti’s ability to develop the giant Geita gold mine in Tanzania. The company was later forced to sell 50% of Geita to AngloGold (AU-N) to complete construction at the mine. Ashanti’s share price has since languished.
Craven says Lonmin was looking to sell its stake, but the company’s shares are currently "terribly undervalued."
"We’ll seek to exit at a time and manner that will find favour with our shareholders and the government of Ghana," he says. "We have no interest in walking away prematurely."
Earlier this year, Finance Minister Yaw Osafo-Maafo said Ghana plans to raise up to US$200 million from the sale of state assets by 2004, including at least part of the country’s Ashanti stake. But the government says that now, with such an unattractive share price, none of its stake will be sold.
Osafo-Maafo added that he saw no reason why the government should consider giving up its "golden share". However, President Kufuor said on Monday that his administration would remain open-minded about Ashanti.
"We are not going to permit any political interference in the affairs of the company at all,” he told reporters.
Kufuor’s government is considered more pro-business than the previous one, which was headed by Jerry Rawlings and controlled the country for nearly 20 years.
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