MARK BENDEICH, London | Thursday
AFRICAN gold mining firm Ashanti Goldfields Co Ltd took the axe to the value of its mine assets on Wednesday, plunging the bottom line into red ink, but the troubled group looked to be turning a corner.
“It looks fine to me,” said analyst Mike Jones of brokerage Canaccord Capital, adding that the writedowns hid an underlying performance which well exceeded market expectations.
The Ghanaian company said in its results statement for calendar 2000 that it had lopped $194 million off the value of three mines — mainly at its main Obuasi operation — to reflect a recent slump in the gold price.
The move led to a net loss of $141m compared with a loss of $184m in 1999, when huge hedging losses brought it close to collapse. But before the writedowns and other exceptional items, earnings totalled $30.5m – more than half 1999’s result but well ahead of analysts’ forecasts.
Profits before exceptional items were 27 U.S. cents per share compared with an average forecast of about 22.
“It’s better than I had expected,” said Jones, who rates the stock a strong buy with a price target of $5. Ashanti’s American Depositary Receipts closed on Tuesday at $2.58.
He said the writedowns should slash Ashanti’s depreciation bill by the equivalent of about $8-10 per ounce, taking its costs down to around $250 per ounce. Ashanti has sold forward much of its production, achieving an average price of $335 an ounce in 2000 compared with a current spot price of $261.
Ashanti, which was staggering on the ropes just over a year ago, said it faced a “formidable task” in further cutting the company’s debt, even though gross debt fell 47% to $366m due to a major refinancing completed last year.
As part of the restructuring, Ashanti was forced to sell half of the prized Geita mine to AngloGold. East Africa’s biggest gold mine, Geita was commissioned last August and has a forecast annual output of 500_000 ounces. – Reuters
ZA*BUSINESS:
Ashanti looks to new Ghana govt for relief February 1, 2001
Ashanti claws back into the black November 7, 2000
Ashanti shores up future with Geita sale October 25, 2000
Eviction claims despite Ashanti payout August 24, 2000
Ashanti Geita pours gold ahead of schedule June 12, 2000
Ashanti profits fall further May 12, 2000
Gold Fields Ghana deal ‘close’ May 4, 2000