South Africa’s AngloGold and Ghana’s Ashanti Goldfields look set for marriage soon, creating the world’s largest gold producer with 26 mines on four continents.
Ashanti, burdened by high operating costs and problems raising cash to pay short-term debt, received the go-ahead from the Ghana government on Tuesday, although parliament will have the last word on the merger.
The merged company would produce 7,5-million ounces of gold a year.
The bid is subject to government approval here because the Ghanaian government is also the regulator of the target company.
The government, with a 16,9% golden share in Ashanti that allows it to veto any merger or takeover deal, agreed the merger after a hectic emergency cabinet meeting.
AngloGold, 51% owned by South African mining giant Anglo American, announced on October 15 it was making an all-share offer for Ashanti of $1,42-billion.
Ashanti said last Monday its board had agreed unanimously to continue recommending AngloGold’s offer to shareholders because it was ”in the best interest” of its shareholders, employees and the people of Ghana.
AngloGold-Ashanti, the merged company, would become the largest gold mining company in the world in terms of resources and production, thus having ”a tremendous positive impact on Ghana’s investment profile,” said Ghana’s Minister for Mines Cecilia Bannerman.
Ghanaian President John Kufuor has not been left out of the intense public debate over the merger.
He has flatly denied that the Ghanaian government allowed Ashanti to be swallowed up.
”Ashanti is not Ghana,” Kufuor said in an interview. ”The Ashanti board and the single majority shareholder of Ashanti, Lonmin, had approved the merger.”
Finance Minister Yaw Osato-Maafo said government approval did not make the deal final: ”The Ghanaian parliament can say yes or no or modify the whole package. Parliament will also be required to decide on tax exemptions as part of the process.”
Explaining the government’s decision favouring merger, mines minister Bannerman said: ”Ashanti, despite its strengths, suffers from significant weaknesses like a constrained financial position, high operating costs in relation to its peers, lack of the required capital expenditure to exploit the full potential of its mines, the inability of its key shareholders (the Ghanaian government and Lonmin) to provide additional cash of 105 million US dollars to pay its short-term debts.
”It also faces risks in its mines in the Democratic Republic of Congo and Ivory Coast,” she said.
AngloGold originally submitted a merger offer in August to create a company with market capitalisation of $9,5-billion and the listing on the Ghana Stock Exchange which would increase the Exchange’s capitalisation by nearly 500%.
The deal also stipulated that two directors nominated by the Ghanaian government would serve on the 18-member board.
Then British rival RandGold Resources submitted a counter-offer for a merger with Ashanti, with highlights including Accra, the Ghanaian capital, to be the operational centre for the new company, which would have had a market capitalisation of 2,1-billion
dollars.
The board of the new company would have been evenly split and Ashanti was to nominate the chairperson and chief operating officer.
In the RandGold offer, the Ghanaian government’s stake would have been 13%, estimated at $209-million, whereas AngloGold offered only 3,4% valued at $340-million.
Bannerman said Anglogold’s superior financial strength, technical expertise in deep level mining and commendable proposals on employment policies, staff training, safe working environment and community development had all been appreciated by the Ghanaian cabinet.
Sources close to the cabinet said that AngloGold had made a last-minute offer of an additional $100-million, exclusively for the government’s 16,9% stake in Ashanti.
This pushed the government’s stake in the $10-billion
merged group from 2,2% to 3,45%.
AngloGold in the last five years has had one of the highest dividend payouts to shareholders in the gold mining industry, and should begin to offer Ashanti shareholders dividends after so many years of no-dividends. ‒ Sapa-AFP