Asenta - Money and Business

Money and Business Crisis at Ashanti Goldfields - Why Mines Minister Ohene Kena was Fired According to the London Financial Times annual survey of global companies, Ashanti Goldfields is rated the largest company in sub-Saharan Africa, registering market capitalization levels of $733m for 1998. The Ghana Government owns 20% of Ashanti Goldfields. The British conglomerate Lonmin, formerly Lonhro, owns 32%. In 1994, the company went public and the running government floated some of its remaining majority shares on financial markets in Ghana, London and New York. Apart from providing almost 90% of the market capitalization of the Ghana Stock Exchange, Ashanti is also one of Africa's major footholds on the global corporate market. It employs a huge number of people in Ghana and has operations across Africa in countries like Tanzania, Zimbabwe, Ethiopia and Burkina Faso. Gold is Ghana's largest source of foreign exchange, providing some $500-$600m a year. Then suddenly, out of the bowls of the earth, the company that is billed as Africa's third largest gold mining company hit a major financial rock, causing both major economic and political mayhem in Ghana. Derivatives Trading Ashanti's current problems began about six months ago when it involved itself in a complex financial scheme to halt losses during a year-long slump in global gold prices. The process known as derivatives trading was made famous with the collapse of Barings Bank after one of its traders Nick Leeson used the mechanism to accumulate and hide huge losses. According to reports in the London Financial Times, Ashanti hedged its potential losses by selling gold in advance at guaranteed prices. The company was gambling that prices would continue to drop lower - instead, there was an upturn in the market. That risk became apparent when the gold price jumped from $260 an ounce to more than $300 and the 17 banks involved in the forward-trading deal decided to call in a margin of their payments as security. Ashanti had to come up with a hard-earned $270m to cover commitments to the banks that hold gold against future price fluctuations. Simply put, Ashanti tethered on the brink of bankruptcy and would have faced liquidation if the banks had played hard ball and had decided to call in their $270m short-term loan. Don't blame it all on Ashanti and derivatives trading. The British treasury's decision to sell off 25 tonnes of gold as part of a plan to convert holdings of 415 tonnes into currency, immediately forced the price of the commodity to slump to below $260 per ounce. This was aggravated by the International Monetary Fund's (IMF) announced plans to sell off 10% of its gold (some 10 million ounces) to help finance the G8's debt relief package for heavily-indebted countries. The decision was ironic in that several of the countries that are eligible for debt-relief under the "Heavily Indebted Poor Countries" initiative (HIPC) are gold producers, particularly in Africa. The resurgence of these economies in the modern era owes a great deal to the exploitation of the mineral. These complex issues caught Ashanti flush in the face and led to the loss of hundreds of millions of dollars making it vulnerable to takeover bids. The problem the Ghanaian government had on its hands was to try to save the company by negotiating with the banks or putting up its remaining 20% share holding for sale to raise desperately-needed cash.	Lonmin Angers Ghanaians Sensing a great opportunity to make a monster kill, the British-based mining company Lonmin -- formerly Lonhro made a bid to purchase the government's shares in Ashanti Goldfields. Lonmin currently owns thirty-two per cent of the company and would have held a whopping 52% majority ownership over what many Ghanaians regard as a national heritage. Understandably, the anger and animosity generated by the thought of this happening was immense. That a gold mining company has not got sufficient funds to service its debts to a bank was mind boggling, to say the least. Lonmin/Lonhro's exploitative adventures (remember Tiny Rowland?) throughout colonial Africa incited an ominous fear of the incipient re-colonization of Africa, at least from an economic standpoint. Not many Ghanaians supported the "cheap" public sale of Ashanti shares on New York and London stock markets in 1994 and were not ready to forgive any government that oversees the complete and absolute sale of a national treasure to foreigners. According to many Ghanaians, a successful purchase of Ghana's main foreign exchange earner and its major player on the national stock exchange would have dealt a severe blow to national pride as well as a serious loss of, perhaps, the only national economic asset. Faced with a potentially damaging economic and political issue in an election year, the government did that which is politically expedient. The minister of mines and energy, Fred Ohene-Kena was dismissed for apparently indicating government acceptance of the takeover bid by Lonmin. Education Minister Ekwow Spio-Garbah has been assigned responsibility for what has suddenly become a hot seat in the Ghanaian cabinet. Ashanti Goldfields weathers storm...for now Latest reports indicate that the company has secured a deal with its creditors to relieve the pressure on its finances. Ashanti Goldfields now has three years to pay debts incurred in derivative deals in the gold market - reportedly representing a liability of more than $270m. The agreement with its creditor banks saves it from paying money due on the contracts - margin calls - until the end of 2002. Instead it is issuing warrants that could turn 15% of company shares over to the banks. The deal also raises limits for margin calls after 31 December 2002 to twice the current levels, and one and a half times the current limits for 2004. The bottom line is that Ashanti has avoided the dreaded takeover bids from Lonmin, and a phantom Saudi Prince at least till the end of 2002. @s

Money and Business

Crisis at Ashanti Goldfields - Why Mines Minister Ohene Kena was Fired

According to the London Financial Times annual survey of global companies, Ashanti Goldfields is rated the largest company in sub-Saharan Africa, registering market capitalization levels of $733m for 1998. The Ghana Government owns 20% of Ashanti Goldfields. The British conglomerate Lonmin, formerly Lonhro, owns 32%. In 1994, the company went public and the running government floated some of its remaining majority shares on financial markets in Ghana, London and New York. Apart from providing almost 90% of the market capitalization of the Ghana Stock Exchange, Ashanti is also one of Africa's major footholds on the global corporate market. It employs a huge number of people in Ghana and has operations across Africa in countries like Tanzania, Zimbabwe, Ethiopia and Burkina Faso. Gold is Ghana's largest source of foreign exchange, providing some $500-$600m a year.

Then suddenly, out of the bowls of the earth, the company that is billed as Africa's third largest gold mining company hit a major financial rock, causing both major economic and political mayhem in Ghana.

Derivatives Trading

Ashanti's current problems began about six months ago when it involved itself in a complex financial scheme to halt losses during a year-long slump in global gold prices. The process known as derivatives trading was made famous with the collapse of Barings Bank after one of its traders Nick Leeson used the mechanism to accumulate and hide huge losses. According to reports in the London Financial Times, Ashanti hedged its potential losses by selling gold in advance at guaranteed prices. The company was gambling that prices would continue to drop lower - instead, there was an upturn in the market. That risk became apparent when the gold price jumped from $260 an ounce to more than $300 and the 17 banks involved in the forward-trading deal decided to call in a margin of their payments as security. Ashanti had to come up with a hard-earned $270m to cover commitments to the banks that hold gold against future price fluctuations. Simply put, Ashanti tethered on the brink of bankruptcy and would have faced liquidation if the banks had played hard ball and had decided to call in their $270m short-term loan.

Don't blame it all on Ashanti and derivatives trading. The British treasury's decision to sell off 25 tonnes of gold as part of a plan to convert holdings of 415 tonnes into currency, immediately forced the price of the commodity to slump to below $260 per ounce. This was aggravated by the International Monetary Fund's (IMF) announced plans to sell off 10% of its gold (some 10 million ounces) to help finance the G8's debt relief package for heavily-indebted countries.

The decision was ironic in that several of the countries that are eligible for debt-relief under the "Heavily Indebted Poor Countries" initiative (HIPC) are gold producers, particularly in Africa. The resurgence of these economies in the modern era owes a great deal to the exploitation of the mineral.

These complex issues caught Ashanti flush in the face and led to the loss of hundreds of millions of dollars making it vulnerable to takeover bids. The problem the Ghanaian government had on its hands was to try to save the company by negotiating with the banks or putting up its remaining 20% share holding for sale to raise desperately-needed cash.

Lonmin Angers Ghanaians

Sensing a great opportunity to make a monster kill, the British-based mining company Lonmin -- formerly Lonhro made a bid to purchase the government's shares in Ashanti Goldfields. Lonmin currently owns thirty-two per cent of the company and would have held a whopping 52% majority ownership over what many Ghanaians regard as a national heritage.

Understandably, the anger and animosity generated by the thought of this happening was immense.

That a gold mining company has not got sufficient funds to service its debts to a bank was mind boggling, to say the least. Lonmin/Lonhro's exploitative adventures (remember Tiny Rowland?) throughout colonial Africa incited an ominous fear of the incipient re-colonization of Africa, at least from an economic standpoint. Not many Ghanaians supported the "cheap" public sale of Ashanti shares on New York and London stock markets in 1994 and were not ready to forgive any government that oversees the complete and absolute sale of a national treasure to foreigners. According to many Ghanaians, a successful purchase of Ghana's main foreign exchange earner and its major player on the national stock exchange would have dealt a severe blow to national pride as well as a serious loss of, perhaps, the only national economic asset.

Faced with a potentially damaging economic and political issue in an election year, the government did that which is politically expedient. The minister of mines and energy, Fred Ohene-Kena was dismissed for apparently indicating government acceptance of the takeover bid by Lonmin. Education Minister Ekwow Spio-Garbah has been assigned responsibility for what has suddenly become a hot seat in the Ghanaian cabinet.

Ashanti Goldfields weathers storm...for now

Latest reports indicate that the company has secured a deal with its creditors to relieve the pressure on its finances. Ashanti Goldfields now has three years to pay debts incurred in derivative deals in the gold market - reportedly representing a liability of more than $270m.

The agreement with its creditor banks saves it from paying money due on the contracts - margin calls - until the end of 2002. Instead it is issuing warrants that could turn 15% of company shares over to the banks. The deal also raises limits for margin calls after 31 December 2002 to twice the current levels, and one and a half times the current limits for 2004. The bottom line is that Ashanti has avoided the dreaded takeover bids from Lonmin, and a phantom Saudi Prince at least till the end of 2002. @s