Ghanaian gold miner
Holders of the company’s exchangeable guaranteed notes will accept payment of US$54.6 million in Ashanti shares valued at US$3.70 each. The rest of the notes, with a face amount of US$163.9 million, will be reissued as new exchangeable notes due at the end of June 2008. The new notes bear a higher interest rate, 7.95%, compared with the old rate of 5.5%, and are exchangeable for Ashanti shares at a price yet to be determined but not less than US$5.03.
Ashanti is scheduled to redeem, at half-yearly intervals, notes to the value of US$12 million, less the value of notes exchanged by holders over the previous six months. It can also elect to exchange a further US$12 million in notes at each redemption date.
The noteholders get a further US$4.4 million in cash at the time the old notes are exchanged for the new series.
The arrangement needs the approval of Ashanti shareholders, its lenders and counterparties to its hedge transactions, and the noteholders themselves. The committee of noteholders, representing 62% of the outstanding notes, has agreed to vote in favour of the refinancing.
Ashanti is still in talks with its major lenders to arrange a new credit line and margin-free hedging arrangements. It reduced its existing revolving credit facility to US$55 million in December 2001 and is currently operating without margin until the end of December 2002. Four of 11 hedge counterparties have agreed to extend that treatment beyond the end of 2002; the company must reach agreement with six of the other seven by mid-March or the noteholders’ committee is released from its agreement to vote for the restructuring.
Amid financial worries spawned by the near-collapse of Ashanti’s hedge book in late 1999, operations at its major mines have been a bright spot. Production in 2001 was down slightly, following the closures of the Obuasi open pit and Ayanfuri mine in Ghana, and the first full year of joint-venture production at Geita, in Tanzania, where South African mining house
Obuasi remains the backbone of Ashanti’s production, turning out 528,000 oz. in 2001, down from 640,988 in the previous year, when open-pit mining was still under way. Underground operations are now hoisting slightly more ore, and a program of underground development has increased the volume of developed reserves at the mine.
Mill throughput was significantly lower, reflecting the end of open-pit mining, and modifications to the flotation circuit increased concentrate grades to 85 grams per tonne from 55 grams. The higher concentrate grade has allowed the mill to increase the residence time for concentrates in the bio-oxidation circuit, since lower tonnages are being fed from upstream. Recoveries have also improved marginally.
Exploration at Obuasi confirmed gold mineralization at a vertical depth of 2,000 metres, about 400 metres below the deepest existing workings.
The Geita mine has been a major contributor for Ashanti, particularly as production has decreased at several of the company’s smaller West African mines. Geita produced 545,000 oz. gold in 2001, half of which goes to Ashanti. In the first full year of operation, Geita milled 4.6 million tonnes of ore at a head grade of 3.9 grams gold per tonne. As the pit progresses, the strip ratio has fallen to 6:1 from 9.6:1 in 2000, and recoveries in the mill have inched upward.
In another development, the Ghanaian Ministry of Mines has granted Ashanti and
Ashanti, which is to earn 100% of the Mampon property once it has provided a bankable feasibility study, has been waiting for government approval for the environmental work for two years. The Mampon mineralization is in a forest reserve (in Ghana, land set aside for the forest industry) and the government had suspended some forms of development work in those areas pending a review of forestry and mining policy. Mampon and four other projects were recently given a green light.
Mampon is part of Birim’s 230-sq.-km Dunkwa property, and Birim retains the rest of the property plus a royalty on production. The royalty is paid in advance on the minable reserves identified in the feasibility study, and then quarterly on any production in excess of the minable reserves identified in the study. The partners have hopes of mining a second deposit on the property, Aboronye, where trenching in the first half of 2001 identified gold mineralization in the 1-to-3-gram-per-tonne range over surface widths of 16-66 metres.
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