For US$205 million in cash and help in obtaining project financing,
The agreement has AngloGold arranging or providing US$130 million in project financing for Geita, with each company repaying 50% from its respective share of cashflow.
Most of the US$130-million financing will be used to repay in full an existing US$100-million bridge loan arranged by Barclays Capital; the balance will be used to reduce inter-company loans made to the project by Ashanti. AngloGold will acquire half of the remaining balance of these inter-company loans.
Stating that the closing of the Geita deal will “place Ashanti’s finances on a much firmer footing,” Ashanti CEO Sam Jonah said the US$335 million in newly available cash will allow Ashanti’s gross debt to be reduced to about US$355 million.
He said that while Geita’s auction had attracted intense competition from seven major gold mining companies, the choice came down to two bidders: AngloGold and
“Ashanti has the highest possible regard for both companies,” said Jonah. “But in the end, AngloGold was selected because of its African experience and because of its undoubted excellent record in the development of mines in Africa.”
Jonah said Ashanti and AngloGold will discuss with Barrick the general development of the emerging Geita-Bulyanhulu gold district.
The Geita mine is expected to be commissioned in June 2000, with production targeted at 150,000 oz. gold this year and an average of 500,000 oz. in each of the following five years. Operating cash costs are expected to be below US$180 million, whereas capital costs are pegged at US$165 million (T.N.M., March 6-12/00).
At Dec. 31, 1999, Ashanti had spent US$138 million developing Geita, with US$115 million in funding derived from inter-company loans and US$23 million from supplier financing.
Anglogold and Ashanti will operate the Geita mine through a joint-venture committee that will have equal voting rights and representation from both partners.
The partners will examine the feasibility of expanding Geita’s annual plant capacity from 4 million tonnes to 7 million tonnes by 2004. If requested to do so, AngloGold will fund Ashanti’s share of expansion costs on terms to be agreed upon.
“We are thoroughly convinced that working together with Ashanti, we can [change] a very good orebody into an absolute world beater,” said Bobby Godsell, AngloGold’s CEO. “We think there is very considerable upside: increasing throughput from 4 to 7 million tonnes annually is eminently do-able and value-generating.”
He also envisages the partners gaining access to Geita’s orebodies at deeper levels than under the current plan.
Elsewhere in the Geita district, Ashanti and Anglogold will form a second, similar joint venture to which Ashanti expects to contribute its entitlement under the Spinifex joint venture and to which AngloGold will contribute its promising Nyamulilima Hill property, also known as “Ridge 8.”
Beyond Geita and the surrounding projects, Ashanti and AngloGold will jointly seek out and develop mines throughout Africa, including their home countries of Ghana and South Africa, respectively.
Commented Godsell: “These two companies share a couple of important things: they believe in gold and they believe in Africa. They believe in the capacity of this continent to hold its own in the international gold-mining arena.”
Added Jonah: “In looking for friends, you look for rich ones. It makes sense to build alliances, and we have decided that Ashanti’s interests will best be served by going into an alliance with AngloGold.”
AngloGold has made it widely known over the past two years that it is seeking to broaden its risk profile by diversifying its operations away from its deep underground gold mines in South Africa.
The Geita deal is expected to close in the next six months once several conditions are met, including approvals from the South African Reserve Bank and from Ashanti’s shareholders and creditors.
AngloGold also announced a second blockbuster deal in Africa: the US$132-million cash acquisition of a 40% stake in Johannesburg-based
“These two deals [Geita and Morila] will give Anglogold some 800,000 oz. of annual production from Africa, excluding South Africa,” said Godsell. “It makes us a continental company and we’re very proud of that. It was African gold that literally provided currency for the European Renaissance, and it would be nice to get back to being the world’s bankers.”
Once the sale is completed, AngloGold will become operator and the remainder of the project will be held by Randgold (40%) and the Malian government (20%).
Randgold will use the cash to repay in full a US$51-million bridge loan from Barnato Exploration. The repayment date has been extended to June 30, 2000.
In return for the extension, Randgold will pay Barnato a US$3-million fee plus US$32,802 for each day the loan remains outstanding after April 30, 2000.
Mine construction at Morila, which began in 1999, is 30% complete and prestripping has started.
The open-pit operation is expected to produce 420,000 oz. gold annually, with average cash-operating costs estimated at US$137 per oz. over a 14-year mine life.
Total capital expenditures are pegged at US$84.6 million, of which US$55 million had been spent by the end of last year.
Reserves at Morila are estimated at 26 million tonnes grading 4.03 grams gold per tonne (3.3 million contained ounces), whereas resources are pegged at 33 million tonnes of 4.22 grams gold. The first 1 million tonnes of ore to be mined will be free-digging oxide material.
Randgold also owns and operates the Syama open-pit gold mine in Mali and has a number of advanced projects and exploration programs there and elsewhere in West Africa.
AngloGold has been active in Mali through its operation of the Sadiola Hill open-pit gold mine, co-owned by Toronto-based
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