Ghana gov’t supports AngloGold-Ashanti tie

The government of Ghana has expressed its support of the planned US$1.7-billion merger between Ashanti Goldfields (ASL-N) and AngloGold (AU-N).

The government agreed to vote its 16.9% stake in Ashanti in favour of the merger and has vowed to vote against any competing offer. Also, the government will not sell or transfer any of its shares in Ashanti; nor will it solicit a competing offer.

In return, AngloGold has agreed to nominate as directors two citizens of Ghana recommended by the government — in addition to the appointment of Sam Jonah (currently Ashanti’s CEO) as president of what will likely be known as AngloGold Ashanti. The company must also list shares in the merged company for trade on the Ghana Stock Exchange.

AngloGold and the government have agreed to enter into a “stability agreement” pending parliamentary approval of the deal. This agreement spells out the government’s fiscal and regulatory responsibilities vis-a-vis its role as shareholder of Ashanti.

Under the stability agreement the government will:

— extend the mining lease at the Obuasi mine until 2054 and freeze mining royalties at 3% for 15 years;

— fix Ashanti’s corporate tax rate at 30% for 15 years;

— guarantee that its “golden share” will apply only to Ashanti’s assets and operations in Ghana; and

— allow Ashanti to retain up to 80% of its exportation proceeds in foreign currencies offshore.

In exchange, AngloGold will issue the government some 2.7 million shares of the merged company and pay US$5 million in cash within three days of parliamentary approval of the stability agreement. AngloGold is also on the hook for US$5 million to help cover the government’s costs associated with the transaction.

At Obuasi, AngloGold is obliged to spend US$220 million on the existing mine, as well as US$44 million on exploration and feasibility studies by the end of 2008. In all, AngloGold has agreed to spend US$570 million over the mine’s life should the Obuasi Deeps program prove viable.

AnlgoGold is offering 29 of its own shares for every 100 Ashanti shares. The deal will terminate if parliament fails to approve it by the end of July.

Ashanti shares were US30 higher at US$13.30 in late afternoon trading following the news on Dec. 12; shares in AngloGold were off US8 at US$46.98.