JCI

Denver — Ashanti Goldfields (ASL-N) has submitted a restructuring plan, together with a financial and operating review, to its hedge counterparties and lending banks, extending to mid-December the freeze on margin calls against the troubled gold producer.

The Ghana-based company was forced to arrange interim financing and a freeze on margin calls in early October, when a sudden surge in the price of gold left it with a US$450-million net liability in its hedge book. The difficulties scotched a merger agreement with Ashanti’s major shareholder, U.K.-based precious-metals producer Lonmin.

The margin-free arrangements last until Dec. 17, but the hedging counterparties have until the close of business on Dec. 8 to pull the plug on the agreement. The margins would then come due on Dec. 9.

Most of the credit lines that were to have expired on Dec. 2 will now be rolled over to Dec. 17.

On Nov. 1, the company’s hedge portfolio included net forward sale and put options on 8.9 million oz. at an average estimated price of US$374 per oz. Net call options totalled 4.2 million oz. at US$356 per oz. The net value of the hedge book was a negative US$219 million.

The government of Ghana has some regulatory authority over the company’s restructuring plan, and the two parties are currently in discussions. The government is also a 20% shareholder in Ashanti.

The restructuring entails a new mine plan at the company’s flagship Obuasi operation in south-central Ghana.

Under the revised life-of-mine plan at Obuasi, surface operations will wrap up by the end of 2000 and tailings retreatment by the end of 2002. At that point, limited underground production, estimated at 500,000 oz. per year, will be treated through the sulphide treatment plant. Cash operating costs are expected to come in below US$200 per oz.

Ashanti will write down the current value of the low-capacity shafts at the northern end of Obuasi and a number of treatment plants, all of which will be shut down as part of the new plan. The writedown is estimated at US$140 million.

Meanwhile, Ashanti has appointed Barclays Capital to arrange a US$100-million debt facility to complete construction of the Geita project in Tanzania, as well as replace or renew a US$95-million tranche, due in December, on its revolving credit line.

Geita is scheduled to enter production in the third quarter of 2000. At full production, it is expected to crank out up to 500,000 oz. annually at operating costs of less than US$180 per oz.

At Sept. 30, the company had cash and liquid assets totalling US$95.2 million and was US$460 million in debt.