AGC: "We're searching for solution to liquidity problem"

GSE All-Share Index records first decline

Accra (Greater Accra) 14 Feb. 2000

Ashanti Goldfields Corporation said on Monday that its Board has worked tirelessly for a solution to the lack of liquidity caused by the right of counterparties to call for a margin.

"This has proved to be quite a challenge since it involved dealing with 17 hedge counterparties, each with different positions and exposures to Ashanti and different vested interests in the variety of options being pursued."

This was contained in a statement issued in Accra on Monday in reaction to government's position on the financial crisis in the Company.

The government has stated, among other things, that if the Company's financial position is not addressed urgently, it is possible that it will go into bankruptcy, resulting in liquidation.

"AGC is in distress and it is important to take measures which will restore it to financial health immediately.

"Solutions have long been offered which could have addressed the immediate and long-term problems of Ashanti. It is time that shareholders took a more concerned interest in the state of the Company."

The Ashanti statement said it regrets that the Government felt it necessary to issue such announcements at a delicate stage of the Company's negotiations with its bank group.

"Regrettably, a significant number of statements contained in the announcement are inaccurate or misleading."

The statement said the Ashanti Board sought to secure government guarantees for the hedge book backed by a major Central Bank and explored World Bank/International Finance Corporation assistance in the form of a supranational guarantee.

It also sought quotes for political risk insurance to enable the hedge banks to grant margin-free trading.

"It further sought to secure additional funding from Ashanti's senior lending banks...None of these options could provide a solution acceptable to all parties in the time available to resolve the crisis."

Giving a background on the hedge crisis, Ashanti said an announcement in late September, last year, by the Group of 15 Central Banks to limit their sales of gold into the market led to a sharp increase in the price of the commodity.

At one stage, it gained 86 dollars during 11 trading days.

The Company's hedge book had been structured with the expectation that gold prices would continue their steady decline. But the developments turned the hedge book from being a significant positive amount to a significant negative amount.

The statement said the impact of this was that the hedge counterparties were entitled to call for margin, which the Company could not meet.

"The exceptional rise in the gold price was unforeseen and Ashanti was not the only company which was wrong-footed by these events.

"However, because the Company's margin free limits were lower than those of its peers in North America due to its Ghanaian domicile, the gold price rise caused a major cash crisis for the Company.

The Government has indicated that the hedge book had moved to a value of negative 570 million dollars, which meant that Ashanti had to pay 270 million dollars as margin calls to its hedge book counterparties.

On the potential sale of assets to raise funds, it said on account of restrictions in its corporate loan covenants, the Geita mine in Tanzania was the most likely candidate for sale.

However, the disposal of an interest in Geita at that time would have involved the sale of associated hedge contracts.

"This would have eroded the net cash proceeds receivable given that the mark-to-value value of the hedge book was a negative 570 million dollars."

The statement said the solution that has emerged, which the board believes should be acceptable to all stakeholders, involves essentially securing a new debt facility of up to 100 million dollars to enable the company to complete its Geita project.

The others are securing the proposed sale of a 50 per cent joint venture interest in Geita and restructuring the Board with the appointment of new additional independent directors with the relevant experience.

Meanwhile, an Extra-ordinary General Meeting (EGM), of shareholders of the Ashanti Goldfields Company (AGC) to elect a new Board of Directors is to be convened on Friday, 3 March.

Mr Justice Richard Apaloo, a High Court Judge announced this in Accra on Friday, as part of his consequential orders.

He pointed out that only names in the register of shareholders of the company at the close of business on Wednesday, 9 February would be entitled to vote.

GRi../

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Accra (Greater Accra) 14 Feb. 2000

The Ghana Stock Exchange on Friday recorded the first decline this year in its market indicator as SSB Bank (SSB) lost five cedis in a market characterised by bearish sentiments.

The All-Share Index, which has for the past weeks made a slow but steady climb to reach 742.99 points by last Wednesday, dropped by 0.07 points to close the week at 742.92 points.

A total of six equities sold 12,700 shares from 1.2 million shares offered.

Most of the 17 equities, which made offers, posted significant amounts of shares ranging from 731,600 from Unilever Ghana Limited (UNIL) to 62,300 shares from Paterson Zochonis (PZ).

Total shares traded on Wednesday were 17,400 while offers ended at 478,990 shares.

Bids finished the week down from 58,700 to 19,100 shares with market capitalisation also down from 3,216.19 billion cedis to 3,216.08 billion cedis.

In the broader market, there were three price changes - two up and one down.

Guinness Ghana Limited (GGL) gained two cedis at 974 cedis. FML was up by a cedi at 936 while SSB Bank lost five cedis at 1,980 cedis.

The following are the last prices of listed equities in cedis:

ABL 470

AGC 18,700

ALW 2,489

BAT 466

CFAO 38

EIC 1,880

FML 936 +1

GBL 1,450

GCB 769

GGL 974 +2

HFC 750

MGL 200

MLC 150

MOGL 14,500

PAF 295

PZ 800

SCB 19,200

SPPC 150

SSB 1,980 -5

UNIL 1,850

UTC-E 125

CMLT 421

GRi../

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