AngloGold to use Africa allowance
November 4, 2003
By Sherilee Bridge
Johannesburg - AngloGold would take advantage of the doubling of South Africa's R2 billion exchange control allowance for foreign direct investment into the rest of Africa, it said at the weekend.
Keen to get started on the $1.5 billion development of Obuasi Deeps in Ghana, AngloGold last week agreed to issue the government of Ghana an additional R731 million worth of shares in exchange for the fiscal and regulatory guarantees it needed to proceed with the mine deepening project at the Ashanti Goldfields asset.
While there were exchange control restrictions, financial director Jonathan Best said, the investment would be funded by offshore reserves and helped by the R2 billion Africa allowance.
The treasury lifted the amount of money local companies can invest elsewhere on the continent from R750 million to R2 billion last October and in February's budget increased the amount they could takefurther afield from R500 million to R1 billion.
Bobby Godsell, the chief executive of AngloGold, said the company needed security of tenure before it poured billions of dollars in foreign direct investment into Ghana.
In exchange for the government's guarantee of a long-term mining lease, a fixed royalty and a lower tax rate, AngloGold will issue the government of Ghana 2.7 million shares.
That is over and above the 9 million shares, worth close on R1.5 billion, the government will receive as a 16.9 percent shareholder in Ashanti based on AngloGold's offer of 29 of its shares for every 100 Ashanti shares.
Godsell said the additional shares would increase Ghana's share of AngloGold Ashanti from 2.3 percent to 3.3 percent.
The government will retain its golden share in the Ghanaian assets and will nominate two representatives to the board.
The controlling golden share gives the government a say in the future of Ashanti's Ghanaian assets, one of the largest contributors to its gross domestic product.
The terms of agreement were revealed after the Ghanaian government threw its weight behind AngloGold's $1.5 billion all-scrip bid for Ashanti, shunning Randgold Resources' higher $1.7 billion rival offer.
"Although a further period of three to six months is required for the completion of the merger, AngloGold is already planning the successful integration of the two companies," Godsell said.
The transaction still requires the blessing of the US Securities and Exchange Commission, the approval of the high court of Ghana and a yes vote by Ashanti shareholders.
AngloGold said it hoped to complete the merger in the first quarter of 2004.
AngloGold bucked a declining gold index by advancing 2 percent to R272.10 yesterday.
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