Ashanti profits slip, sees more Geita gold

02:50 a.m. Nov 04, 1999 Eastern

LONDON, Nov 4 (Reuters) - Ghana mining company Ashanti Goldfields Co Ltd on Thursday announced an 82 percent increase resources at its Geita gold mine in Tanzania, effectively increasing the value of its most promising asset.

Ashanti now puts Geita's resource base at more than 12 million ounces, following ``outstanding'' exploration in the Nyankanga area.

Ashanti, which has been struggling with a liquidity crisis triggered by big losses on its hedge book, made the announcement as its reported third quarter results showings earnings fell to $18 million, before an exceptional charge of $10 million for labour rationalisation at the Obuasi mine.

Earnings in the year ago period were $20.3 million, before an exceptional charge of $30 million for the Iduapriem mine.

Ashanti also gave an update on its hedging position as at November 1, showing that the mark-to-market value of the portfolio was a negative $219 million at a spot gold price of $292 per ounce.

The company added that a $10 move in the gold price up or down would alter the mark-to-market value of the portfolio by about $97 million.

Ashanti said forward sales and put options contracts, designed to provide it with gold price protection, totalled a net 8.9 million ounces at an estimated average price of $374 per ounce. Net call options totalled 4.2 million ounces at an average strike price of $356.

Gold production in the three months to September 30 fell to 379,543 ounces from 420,162 a year ago and Ashanti said it expected total 1999 output to exceed 1.5 million ounces at an average cost of $213 per ounce.

Lonmin Plc, which already owns 32 percent of Ashanti, on Wednesday withdrew a bid for Ashanti after an improved offer for the company was rejected by the board of the group.

Industry sources said the Ghana government, which has a 20 percent stake and veto vote in Africa's third largest gold producer, remained opposed to the Lonmin deal.

Lonmin said it was open to resuming talks with both Ashanti and the government of Ghana at a future date.