Kufuor defends the Ashanti merger deal

"Ashanti is not Ghana," Kufuor said.

The Ashanti board and the single majority shareholder, Lonmin, approved the merger and then gained the go-ahead from the Ghanaian government, which holds a 16.9% "golden share". It agreed to the merger after a hectic emergency cabinet meeting.

Finance Minister Yaw Osafo-Maafo said government approval did not make the deal final. "The Ghanaian parliament can say yes or no, or modify the whole package. Parliament will also be required to decide on tax exemptions as part of the process."

However, the Sunday Times, Johannesburg, reported that AngloGold had secured a 30% tax rate instead of the usual 32.5%. Royalty payments to the government were to be 3% rather than on a sliding scale of 4%-6%, depending on a mining company's profitability.

AngloGold said it would pay the government US106m in shares to secure various concessions over the life of the Obuasi Deeps project, including the fixed royalty payments, a lower tax rate and a long-term lease.

Sources close to the cabinet said that AngloGold had made a last-minute offer of an additional US100m exclusively for the government's 16.9% stake. This pushed the government's stake in the $10bn merged group from 2.2% to 3.45%.

AngloGold originally submitted a merger offer in August to create a company with market capitalisation of $9.5bn and a listing on the Ghana Stock Exchange, which would increase the exchange's capitalisation by nearly 500%.

The deal also stipulates that two directors nominated by the Ghanaian government will serve on the 18-member board.

The merger creates the world's largest gold producer with 26 mines on four continents. It will produce 7.5 million ounces of gold a year.

Ashanti, burdened by high operating costs and problems raising cash to pay short-term debt, received the go-ahead from the Ghana govenrment on Tuesday, although parliament here will have the last word on the merger.

The merged company would produce 7.5 million ounces of gold a year.

The bid is subject to government approval here because the Ghanaian government is also the regulator of the target company.

The government, with a 16.9% golden share in Ashanti that allows it to veto any merger or takeover deal, agreed the merger after a hectic emergency cabinet meeting.

AngloGold, 51% owned by mining giant Anglo American, announced on October 15 it was making an all-share offer for Ashanti of $1.42bn.

Ashanti said last Monday its board had agreed unanimously to continue recommending AngloGold's offer to shareholders because it was "in the best interest" of its shareholders, employees and the people of Ghana.

AngloGold-Ashanti, the merged company, would become the largest gold mining company in the world in terms of resources and production, thus having "

Bannerman said the merger would have "a tremendous positive impact on Ghana's investment profile." Ghana's Minister for Mines Cecilia Bannerman.

Ghanaian President John Kufuor has not been left out of the intense public debate over the merger. He has flatly denied that the Ghanaian government allowed Ashanti to be swallowed up. "Ashanti is not Ghana," Kufuor said in an interview.

"The Ashanti board and the single majority shareholder of Ashanti, Lonmin, had approved the merger." Finance Minister Yaw Osafo-Maafo said government approval did not make the deal final: "The Ghanaian parliament can say yes or no or modify the whole package. Parliament will also be required to decide on tax exemptions as part of the process."

Explaining the government's decision favouring merger, mines minister Bannerman said: "Ashanti, despite its strengths, suffers from significant weaknesses like a constrained financial position, high operating costs in relation to its peers, lack of the required capital expenditure to exploit the full potential of its mines, the inability of its key shareholders (the Ghanaian government and Lonmin) to provide additional cash of 105 million US dollars to pay its short-term debts.

"It also faces risks in its mines in the Democratic Republic of Congo and Ivory Coast," she said.

AngloGold originally submitted a merger offer in August to create a company with market capitalisation of 9.5 billion dollars and the listing on the Ghana Stock Exchange which would increase the Exchange's capitalisation by nearly 500%.

The deal also stipulated that two directors nominated by the Ghanaian government would serve on the 18-member board.

Then British rival RandGold Resources submitted a counter-offer for a merger with Ashanti, with highlights including Accra, the Ghanaian capital, to be the operational centre for the new company, which would have had a market capitalisation of 2.1 billion dollars.
The board of the new company would have been evenly split and Ashanti was to nominate the chairman and chief operating officer.
In the RandGold offer, the Ghanaian government's stake would have been 13%, estimated at 209 million dollars, whereas AngloGold offered only 3.4% valued at 340 million dollars.
She said Anglogold's superior financial strength, technical expertise in deep level mining and commendable proposals on employment policies, staff training, safe working environment and community development had all been appreciated by the Ghanaian cabinet.
AngloGold, in the last five years, has had one of the highest dividend payouts to shareholders in the gold mining industry, and should begin to offer Ashanti shareholders dividends after many barren years of no-dividends.