Ashanti Recommendation By Friday

A giant stride will be made on Friday in deciding who will win the two-way race for Ashanti Goldfields, the Ghanaian gold producer. This is the day French bank Societ? G?n?rale, the advisers to the Ghanaian government, will submit its recommendation on the best bid.

A senior market source, close to the government, told Mineweb that Societ? G?n?rale would table its recommendation by no later than the end of this week.

"The government will then consider it (the SG recommendation) carefully before it makes its decision," the source said. No time has been set for the government's final pronouncement on the deal, but its instruction to SG to act "expeditiously" in evaluating the offers, suggests it will not drag its heels in making a decision.

"SG will have weighed up all the factors; price, long-term stability of the company, employment, inward investment and the development of Obuasi, of course," said the source. "The government obviously has a long-term view and that has also been taken into account." The timing of the report could prompt a higher offer before the end of the week from Randgold Resources, the London-based gold producer that is trying to overturn the Ashanti board's unanimous decision to support a rival offer from South African gold producer, AngloGold.

The source said, however, that if a higher Randgold offer was made and led to another Ashanti board meeting, Societ? G?n?rale would be forced to await its outcome.

The Ghanaian government said earlier it would be guided by the recommendation of the Ashanti board, when making its decision. The Ashanti board last week unanimously endorsed an all-scrip offer by South African gold producer AngloGold, to swap 29 of its shares for every block of 100 Ashanti shares.

At today's opening share prices in New York, the AngloGold offer values Ashanti shares at $10.26 each, 9.6 percent below Ashanti's closing price last night of $11.35. Randgold closed yesterday at $11.35 a share.

Randgold chief executive Mark Bristow, has made it clear that he will not shy away from a bidding war. He has said an increased offer is likely, despite the fact that Randgold's original offer -- rejected by both the Ashanti board and Lonmin, Ashanti's largest shareholder - is still higher than AngloGold's offer.

AngloGold says its offer is final and will not be changed.

The rationale behind the higher Randgold offer is to re-establish a 15 percent spread between its offer and the lower AngloGold bid. A 15 percent gap, says one London banker, would allow Lonmin to sell its Randgold shares at a discount and still realise a price higher than the AngloGold offer. Lonmin owns 27.6 percent of Ashanti.

The Lonmin vote is crucial to the 'schemes-of-arrangement' proposed by both Randgold and AngloGold, given that Ghanaian law dictates that a merger offer should garner the support of at least 75 percent of the shareholders to be successful. An outright rejection from Lonmin would torpedo any offer.

It is uncertain how a straight increase from Bristow and Randgold would change the current state of play, given Lonmin is precluded from even holding discussions with Randgold, unless it offers cash. And raising more than $1.5 billion in cash is likely to prove a bridge too far, even for a feisty Randgold.

Lonmin seems unlikely to change its preference for cash over Randgold shares.

Its seemingly immovable stance looks unlikely to change. For one, it has given AngloGold what amounts to an irrevocable undertaking not to accept Randgold paper. There is also lingering uncertainty over how the Randgold stock will behave in the event its succeeds in its bid. AngloGold's paper, on the other hand, continues to be regarded as cash equivalent, giving it the edge over Randgold.

But there is an alternative. Randgold could offer a straightforward tender for Ashanti's shares, which would leave it needing only a simple majority, rather than 75 percent. Under the tender process, however, Randgold would be compelled by Ghanaian law to leave 25 percent of Ashanti behind as a listed Ghanaian entity. But carving up the country's most valued business is unlikely to be an option that appeals to either bidder, management, or the Ghanaian government.