Ashanti Goldfields Reaches Agreement with Mineworkers Union on Labour Rationalisation Plan for Obuasi Mine

11:20 a.m. Jul 21, 1999 Eastern

NEW YORK--(BUSINESS WIRE)--July 21, 1999--Ashanti Goldfields has reached agreement with the Ghana Mineworkers Union for a labour rationalisation plan involving the retrenchment of over 2,000 permanent employees. The implementation of the plan will begin on 1 September, 1999 and, when complete, will result in a reduction of over 20% in the Obuasi workforce.

The Agreement was signed on 15 July between Ashanti Goldfields and the Ghana Mineworkers Union. It was approved on 16 July by the Labour Department of the Ministry of Employment. On 19 July the terms of the agreement were accepted by the Obuasi workers at a rally organised by the Mineworkers Union.

The Agreement provides for redundancies of 2,000 junior staff (i.e. shift-workers), 150 Ghanaian Senior Staff (i.e. salaried employees) and 5 expatriate senior staff. As at 30 June 1999, the number of workers employed by Ashanti in each of those categories at the Obuasi Mine was 8,152 junior staff, 942 Ghanaian senior staff, and 41 expatriate senior staff. One month's notice of redundancy is required to be given, and the redundancy compensation for junior staff has been agreed at 20% of current annual basic pay for each year of service. This redundancy compensation is in line with prevailing practice in the Ghana mining industry, and is very similar to redundancy packages that have been agreed for recent retrenchment exercises at Bogosu Gold Limited (approximately 800 employees), Ashanti's Iduapriem Mine (215 employees) and some other mines in Ghana.

The background to the rationalisation plan is the drastic fall in the gold price, which has been exacerbated since the announcement in May of the planned gold auctions by the Bank of England. Ashanti has renewed its efforts in reducing operating costs across all of its mines, and in particular is reviewing critically the future of the Obuasi surface mine, which is currently the highest cost mine in the Group. The labour rationalisation programme at Obuasi will involve manpower reductions in all areas of the mine. This will include: the underground mine (which employs 5,000 workers), where substantial gains in stoping and development productivities have been achieved through underground mechanisation over the last three years; the surface mine (currently 1,000 workers), most of which is scheduled to close during next year; and the operational overhead areas (currently 2,000 workers). In addition to reductions in permanent staff, management has began making substantial cuts in the level of contractors and casual workers, who numbered 1,400 at 30 June 1999.

The Company plans to implement the labour reductions over a period of six months starting from September, in an orderly manner that avoids disruption to production or to the development of the underground mine. An extensive employee communication programme is underway to explain to the workforce the reasons for the rationalisation. Ashanti will seek to the extent possible, to minimise the social impact of the retrenchment by identifying employment opportunities for redundant workers.

The total cost of the labour rationalisation plan is estimated at US$10 million. Ashanti expects to take a special charge to cover the cost of the plan in the quarter ending September 1999. The plan is expected to reduce Obuasi operating costs by about US$7 million per annum, equivalent to US$9 per ounce at current production levels.

All of Ashanti's mines other than Iduapriem (which is expected to close in 2000) and Obuasi have operating costs below US$200 per ounce.

The Company will be announcing its results for the quarter ended June 1999 on 28 July and will discuss the results as well as the rationalisation programme with the investment community on that date.