Ashanti weighs options as Lonmin cuts offer

By Ben Hirschler and Nicholas Kotch

LONDON, Oct 18 (Reuters) - Ashanti Goldfields Co Ltd and the Ghanaian government said on Monday they were considering all options after Lonmin Plc cut its offer for the group by 20 percent.

Lonmin amended its offer to 16 shares for every 27 Ashanti shares, down from the previous proposed ratio of 32 to 43, in a move which analysts said reflected the hedging problems closing in on Africa's third largest gold producer.

The revised bid values Ashanti at around $665 million, or $5.95 a share, against the previous offer from Lonmin -- which already owns 32 percent of Ashanti -- worth $7.50.

``There is a gap in the valuation that we have to sort out,'' said Ashanti's senior spokesman, James Anaman, by telephone from Accra. ``We are looking at that critically and we have other possibilities alongside this one that we are assessing.''

Ghana's government -- which has a 20 percent stake and a veto vote in the country's biggest company -- echoed that view, saying it would be talking to other potential investors who had expressed an interest.

Industry sources said other potential suitors included South Africa's AngloGold Ltd, which has long coveted Ashanti's rich gold mines, and Barrick Gold Corp of Canada, which is keen on the Geita gold project in Tanzania.

ASHANTI SHARES FALL

Shares in Ashanti fell to $4 in New York by 1510 GMT after closing on Friday at $4-10/16 while Lonmin dipped four pence to 601p in London.

``It (the revised bid) is a better price for Lonmin shareholders, but obviously if you're lowering your offer it tends to suggest you think there are some underlying problems,'' said one mining analyst at a U.S. investment bank.

Lonmin's new offer includes $100 million additional financing for capital expenditure on Geita and a warrant worth one tenth of a Lonmin share, or $1, if gold averages at least $325 per ounce over three years.

However, analysts said these two items were largely ``red herrings'' since the cost of developing Geita was well known and the timescale on the warrant made it of limited value.

A second analyst, who also requested anonymity, said the reduced all-share offer simply highlighted the problems of valuing Ashanti, less the liability of its hedge book losses.

``Anyone taking on that company would want to neutralise or sterilise that hedge and there's going to be a cost associated to that,'' he said.

``I suspect they have to satisfy themselves they've got $150-200 million and that's basically the difference between the first and second offers.''

STANDSTILL DUE TO EXPIRE

Ashanti faces a liquidity crisis after being caught out by a sharp rise in bullion prices which turned its gold hedge position from a profit into a loss, entitling its counterparties to margin calls of $270 million at a gold price of $325.

The counterparties have agreed a short-term standstill but this expires at 5.30 p.m. (1630 GMT). The Ghanaian government said it had asked for a one-month extension while efforts are made to resolve Ashanti's liquidity crisis.

The Lonmin offer is conditional on approval from the government and on a long-term standstill.

Ashanti said it expected to make a further announcement later this week when it announces its third quarter results.

It is Ghana's biggest company by far and the possibility that it will fall into foreign hands is a sensitive political issue for President Jerry Rawlings. Anaman said if a deal were struck with Lonmin the new company would be called Ashanti Plc.

Rawlings sacked the former mines minister last week after he spoke out of turn and backed Lonmin's bid. The new acting minister, Ekwow Spio-Garbrah, was briefing the West African country's government on the latest offer.

The combination of Ashanti and Lonmin would create a leading precious metals group with annual output of some 1.7 million ounces of gold and 1.2 million of platinum group metals.