The way is becoming clear for Ashanti Goldfields to take part in the rapidly developing gold industry consolidation, an upbeat Sam Jonah, the Ghanaian group's chief executive, indicated today.

Ashanti's access to the new Government of Ghana was much better than before and the President himself had told a delegation from Ashanti and Lonmin, its other big shareholder, that his government would "work to establish a proper value for Ashanti".

Jonah told me after presenting his third-quarter results in London: "The new government, unlike previous governments, has pledged to allow Ashanti to behave like a normal public company." This suggests the government would neither use the Golden Share, which gives it the right to veto any potential partner for Ashanti, nor its 20 per cent shareholding to impede a deal that would benefit all stakeholders in the company.

However, Ashanti remains in something of a financial straightjacket because it is under the watchful eyes of the bullion bankers and financiers on the other end of hedging arrangements that went badly awry and sent the company to the brink of bankruptcy in September 1999. The banking group has given the company breathing space until January 2003 to sort itself out.

Jonah insisted the banks were unlikely to stand in the way of a beneficial deal and pointed out that Ashanti had probably been in its most desperate financial condition when the banking group allowed it to acquire the Teberebie gold mine in Ghana.

He pointed out that, in its heyday, Ashanti was at the forefront of gold industry consolidation. In the space of three years it acquired four listed companies. "There needs to be fewer companies [in the gold industry] and we don't want to be left behind."

However, when asked whether Ashanti had any particular objective in mind on the acquisition or merger front, Jonah said the company was "in continuing dialogue with a number of interested parties ? but we're not unique, the whole of the industry is involved [in consolidation talks]".

Financial position strengthened

He insisted that Ashanti's financial situation had strengthened to the point where it was now in a position to take an aggressive stance in any consolidation discussions. He argued that in merger talks there were those who did and those who were done to. Ashanti was now in the former category.

Mark Arnesen, International Treasury managing director, told me relationships with the banking group had been transformed. "To say we've got a friendly banking group would be pushing it. But it is a much more reasonable banking group," he added. "We are beating the banks' expectations and they realise we have great cash-generating potential."

Two factors that still presented a potential threat to Ashanti's full financial recovery were: something going badly wrong with gold production, and the fact that from January 2003 it would once again face margin calls from counterparties to its hedging operations. (Under the moratorium, the company's hedging is margin-free until that time.) "We are talking to all counterparties and having some success," said Mr Arnesen. "But it is early days."

As some hedging arrangement had matured over time and because US dollar interest rates had fallen, Ashanti's hedge book was in much better shape. The hedge book, which was $41 million mark-to-market positive at the end of September, based on a gold spot price of $291 an ounce, would not now become "neutral" until the price was about $300 an ounce. (Analysts calculate that at the end of 2000 the hedge book would have been about $170 million negative at $300 an ounce).

Meanwhile, said Jonah, Ashanti's production was on target. The company expects to produce 1.6 million ounces of gold this year at a cash cost of under US$200 an ounce.

Ashanti is taking a very proactive approach to solving its financial problems, he pointed out. It was determined to put its balance sheet in order as the appointment of new financial advisers earlier this year showed. Among them is Houlihan Lokey Howard & Zukin Capital, a US firm that is, according to Jonah, one of the best bond-restructuring experts in the business. Bonds make up the biggest slice of Ashanti's conventional debt and the biggest bondholder is in the US. Jonah said most of the exchangeable note holders had now been identified and "dialogue with them has commenced". He would not say how the dialogue was progressing.

Analysts suggest that potential suitors for Ashanti, such as AngloGold and Barrick Gold, have been hanging back to see if Ashanti manages to clamber out of the deep financial pit it dropped into. There was always the possibility that Ashanti's assets might come up for sale separately and predators could do some "cherry-picking". That now seems unlikely, as Ashanti is obviously getting a firmer grip on its own destiny.