Open Letter To Lonmin PLC and the Board of AGC

This open letter seeks to explain to the Ghanaian public how Lonmin plc and Lonhro have succeeded in fleecing Ghana and to ask why the leadership of Lonmin plc should expect Ghana to accept their dictates that are patently detrimental to Ghana’s interest. This letter seeks also to briefly explain the historical relationship between Ghana and Lonhro/Lonmin and presently determine what benefits Ghana obtains from this relationship. Above all, this letter seeks to refer Lonmin plc to the issues discussed with respect to the golden share, the attempt to merge or consolidate AGC operations with another giant mining company, the shortcomings of Lonmin plc and lastly, the need for accountability by Lonmin plc.

As Lonmin plc senior executives seek to meet Ghanaian government officials this month to discuss issues which are not clearly identified on any agenda, it is imperative that Lonmin plc and the board of AGC understand the position of Ghana. In a country where the regulatory environment is weak, where there is lack of proper advocacy and activism to prevent the deterioration of corporate governance, where institutions to protect democracy and ensure participation by all are lacking or non existent, where the presence of extreme poverty pushes many to become compradors who are eager to sell their own country for a mess of pottage, it is incumbent on those who care and are knowledgeable to step up to the plate and defend the defenseless, the weak, the poor and the needy.

Though Lonmin plc has not made its agenda known to the government, it is believed by many that the following are the issues which should be on the agenda:

? The need for accountability in Lonmin’s relationship with Ghana, in particular the need for Lonmin plc to pay Ghana and the many Ghanaian investors for the losses resulting from speculation on gold prices undertaken by Sam Jonah their representative on the AGC board.
? Discussions and execution on the 28 point demands made on Lonmin plc and the board of AGC. (vide infra)
? End any merger or consolidation plans unless Lonmin plc can provide valid answers to questions raised on the issue below.
? Publicly express Lonmin’s recognition of Ghana’s position on the issue of the golden share in terms of the transfer of risks.

Lonhro/Lonmin historical relationship with Ghana

Lonhro, the mother of Lonmin plc, is alleged to have acquired their interest in AGC by paying a very small amount of money in cedis in the bad old days of the previous administrations. It is alleged Lonhro obtained a loan in Ghana in cedis for this acquisition and failed to make any material capital investment in AGC until the recent privatization around 1984. Additionally, Lonhro acted as a supply agent of AGC for most of the supplies of AGC and sent supplies with inflated prices to AGC. Further, Lonhro charged AGC commission on top of the inflated prices for acting as an agent of AGC. If these allegations are true, may I ask whether Lonmin plc is the type of investment partner Ghana needs?

Since the recent privatization and the emergence of Lonmin plc (the successor company to Lonhro) Ghana has continued to be fleeced. The Technical Service Agreement (TSA) which gives Lonmin plc management rights for approximately $2 million is unconscionable and needs to be revoked immediately. The agreement has only rewards for Lonmin plc and all the risks on Ghana. Lonmin’s abysmal failure to supervise the management and actions of Sam Jonah and his ex CFO and business partner bankrupted AGC and this has cost many Ghanaians millions of dollars and has cost Ghana the loss in the value of its shareholdings not to mention the whittling down of its percentage ownership. This woeful neglect has cost Ghanaians jobs as well as placed AGC at the mercy of its counter hedging parties. Furthermore, the effect of the speculation on gold prices is not yet over for AGC. Lonmin plc should be accountable!

IS GHANA ANTI-BUSINESS AND ANTI-INVESTMENT?

Sam Jonah said that “it is only when the golden share was removed that investors would do business with Ashanti on the stock market or “play the game” with Ashanti.” This preposterous position of Sam Jonah in implying that if he does not get his way, then Ghana is not ready for the big leagues of global business is criticized by Dr. Kofi Ellison in his piece on the golden share. Kofi Ellison writes, “The propaganda machine of the AGC and its surrogates continue to trumpet the rather bizarre notion that the government’s decision constitutes an anti-investment stance.” It is imperative that Lonmin plc restrain Sam Jonah from such activities which are not in the interest of the country he professes to love.

Ghana’s unwillingness to offer the golden share to Lonmin is based on sound economic, social and political underpinnings. The rationale is clearly stated in a recent article by the author. Supporting the strong conceptual basis for rejecting any merger or consolidation idea I wrote “never mind what Ghana wants. Never mind the fate of the many poor miners. Never mind that Ghanaian investors who bought AGC at the equivalent price of $18 to $27 a share have lost significant sums of money due to the reckless mismanagement of AGC by Sam Jonah. Never mind Ghana’s strategy of protecting its natural resources, creating and maintaining high levels of employment, high foreign exchange reserves, high demand for local goods and services; never mind socio-economic benefits that necessitated the introduction of the golden share provision. These socio-economic benefits and strategy do not change because AGC is virtually bankrupt; these benefits and strategy do not change because there is a new NPP administration; the government’s strategy and socio-economic conditions made perfect sense then and make perfect sense now!”

MERGER AND CONSOLIDATION IS QUESTIONABLE

The conceptual basis for our disdain for any merger or consolidation is stated in another article written on that issue some months ago. In it I question the position of those proposing a merger or consolidation by writing “Where is it written that the only way a mine or mines can be operated profitably or efficiently is if it is a part of a giant global operation? What is the benefit or advantage that AGC would derive from such a merger that AGC is not getting simply because it is not part of a global giant mining operation? Are there any synergies or economies of scale to be derived in becoming a cog in the wheel of a giant mining operation with head office in J’burg or London which uses basic technology? What is the purpose of global consolidation other than empire building? Are there any real benefits to local mine operations or Ghanaian operations that cannot be realized by stand alone operations? What is in it for Ghana or the Ghanaian mine as a whole of having our mining operations managed by a bunch of overpriced, overpaid and underperforming silk socks wearing third rate bureaucrats in London and elsewhere? Is rationalization, merger, consolidation an end in itself? Why are small mines in the United States and elsewhere succeeding while large mines in other places failing? Apart from the ability to raise capital, which AGC succeeded in doing until it’s self-orchestrated near collapse, what does AGC need from a jumbo-sized or a super sized giant mining operation?”

GOLDEN SHARE AND THE ATTEMPT TO TRANSFER RISKS

Doubtless, you will agree with me that the debate about Ghana’s golden share in AGC is all about transferring of risks. And as Michael J. Mandell wrote in a recent Business Week edition “…pushing risk on to others without their consent is a bit like dumping garbage on other people’s property in the middle of the night” Additionally, he adds “Imposing non-consensual risk is in some ways like stealing: On average, it makes the people absorbing the risk worse off” My question is why Lonmin plc and the members of the board can sit down mum while Sam Jonah goes out telling lies to the international community and in particular, the people of Ghana, the real issue surrounding the golden share in AGC? Let me draw your attention to an apparent slide presentation of Sam Jonah at a conference in South Africa.

The details of slide 23 (Indaba 2002) reads as follows:
The Future: What next for Ashanti?

? There is a great deal of misconception surrounding the Golden share
? The Golden Share can only be exercised for:
1. The voluntary winding up or liquidation of the company
2. The disposal of any mining lease
3. A material disposal of assets
4. An amendment, deletion, redemption, or purchase of the Golden Share provision ? Still, it should be removed on account of its negative investor perception

Sam Jonah fails in this presentation to disclose the impact on Ghana, Ghanaian miners and others if the golden share provision is removed. This is a clear case of lying by omission. The board of AGC must restrain him from doing this!

It is apparent to some that the Ghanaian public and certain international media have been misinformed about the real issue surrounding the Ghanaian government ownership of the golden share. This deliberate and fraudulent misrepresentation of the issue of the golden share is perpetrated by the CEO, Sam Jonah, with the apparent silence or acquiescence of Lonmin plc and the board. If this is correct, then this is a fraudulent way of doing business. It is the same type of lies which landed AGC in its current predicament and which Sam Jonah continues to perpetrate. There is a pattern of fraudulent misrepresentation of facts to the public. It is the same reason why investors do not trust AGC and do not want to put their money.

FINANCIAL AND OTHER INVOLVEMENT OF BOARD MEMBERS WITH SAM JONAH, CEO OF AGC

It has come to the notice of people that certain board members do sit on certain boards with Sam Jonah. In particular, Mr. Chester Croker is on the same advisory board of Modern Africa which has significant investments in Ghana including owning Phyto Riker. Sam Jonah had similar financial arrangements with Mark Keatley, the former CFO. They both owned MetLab with one Dr. Danso, who lives in Zimbabwe.

In the interest of transparency and to end all opaque operations and transactions, the public would like to know the nature and extent of the financial and other involvement with Sam Jonah outside AGC. In the interest of Ghana, AGC and of course the SEC, the New York Stock Exchange of the United States and other relevant exchanges, please disclose all dealings which may appear to conflict your interest as board members of AGC to the Ghanaian public.

With respect to the speculation on the gold prices, it is imperative that there be accountability and the real culprits punished. It is not right that those suffering from this debacle are the people of Ghana whose investment has whittled away from near 20% to 13%, the 2500 miners who lost their jobs, the many Ghanaian investors who bought shares between $18 to $28 a share. These people need to compensated and reimbursed for the reckless actions in AGC and Lonmin plc MUST PAY UP!

You will no doubt agree with me that in this era of massive corporate failures in the United States and the globalization of capital sourcing, it is imperative that the independence of board members be a foundation of proper corporate governance. We are in an era of transparency, accountability and responsibility. And this is true for a US company listed on the New York stock exchange as it is true of an African company listed on the New York Stock exchange. The same level of scrutiny therefore must exist of the role of board members, their independence and their performance of their fiduciary role of protecting shareholder interests; not the interest of the CEO or a small number of deep pocket corporate shareholders.

DEMANDS ON AGC AND LONMIN PLC

The following demands are therefore what we think Lonmin plc and the board of AGC must answer at the meeting with Ghanaian officials.

1. Replace Sam Jonah with another Ghanaian CEO at AGC.
2. End the TSA and end the yearly payment of approximately $2 million to Lonmin by AGC.
3. Audit and investigate the Charitable Donations Fund for the last 16 years.
4. Audit and investigate the public relations expenditure budget for the last 16 years
5. Audit and investigate contracts, including contracts for materials and supplies, contracts for professional and consulting services and capital expenditures for the last 16 years to determine performance, conflict of interests, related party transactions, self-dealing, commission payments to agents and tax evasion.
6. Investigate Kwesi Ndoum and Deloitte Touche’s special arrangements including the so-called $5 million contract which was alleged not to have been performed.
7. Revamp the board of AGC to include qualified Ghanaians living abroad since AGC has many board members who live abroad.
8. Replace all non-Ghanaian management expertise in Ghana since there must be an exit strategy for any TSA and it is about time AGC is fully managed by qualified Ghanaians.
9. Require all AGC board members to disclose all conflict of interest and related party transactions known to them in the last 16 years. This must include all transaction between Sam Jonah and board members (current and past) outside AGC activities.
10. Require all board members to provide financial position statement, itemizing individual ownership interest in all transactions for all 16 years as well as current year.
11. Change auditors to bring in more competence and independence.
12. Require that all consulting be done by experts who are not with current or past auditors (Deloitte & Touche)
13. Require Sam Jonah to resign board Chairmanship of Ghana Airways immediately.
14. Withdraw all stock options given to Sam Jonah in AGC as well as the revamped stock options given to management last year to replace the options already in water.
15. Provide full disclosure of total emoluments, including constituent elements clearly itemized including taxes paid for each of the last 16 years for Sam Jonah and all employees in AGC head office in Accra.
16. End the contingent golden handcuff (golden parachute) in the Sam Jonah services contract.
17. End the subsidizing of the presidential political campaign of Sam Jonah by including in his total emoluments, the market value of the private use of AGC facilities including its plane, cars, etc.
18. Require all board members to spend at least one week in a year in the home of a randomly selected deep shift miner in Obuasi or Bibiani to appreciate their deplorable living conditions and thereby undertake policies to improve their standards of living.
19. Lonmin should pay for any margin free debt obligations entered into as a result of the hedging fiasco.
20. Ensure that the suit against Sam Jonah is not paid by AGC.
21. Require board members to declare their independence from the CEO, Mr. Sam Jonah and disclose their financial and other involvement with the CEO outside AGC and within AGC.
22. Require the board to offer its fiduciary duties for the interest of all shareholders and not only Sam Jonah and certain shareholders.
23. Abide by the regulations of the SEC, the New York Stock Exchange and other relevant stock exchanges, with respect to accurate, fair and complete disclosure and transparency in operations.
24. Improve corporate governance in Ghana in an era of improved political governance.
25. The Ghanaian government maintains its percentage share. No further dilution of its percentage share should be tolerated. No further capital infusion should be expected from the Ghanaian government.
26. The golden shares provisions remain intact.
27. The head office for AGC must remain in Accra or Obuasi.
28. The losses and the costs of the hedging should be paid by Lonmin plc and Sam Jonah and they should reimburse Ghanaian investors who lost millions of dollars.

CONCLUSION

With the high grade rich quality ore obtainable in Ghana, Ashanti ought to be producing gold at less than $140/oz and increasing its profitability and its international competitiveness. Instead, Sam Jonah, Lonmin plc and AGC continue to load AGC cash operating costs with needless and useless expenditures, such as over charging AGC for contracts in which Sam Jonah has interest, contracts in which Sam Jonah knows there are clear conflicts of interests, contracts in which parties related to Sam Jonah are involved, and contracts where AGC is duped. A capable CEO ought to concentrate his efforts improving efficiency, managing the business, increasing revenues and reducing costs instead of globetrotting to collect useless accolades such as honorary doctorate which he could not study to obtain; accolades that boost Sam Jonah’s big ego and do nothing for AGC and the many poor miners who cannot get good drinking water or who are in the cesspool of environmental decay. All this makes sense when we say SAM JONAH MUST GO and end this cancerous episode in AGC history as well as end the incestuous relationship between Lonmin plc and Sam Jonah. It is time to close the supermarket of fraud and corruption in AGC!! It is time to shut this sewage of deceit faucet off. Sam Jonah and his cronies must get out of AGC’s business. It is time to pull the plug on Sam Jonah and send a clear message that Ghana really wants good governance in politics as well as in corporate life!