Billion Dollar Anglogold-Ashanti Merge Prospect to Attract Counter Bids for Gold League's Top Spot

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). If you are disenchanted with the sports pages, full of items on under performers who have been granted obscene compensation increases and managements who have forgotten that sport is about spectators and dreaming about a brave old world, then turn to the business pages. If, on the business pages, you overlook the stories about under performers who have granted themselves obscene compensation and managements who have clean suppressed any vestigial memories of shareholders, then you might spot one or two sporty tales full of blood, guts, and derring-do.

The scene is now set for a real crowd pleaser in the hardhat and pinstripe world of gold mining majors. Remember last year, when the dust was beginning to settle over the Newmont Mining (NYSE:NEM) (Denver, Colorado) takeover of Australia's Normandy after beating off Anglogold (LSE/JSE:ANG, NYSE:AU) (London, United Kingdom), we placed our bets on the gritty chaps from Anglogold making a play to bounce back into gold's top spot in the not too distant future? (See Newmont Mining continues Acquisition and Growth Mode

In the last week Anglogold and Ashanti Goldfields (NYSE:ASF) (Accra, Ghana) have confirmed that they are involved in merger talks. If there is a successful outcome to these talks an African based company, with global interests, with an annual gold production of around 7.6 million ounces would be formed which would eclipse Newmont's production of just over 7 million ounces and put Anglo back on top of the league.

The Ghanaian government has a 17% stake in Ashanti and a 'golden share' which gives it a casting vote or in effect the right to veto on any merger or corporate activity. The government also has to take into account public sentiment in the country where the 107 year old Ashanti is not only a business icon but is felt as living link with the history of the Gold Coast'.

Priced at current stock market levels the takeover by Anglo would come in at just under $1 billion, which market analysts are almost unanimous in considering it a good deal for Anglo. The same good deal will also be attractive to other bidders, who could be the Canadian companies Barrick Gold (NYSE,TO:ABX) Toronto, Canada) and Placer Dome NYSE,TO:PDG) (Vancouver, Canada), and of course Newmont.

South African Goldfields (NYSE,JSE:GFI) (Johannesburg, South Africa) is said to have had a look and gone no further, which could also be connected with the fact that it already has major gold operations in Ghana in the form of Tarkwa and Damang mines and that its has a major shareholder in the form of Anglo American (LSE:AAL) (London, United Kingdom), which in turn holds 57% stake in Anglogold. Harmony Gold (NYSE, JSE:HMY) (Randfontein, South Africa) has also been circulating in the middle foreground and maybe toting its excellent empowerment deal making credentials as a willing partner in a new formation.

One scenario is that Ashanti and the Ghanaian government would look favorably on Anglo gold in line with the New Partnership for Africa's Development (NEPAD), and the further expansion of operations and empowerment across the new entity. Anglogold may also want to recalibrate its image as an African company by taking 'Ashanti' into the new company profile and allow Anglo American, which owns 50% of Anglogold, to move some of the gold company's assets out of South Africa. The deal of 26 Anglogold shares for every 100 Ashanti shares gives the bidder a market rated premium. The successful bidder would have to take on some of the baggage Ashanti's somewhat shaky past financial history. But a good deal is a good deal so new bidders begin here.

To make sure you can't wait for the rest of the game Lonmin (LSE:LMI) (London, United Kingdom), the world's third largest platinum producer, has a 28% stake in Ashanti, and Anglogold has been keeping in close touch with the company after learning a crucial lesson in not wooing Franco Nevada, which was the biggest shareholder in Normandy in last year's bidding battle against Newmont. Now, Lonmin recently hired Brian Gilbertson, the once CEO of the world's largest diversified resources company, BHP Billiton (ASX,NYSE:BHP) (Melbourne, Australia), as a consultant to put some fire in their strategy. Gilbertson is known as an action man and dealmaker who can smell the sizzle on the stake and likes to be where the rubber hits the runway etc...etc... The Aussies felt uncomfortable with the Johannesburg lad (irreconcilable differences), who was a tall poppy and who was setting up a deal/merger/association with Rio Tinto to give BHP unassailable weight and scope in the resources field and who had been instrumental in setting up the original BHP Billiton. Gilbertson, through all his past and present contacts including Lonmin, must be privy to the finer shadings and Chinese whispers surrounding the Ashanti deal. Watch this space.

Oh yes, to get back to the sports page. Gilbertson has just scored a severance package with BHP of around $10 million when options and allowances are added up with an annual pension of around $1 million a year and BHP shareholdings. This total includes only one year of his pension payments. Analysts say that BHP should have known what they were taking on with the feisty South African and so there should be no crocodile tears. Likewise Lonmin should also know what to expect and are probably living in expectation.

And, dear reader, we can look forward a real match with the brave battling it out for pride and possession with full-blooded commitment. We can understand good sports who look at the gold price, check their per ounce production costs, do a good old subtraction sum and say "Lets rock and roll on this one." They already have cash and will travel... probably between Johannesburg, Accra, Toronto, Denver and London by executive jet, with phone calls to and from Melbourne.