Ashanti Goldfields Company Limited

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Ashanti Goldfields Company Limited

Gold House
Patrice Lumumba Road
P.O. Box 2665
Telephone: (233 21) 77 2190
Fax: (233 22) 77 5947
Web site:

Public Company
1897 as Ashanti Goldfields Corporation, Ltd.
Employees: 10,429 (2000 est.)
Sales: $582.2 million (2000 est.)
Stock Exchanges: New York London Ghana Zimbabwe Australia Toronto
Ticker Symbol: ASL (New York); ASN (London); AGC (Ghana); Ashanti (Zimbabwe); AHA (Australia); AHD.U (Toronto)
NAIC: 212221 Gold Ore Mining

Over a century after its incorporation, Ashanti Goldfields Company Limited of Accra, Ghana, remains one of the largest producers of gold in the world, achieving an annual gold production of 1.74 million ounces in 2000. It is also Ghanas largest earner of foreign funds and the only mining operation on the New York and London stock exchanges run by black Africans. Originally operating with a single minethe Obuasi mine in Ghanas Ashanti region that gives the company its nameAshanti has in recent years expanded aggressively throughout Africa and now operates seven mines in Ghana, Zimbabwe, Guinea, and Tanzania. The company also maintains 25 active exploration projects in six African countries and about 20 outside the continent. Ashantis most productive mine is Obuasi, which, despite over 100 years of continuous operation, is still one of the top-producing mines in the world and the largest mine in Africa outside South Africa. Conscious of its success on an often volatile and troubled continent, Ashanti prides itself in its relationships with local authorities and traditional political and social institutions in the African countries where it operates. The company has assisted local communities with infrastructure projects such as roadways, water and electricity access, and education.

Early Days

The rich goldfields in the Ashanti region of what is now Ghana were controlled by the powerful Asante (Ashanti) state as far back as the 17th century. The British colonization of Ghana in 1874 and the ensuing Ashanti wars brought a large number of Europeans to the area, and soldiers and travelers spread the word about the regions legendary gold reservesyou could pick up gold as you would potatoes, reported one traveler. Widespread interest opened the region for large-scale commercial gold production. In 1890, Joseph E. Ellis and Chief Joseph E. Biney, Fatwe merchants from Africas Cape Coast, and their accountant Joseph P. Brown negotiated mining concessions for 100 square miles in the Obuasi District. There they opened the Ellis Mine and introduced modern industrial mining techniques to the area. The Ellis mine operated for five years, then the partners sold the concession to Edwin Arthur Smith of the London-based firm Smith and Cade. With the overthrow of the Ashanti king in 1896, the Ashanti protectorate was brought directly under British control, and Cade was given approval to mine the region.

On June 11, 1897, Cade listed the Ashanti Goldfields Corporation Ltd. on the London Stock Exchange and set up operations at Obuasi on December 24 of that same year. The technique of adit miningwherein a horizontal passage is dug from the earths surface into the mineproscribed by mining engineer John Daw tapped into the most immediately accessible ore in the hills around Obuasi and yielded initially impressive results. The Obuasi mine yielded 2,544 ounces of gold in its first year of operation and 4,673 ounces the second year. This early success, coupled with the devastation of the South African gold trade during the Boer War (1899-1902), fed Ashantis rapid growth that continued until the uprising of the Ashanti people against British rule in 1900.

Into the Twentieth Century

The impact of the anti-colonial conflict on Ashanti was devastating. Work was halted, mines became run-down and collapsed due to lack of upkeep. However, the good relations maintained by Daw and Cade with their local employees ensured the safety of the European staff during the hostilities. After the end of the conflictdespite the arrival of the railway lineAshanti continued to suffer. Output did not return to previous levels, leading to shareholder skepticism over Daws mining techniques. Edwin Cade died in 1903, leading to a further devaluation of shares. In 1905, an independent assessment of Ashanti operations was carried out by chemist W.R. Feldtmann and mining engineer J.A. MacTear. They criticized Daws adit mining approach, declaring that the easily reachable ore was nearly exhausted, and that the hills around Obuasi did not contain the rich reefs (veins of ore) once believed. Daw resigned in 1906, and Feldtmann took over as consulting engineer.

Under Feldtmann, Ashanti underwent a period where output was slowed to allow for a change in mining techniques. Shallow adit mining was discontinued in favor of shaft mining in which a vertical tunnel is dug deep into the ground. To accommodate these new techniques, the companys profits were directed into new equipment. Feldtmann also developed more efficient methods of treating gold ore once it was mined. The discovery of an exceptionally rich ore deposit in 1908 brought fruit to Feldtmanns efforts, and Ashantis success increased until the advent of World War I forced cutbacks in operations.

After the war, Ashanti saw a yearly increase in gold output. Significant discoveries in 1937 of gold along the Obuasi fissure and other locations gave rise to a time of great optimism at Ashanti. The company made plans for major expansions and budgeted for increased output. These plans were cut short by the dawn of World War II, which had a disastrous effect on the entire African gold mining industry. Most mines in the Gold Coast region were shut down for the duration of the war, but a few profitable operationsincluding Ashantiwere kept open on a care and maintenance basis, making do with aging and obsolete equipment.

Postwar Turbulence

The end of World War II saw a short surge in the African gold industry (often referred to as the jungle boom), but that growth was short-lived. The industry had been cut off from foreign investment since 1942, and many mines that had opened shortly after the war found that they could not sustain themselves, and quickly closed. Ashanti was one of only four operations on the Gold Coast that remained open during this time and was the largest and most profitable. At this time, Ashanti was led by its autocratic chairman General Sir Edward Spears, who lived abroad and visited the companys operations only infrequently, treating it, according to Ashantis company history, as a personal fiefdom.

During Spears leadership, the government of Ghana underwent rapid changes. In 1957, the British Parliament granted Ghana its independence, and Kwame Nkrumah became the countrys first prime minister. In 1960, a new constitution was drafted, and the country became the Republic of Ghana, with Nkrumah as its president. Nkrumah proved to be an increasingly dictatorial leader, limiting freedom of action, imprisoning his critics, and finally introducing a one-party system in 1964. He nationalized five of Ghanas six producing gold mines (all but Ashanti), and granted Spears favorable land leases for Ashanti in exchange for derisory royalties. Nkrumah was deposed by the National Liberation Council (NLC) in 1966. The NLC soon began to question the contribution of mining operations such as Ashanti to the local economy and appeared to threaten the favorable land lease options Spears had enjoyed under Nkrumah. In response, Spears threatened to flood the mines. The Ghanaian government then ordered the commissioner of mines and energy to seek new investors for its mining industry, including the Ashanti Goldfields.

The Lonrho Years

Fortunately, Lonrho (London and Rhodesia Mining and Land Companynow Lonmin) already had an interest in acquiring the company, and the government quickly welcomed the takeover. Lonrho acquired Ashanti in 1968 for £3 million (US$2.1 million) in stock, promising to preserve Ashanti as a separate entity. Ashanti was delisted from the London Stock Exchange, and Lonrho offered the Ghanaian government a 20 percent interest in the company in exchange for a 50-year extension on its land leases. The government would also have an option to buy another 20 percent of the company for £1 (US$.70) per share. In response to the sentiment in Ghana that Ashanti had not been growing quickly enough to meet the countrys currency needs, Lonrho also promised to increase the mine capacity from 45,000 to 80,000 tons of ore per month. Spears was invited to join the Lonrho board. He retained the title of chairman, but, after expressing much dissatisfaction with the increased government involvement with Ashanti, resigned in 1971.

The Lonrho years were marked by turmoil. Violence between police and miners at the March 1969 strike killed three and wounded 28, and another strike in 1970 closed the mine for a week. A coup in 1972 once again forced a change in government, and the new administration, led by Ignatius Archeampong, demanded government participation in all mining companies and acquired 55 percent of Ashanti shares. The company was ordered to change its name to the Ashanti Goldfields Company and relocate its headquarters to Accra from London.

Company Perspectives:

Ashantis Mission is to build an African gold mining and exploration company to international standards of excellence, managed predominantly by Africans. Ashanti aims to pursue growth for the benefit of our shareholders, employees and the nations where we operate.

As part of their participation in Ashantis operations, the government appointed Lloyd A.K. Quashie, a geologist and mining expert, to Ashantis board of directors as deputy managing director. Under his direction, the company began efforts to improve conditions for local workers, and instituted a program to decrease the percentage of expatriate positionspositions held by non-Africans. The program sent promising young Ghanaians to universities abroad, with the idea that they would return to work for the company, supplanting the expatriates. One of the first recipients of these educational opportunities was Sam E. Jonah, who attended Exeters Camborne School of Mines in Cornwall, England, and the Imperial College of Science and Technology in London and later became the CEO of Ashanti.

Despite the turbulent times, Ashanti continued to prosper, reaching a peak production level of 533,000 ounces in 1972. Unfortunately, by that time, many ore deposits had been exhausted. This depletion, combined with the loss of foreign exchange and a high tax bill led to another decline through the seventies. The company was unable to expand its interests, invest in new plants, or even replace outdated equipment. Annual production fell to 232,000 ounces in 1980. Profits continued to fall, and in 1982, the company experienced the first operating loss in its history.

A New Beginning

It took another governmental shift to turn the companys fortunes around. In 1981, the Provisional National Defence Council, led by Jerry Rawlings, took control. At first, the new governments socialist ideology seemed to spell even more trouble for the Ashanti. But by 1983, the government realized that outside capital would be needed to achieve its goal of rebuilding Ghanas economy, so the political stance shifted to welcome a more free-market philosophy. Its Economic Recovery Program, backed by the International Monetary Fund (IMF), the World Bank, and Western aid donors aimed to rehabilitate Ghanas major export earners, and Ashanti was one of its major beneficiaries. In 1985, Ashanti was granted a £159 million (US$111 million) IMF loan, and the new Minerals and Mining Law allowed Ashanti to keep 45 percent of its export earnings.

With this fresh infusion of capital, Ashanti was ready for an ambitious program of expansion and modernization. In 1986, the companys first Ghanaian CEO, Sam Jonah, was appointed. He embarked on a major overhaul of company operations. While the companys headquarters had been in Accra for twelve years, much of the planning and budgeting was still carried out by consultants in the London office. Jonah transferred these duties to Ghana, keeping the staff geographically close to the mine site. Communications between management and line workers was improved, wages for mine workers were raised, and the company began the community renewal plan that is now a hallmark of all its operations throughout Africa. Ashanti purchased new equipment for mining surface oxides and commissioned a heap leach (a low-cost method of extracting ores) facility in 1990, and the company built an oxide treatment plant in 1991. This project established the Obuasi mine as the largest surface mining operation in Africa and the mine as a whole became one of the top five in the world. Gold production reached record highs, increasing by 25 percent. Loans from the International Finance Corporation (IFC) helped the company launch its Ashanti Mines Expansion Program, allowing it to take advantage of highly profitable, lower grade underground gold resources.

Growth and Renewal

Holder of the majority of Ashanti shares, the Ghanaian government in 1994 announced its plan to sell 17.9 million sharesa full half of its 55 percent stakein a share flotation on the London and Ghana stock exchanges. The company reserved 1.2 million shares exclusively for Ghanaians, and each of Ashantis employees received five free shares. In 1996, Ashanti became the first African-operated company to list on the New York Stock Exchange. The capital raised by these two flotations (the London IPO alone was worth $454 million) allowed the company to pay its debts to the IFC and begin its expansion in Ghana and in other African nations. By the end of the 1990s, in addition to the original mine in Obuasi, Ashanti operated the Ayanfuri, Bibiani, and Iduapriem mines in Ghana, the Siguiri mine in Guinea, and the Freda-Rebecca Mine in Zimbabwe. The nineties also saw Ashanti expanding its links with the communities where its mines are located. Beginning in 1990-91, the company supplied water resources such as hand pumps, boreholes, and hand-dug wells for the Obuasi township and 137 smaller villages and townships. Ashanti also undertook projects to bring electricity to villages without it and to build schools for the families of its staff.

Key Dates:

Ashanti Goldfields Corporation, Ltd. is incorporated in London and the Ashanti mine begins operation.
W.R. Feldtmann becomes consulting engineer and reforms mining techniques.
World War I forces production cutbacks.
General Sir Edward Spears becomes chairman.
The new National Liberation Council orders search for new investors for company.
Company acquired by Lonrho of London.
New government acquires 55 percent of companys shares.
Company receives £159 million loan for expansion from the International Finance Corporation.
Sam E. Jonah becomes company chief executive.
Company listed on London and Ghana stock exchanges.
Company listed on New York Stock Exchange.
Companys seventh mine, Geita, opens in Tanzania.

Into the New Millennium

A well-publicized crisis at the end of the nineties nearly spelled disaster for the company. The price of gold rose dramatically in September of 1999. The company had outstanding hedge contracts, and the rise in gold price exposed the company to possible margin calls on these contracts. Ashantis credit lines were frozen. The freeze resulted in a shortfall of capital, which put in danger the completion of the Geita mine in Tanzania, slated for opening in 2000. Ashanti successfully resolved these problems, however, by negotiating a period of margin-free trading and a $100 million bridge facility to finance completion of the Geita mine. Geita opened in August of 2000, three months ahead of schedule, and was the largest gold mine in Tanzania.

Ashanti reported a gold production of 1.74 million ounces for the year 2000a record for the company, despite its recent difficulties and the cessation of surface mining operations at Obuasi. In 2001, the companys future plans included further expansion in Africa, including operations in the Ivory Coast and the Congo. In his remarks at the Indaba Conference in Cape Town, South Africa, in February 2001, Jonah acknowledged the difficulties of the past and expressed pride in the companys recovery. We were able to keep focus, despite some particularly choppy waters, he said. And I am confident we can continue to do so as we train our eyes further out into the future.

Principal Subsidiaries

Ashanti Goldfields (Ayanfuri) Limited; Ashanti Goldfields (Bibiani) Limited; Ghanaian-Australian Goldfields Limited (80%); Societe Ashanti Goldfields de Guinee S.A. (Guinea) (85%); Ashanti Goldfields Tanzania Limited (Tanzania); Ashanti Goldfields Zimbabwe Limited (Zimbabwe); Ashanti Treasury Services Limited (Isle of Man).

Principal Competitors

Barrick Gold Corporation; Newmont Mining Corporation; Placer Dome, Inc.

Further Reading

African Privitisation: Golden Shares, The Economist, March 19, 1994, p. 96.

Anglos Long Trek North, The Economist, November 2,1996, p. 69.

Ashanti Goldfields Becomes First African Company to List on New York Stock Exchange, Jet, March 18, 1996, p. 46.

Ashanti Record, Mining Journal, February 9, 2001, p. 111.

Ashantis Geita Pours First Gold, American Metal Market, June 14, 2000, p. 6.

Ayensu, Edward S., Ashanti Gold: The African Legacy of the Worlds Most Precious Metal, Accra, Ghana: Ashanti Goldfields Company Limited, 1997.

Barnabas, Thondhlana, Investors Warm to Ashanti, African Business, July/August 1997, p. 28.

Bowman, Louise, Pits-Tops, Project Finance, February 2001, pp. 52-53.

Cozens, Claire, Ashanti First out of Africa, Corporate Finance, December 1995, p. 41.

Cronjé, Suzanne, Margaret Ling, and Gillian Cronjé, The Lonrho Connections: A Multinational and Its Politics in Africa, Encino, Calif.: Bellwether Books, 1976.

De Giorgio, Emmanuelle Moors, AshantiThe Full Story, African Business, December 1999, pp. 34-36.

Ghana, Microsoft Encarta Encyclopedia, Redmond, Wash.: Microsoft Corporation, 1999.

Gold, Microsoft Encarta Encyclopedia, Redmond, Wash.: Microsoft Corporation, 1999.

Gordon-Walker, Rupert, Rich Pickings or Fools Gold? Euromoney, May 1996, p. 22.

McGeary, Johanna, and Marguerite Michaels, Africa Rising: Hope on the Continent, Time, March 30, 1998, pp. 34-45.

Olivier, Charles, Ashanti Breaks Free from IFC, Corporate Finance, August 1995, p. 4.

Picker, Ida, Sam Jonah of Ashanti Goldfields Co.: A Glittering Success Story in Sub-Saharan Africa, Institutional Investor, June 1996, p. 29.

President Praises Sam Jonah, Africa News Service, August 14,2000.

Winfred, Arthur, Jr., Dennis Doverspike, and James E. Kuthy, Striking Gold through a Deep-Level Organizational Intervention in Ghanas Mining Industry, International Journal of Organizational Analysis, April 1996, pp. 175-186.

Lisa Whipple