Denver Gold Show: Ashanti Presents Situation Report.

Business Editors

ACCRA, Ghana--(BUSINESS WIRE)--Oct. 3, 2000

Further to the announcement on 14 September 2000 that Ashanti Goldfields Company Limited ("Ashanti" or "the Company") has secured the consent of its banks for an extension of both the US$100 million Barclays Bridge Facility and the date for completion of the sale of a 50% interest in its Geita gold mine in Tanzania to AngloGold Limited ("AngloGold") until 31 October, 2000, the Company is today updating delegates at the Denver Gold Show of the following progress, which has been achieved in relation to its current operations, financing arrangements and other developments. The Company is accordingly making this announcement to securityholders of the salient information contained in its presentation this afternoon.

Financial developments

As announced on 14 September, the deadline for completion of Ashanti's disposal of a 50% interest in its Geita mine to AngloGold has been extended to 31 October 2000. The extension provides further time for the Company and its banks to seek to finalise revisions to Ashanti's financing arrangements in connection with the Geita transaction, which have already been agreed in principle. These have taken longer to negotiate than was initially anticipated owing partially to inter-creditor issues. The Company will need to obtain a further extension if the remaining inter-creditor issues are not quickly settled. The Company will issue a circular to shareholders seeking approval of the Geita transaction once the financing arrangements with the banks have been agreed and documented and the requisite formal consents to the transaction have been obtained from the banks. Should the Geita sale not be completed by 31 October 2000 (or any later extension thereof) then, unless a standstill or other accommodation was reached, the Company would be in default under the terms of the Bridge Facility. If this were to occur, it would cross default into the Company's other debt facilities, all of which would become due for repayment. The Company's ability to continue as a going concern should the Geita sale not be completed by 31 October 2000 (or any later extension thereof) would depend, therefore, entirely upon an extension of the Company's banking facilities while an alternative solution was sought.

Upon completion of the Geita sale, on the basis of the terms agreed in principle for the relevant debt facilities, the Company expects to repay at least US$300 million of existing debt. As a consequence of these payments, Ashanti will reduce its gross debt to approximately US$400 million. The Barclays Bridge Facility will be retired in full. Tighter mechanisms to conserve and generate free cashflows are working effectively and this has allowed the Company to draw down approximately US$20 million less than was available under the US$100 million Barclays Bridge Facility. A substantial proportion of the Revolving Credit Facility ("RCF") will also be retired and an additional amount of the RCF will be repaid but will remain redrawable for working capital purposes. This is part of a wider restructuring of the Company's on-going banking arrangements which is also planned to encompass the inclusion of certain bilateral obligations within the amended RCF. A substantial portion of the proceeds used to repay debt will be sourced from the US$130 million net proceeds of a new project financing at the Geita level. The terms provide for this facility to be non-recourse to Ashanti, although 50% of the drawn amount will be reflected in its consolidated balance sheet within gross liabilities attributable to Geita. Notwithstanding the proposed significant reduction in its debt facilities, the Company will, following the sale, remain reliant on the continuing support of its banks for financing for its ongoing working capital requirements beyond 2001.

Hedge Book

At a spot gold price of US$275 per ounce and assuming lease rates of 1.5%, Ashanti's current hedge book would, if held to maturity, generate in excess of US$550 million in cash and has a mark-to-market value of approximately US$61 million (negative). Six months ago, at a gold spot price of US$276 per ounce, the mark-to-market value of the book was approximately US$146 million negative, some US$85 million more negative than it stands today. This improvement is a result of two factors: time decay and the restructuring that has taken place during that period.

Ashanti has adopted a new hedge policy, aimed at reducing the levels of over-commitments that currently exist in the book, while at the same time aiming to increase and maintain appropriate levels of protection to withstand low spot prices. Over the next 2-3 years, the Company plans to increase its exposure to any gold price rise, even as the proportion of its unhedged production decreases as a consequence of the disposal of 50% of Geita. Although Ashanti is enjoying a period of margin-free trading that ends on 31 December 2002, it hopes to restructure the book such that the gold price will have to rise significantly to trigger any margin call beyond 2002.

Operations

At Obuasi the high cost surface mining activity has ceased and consequently the Pompora Treatment Plant and the Oxide Treatment Plant have been closed down. The Tailings Treatment Plant will be shut down by 2003, when the old tailings will be depleted. Ashanti will not, as previously planned, increase underground production to replace depleted surface ounces, so plant throughput will reduce from 3.5 million tonnes per annum to 2.5 million tonnes per annum. Consequently, planned gold production will reduce from 850,000 ounces to 550,000 ounces, but at lower cost and will result in improved cash flow. The Company is focusing on the underground mine: the strategy is to maximise hoist capacity, rationalise the mining sequence modify stoping methods to improve productivity, increase recovery and reduce dilution. The Company is also improving its block modelling systems to make reconciliation and feedback to the operation more interactive and improve information analysis and transfer. It has also implemented a number of process initiatives that should improve recoveries at the Sulphide Treatment Plant. Cash operating costs are targeted to reduce below US$200 per ounce by 2002, and annual sustaining capital expenditure is expected to reduce to less than US$40 million annually.

Bibiani is on track to achieve its target of 262,000 ounces at a cash operating cost of US$170 per ounce for the full year. The recently expanded Siguiri mine in Guinea is on track to produce its target of 300,000 ounces at a cash operating cost of US$180 per ounce for the full year. Exploration around the mine site has been particularly successful, and has fully replenished Siguiri's resources in the last three years. The mine is therefore expected to operate for another seven years at its expanded capacity.

Iduapriem was scheduled to shut down at the end of 2000. However, through Ashanti's recent acquisition of the adjacent Teberebie mine from the Pioneer Group, the Iduapriem/Teberebie complex is expected to be able to produce 150,000 ounces for the next eight years at a life of mine cash operating cost of approximately US$200 per ounce.

In spite of the problems in Zimbabwe, the Freda-Rebecca mine remains on course to produce 100,000 ounces this year, although cash operating costs may not fall below US$200 per ounce as originally planned. Cash flows generated by Freda-Rebecca will be used to reduce local borrowings with a view to reducing Group debt.

Following its completion, the Geita mine is on track to produce 150,000 ounces this year at a cash operating cost of below US$200 per ounce. This is despite the teething troubles the Company recently encountered with the SAG mill, reflecting commissioning difficulties that often arise in bringing a project of this size on line. From next year, Geita is expected to produce to Ashanti's account approximately 250,000 ounces annually at an estimated cash operating cost of US$180 per ounce. Once debt service reserves have been built up, as required under the new project finance facility, Ashanti expects to share, with AngloGold and the project financiers, in the surplus cash generated by the mine. As previously announced, the Company has already begun to outline plans with AngloGold to expand mill capacity from 4 million tonnes per annum to 7 million tonnes per annum, with a view to increasing total production to some 750,000 ounces per annum.

At the Head Office, the Company has implemented a rationalisation programme, reducing headcount and streamlining organisational effectiveness which it estimates will save it more than US$5 million annually when fully implemented.

Exploration

Recent drilling below the 5,000-foot level ("50 Level") at Obuasi has produced some very high-grade intersections, and the prediction of down dip mineralisation based on the upper level history is not unrealistic. The Company is planning, over the course of 2000 and 2001, to complete exploration and conceptual engineering of the resource below "50 Level", and should then be in a position to decide upon the most suitable development option for the resource below "50 Level".

At Geita, in addition to the 5.5 million ounce reserve that is currently outlined, the Company believes there is the potential for more open pit resources spread out between Nyankanga, Nyamatigata and Nyamulilma Hill (once the latter is contributed by AngloGold to the JV). The Company also believes that there is potential for underground mines at Nyankanga as well as at the Geita, Lone Cone and Kukuluma deposits.

The Company is in the process of developing a strategy for its Kimin property in the Democratic Republic of Congo (DRC). However, given all the problems in the DRC, Ashanti does not expect to start producing gold from Kimin in the near future, even though there is a small mine already in existence, but which is not currently operational. The Company has, however, taken necessary steps to consolidate its position in Kimin and has received a Presidential decree that recognises Kimin's rights. When the political situation stabilises in the DRC, Ashanti will be poised to participate in the development of one of the most prospective gold districts in Africa.

This announcement contains a number of statements relating to future results of Ashanti that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act 1995 of the United States of America. Statements that are not historical facts, including statements about Ashanti's beliefs and expectations, are forward-looking statements. Such statements may include statements regarding anticipated production or construction commencement dates, construction completion dates, working capital, expected costs or production output and the anticipated productive lives of mines.

These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Ashanti can give no assurances that such results, including the actual production or commencement dates, construction completion dates, working capital, costs or production output or anticipated lives of the projects and mines discussed will not differ materially from the statements contained in this announcement. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Ashanti, which may cause actual results to differ materially from those expressed in the statements contained in this announcement. For example, future revenues from projects or mines described herein will be based in part upon the market price of gold, which may vary significantly from current levels. Such variations, if materially adverse, may impact on the timing or feasibility of the developments of a particular project or the expansion of specified mines.

Other factors that may affect the actual construction or production commencement dates, costs or production output and anticipated lives of mines include the ability to profitably produce and transport gold extracted therefrom to applicable markets, the impact of foreign currency exchange rates on the market prices of gold and activities by governmental authorities where such projects or mines are being explored or developed, including increases in taxes, changes in environmental and other regulations and political uncertainty.

Forward-looking statements speak only as of the date they are made, and Ashanti undertakes no obligation to update publicly any of them in light of new information or future events.