The Company also considered raising funds by the sale of assets. On account of restrictions in Ashanti's corporate loan covenants, this meant that the Geita mine in Tanzania was the most likely candidate for sale. However, the disposal of an interest in Geita at that time would have involved the sale of associated hedge contracts. This would have eroded the net cash proceeds receivable given that the mark-to-market value of the hedge book was a negative US$ 570 million. Taken together with the initial tax assessment on the sale structures proposed by the bidders, the net cash proceeds to the Company would have been approximately a quarter of the value of the offers. It quickly emerged that the sale of assets to solve the hedge crisis was not the optimal solution."
I interpret this to mean that ASL would have to use much of the proceeds from selling off 1/2 of Geita to close out margin positions at a loss. Since ASL has already given up 15% of the company (in the form of warrents at about $4 / share) in exchange for margin free trading in their hedges for 3 years, why would they want to close out the hedges now? It is good practice to never exercise an option too early and ASL has bought themselves 3 years of breathing room. So, of course ASL will try to hold onto to Geita.
Remember that Geita has turned out to have about twice the gold reserves that ASL estimated when they purchased the property. In the past they have rationalized that if they sold 1/2 of Geita they would still be adding the same amount of gold reserves that they originally anticipated from the purchase of Geita.
Final thoughts. If ASL went under and the government would nationalize the mines in Ghana, what would be the value of the remaining assets? Geita is $400 MM alone.
The above statement from ASL implies that the hedge positions may be tied to gold production from specific mines. The Ghana mines are nationalized. The hedge positions associated with those mines become the problems of the hedge counterparties. Left for the stockholders are the non-Ghana mines (Geita) and the non-Ghana hedge positions. As a wild idea, could it be conceivable that this liquidation could even be good for the stockholders?
I also find it interesting that the mark-to-market value of the hedges remains at a negative $570 MM for the last few months. The price of gold has moved significantly and I can only assume that ASL has made some moves on their hedge positions, but the impact of the hedge position on ASL has always been this $-570 MM. Is it possible that they ran the computer program only once to determine their exposure? Or are they reluctant to get into the habit of routinely disclosing data and will use the last released number till someone hollars loud enough?