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«Thesis submitted in accordance with the requirements of the University of London for the degree of Doctor of Philosophy By AYOWA AFRIFA TAYLOR London ...»

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Thesis submitted in accordance with the requirements of the University of London

for the degree of Doctor of Philosophy



London School of Economics and Political Science

August 2006


Signed Declaration

The work presented in this thesis Signed Dated 2 2


No comprehensive history of the Ashanti Goldfields Corporation (AGC) has been written yet. While this doctorate thesis, due to time and word limit constraints, cannot claim to have achieved this level of completeness it does provide a major contribution towards such a comprehensive history by providing for the first time an academic account of this African-based gold mining firm from 1895 to 2004.

The thesis has chronological range: from the firm's incorporation to its demise as an autonomous company. Depth of analysis is reserved for the consideration of important aspects of the four factors of production and how these resources affected the company's fortunes. The thesis will contribute to the business historiography of Africa as well as to our understanding of the history of Ghana with respect to British foreign investment and the development of the gold mining industry.

The main question under investigation is how the Ashanti Goldfields Corporation managed to survive for so long: how the company evolved, what accounted for its longevity, and what assessment can be made of its business performance over time.

It is found that AGC's business performance in terms of output experienced five distinct phases: steady growth between1898 and1939, decline between1939 and 1956; strong growth between 1957 and 1974; near-terminal decline between 1975 and 1986; and rapid growth between 1987 and 2004. A different and more erratic pattern emerges on profitability notably with a sharp decline in the company's last decade of existence, contributing to its loss of independence. The firm's longevity cannot solely be explained by the geological uniqueness of the Ashanti mines, although this gave the firm a critical advantage. In the face of challenging political and economic changes, managerial decisions and the manner in which the factors of production were employed help us to understand the firm's successes and failures.



I would like to thank the following people and organizations for the various forms of assistance given to me during my research. Gareth Austin for his expertise and direction on African economic history, his detailed feedback and critical editorial eye. My thanks to Tim Leunig for his invaluable contributions from a business and financial history perspective and for his constant encouragement. My fees, living costs and fieldwork were funded by the Economic and Social Research Council, for which I am grateful. The following individuals provided help above the call of duty during my fieldwork in Ghana. Mr Ampong, Mary Dwobeng and Kofi Dok at the Public Records and Archives Department, Kumasi; Mr Sackey, chief executive of the Mines Department, Accra and his colleagues at the Takoradi branch; Isaac Glover of the Ghana Chamber of Mines; the former directors, managers and staff of Ashanti Goldfields who assisted in various ways, in particular the former chief executive, Sam Jonah, for the generous access to himself for interviews and internal company documents; also Mark Keatley, Srinivasan Venkatakrishnan, John Clark, Trevor Schultz, Martin Martineau, Richard Kwame Peprah, Merene Botsio-Philips, Ernest Abankroh, Fred OheneKena, James Anaman, Kofi Ansah, Ken Tshribi, Kwamena Sekyi-Yorke, Rosaline Nutsugah and Kingsley Asamaoah. At Lonmin I must thank the chairman, Sir John Craven, for his cooperation and permission to view internal documents, as well as John Robinson, Rob Bellhouse and Virginia Rigall. From the mine finance industry I would like to thank the following people who assisted with their time, knowledge and data to aid my understanding of AGC's recent history and derivatives crisis: Mark Bankes, Victor Flores, Gerard Holden, John Pott, Michael Price and Andrew Quinn. I am grateful to Sarah Stockwell for providing information which helped me to obtain access to closed papers in the Spears collection at the Churchill Archives, Churchill College, Cambridge; Natalie Adams and Karen Thompson at the Churchill Archives for reviewing, cataloguing in detail and opening up most of the Spears papers concerning Ashanti Goldfields.

The staff at the Guildhall Library Manuscripts Department, London, were always helpful. And last but not least, I must acknowledge the incredible support of friends and family over the three years of this project.

–  –  –

Geological information adapted from E. Dumett, El Dorado in West Africa: The Gold-mining Frontier, African Labour, and Colonial Capitalism in the Gold Coast, 1875-1900, Athens: Ohio University Press, 1998, p. 30.

–  –  –

AFRC Armed Forces Revolutionary Council AGC Ashanti Goldfields Corporation AGM Annual general meeting AMEP Ashanti mine expansion project ARPS Aborigines Rights Protection Society BBWA British Bank of West Africa CAST Consolidated African Selection Trust CEO Chief Executive Officer CFO Chief Financial Officer COO Chief Operating Officer CTP Central treatment plant CPP Convention People's Party DC District Commissioner EGM Extraordinary general meeting ERP Economic recovery programme ETS Eaton Turner Shaft FDI Foreign direct investment GCS George Cappendell Shaft GCST Gold Coast Selection Trust GDRs Global depository receipts GM General mines manager GSM Golden Shamrock Mines IFC International Finance Corporation IPO Initial public offering KMS Kwesi Mensah Shaft LDC Less developed country Libor London interbank offer rate Lonrho London and Rhodesia Mining and Land Company MD Managing director MEU Mine Employees Union MNE Multinational enterprise MOU Memorandum of understanding MS Guildhall Library London manuscript 15 MWU Mine Workers Union NDC National Democratic Congress NLC National Liberation Council NLM National Liberation Movement NPP New Patriotic Party NPV Net present value NRC National Redemption Council NRCD National Redemption Council Decree NYSE New York Stock Exchange OTC Over-the-counter PNDC Provisional National Defence Council PP Progress Party PTP Pampora treatment plant RCF Revolving credit facility SCOA Societe Commerciale de L'Ouest Africain SGMC State Gold Mining Corporation SMC Supreme Military Council STP Sulphur treatment plant UAC United Africa Company UGCC United Gold Coast Convention WAGC West African Gold Corporation * Archival abbreviations are listed in the Bibliography

–  –  –

Abusa A system of sharing output (or income) derived from the land into thirds between a landowner, management and labour.

Adansihene The king of the Adansis, a polity of second tier importance in the Ashanti kingdom. The Adansis sought British protection from 1874.

Akan A large ethnic group found in West Africa, predominantly in the coastal and central forest belt of Ghana, where they make up the single largest ethnic group. The Akan consist of several subgroups including the Asante and Fante.

Asante The kingdom which enjoyed the peak of its geographic expansion in the early nineteenth century when it covered much of present day Ghana. The administrative capital of the kingdom was Kumasi. The anglicised spelling, Ashanti, is used in reference to the smaller geographic area following the kingdom's demise at the hands of the British. Asante also refers to a sub-group of the larger Akan ethnic group predominantly occupying the forest zone of central Ghana.

Asantehene King of the Asante.

Bekwaihene Chief of the Bekwai; this chieftaincy was one of five core polities of the Asante kingdom.

Cedi The Ghanaian currency since 1965.

Fante A sub-group of the larger Akan ethnic group occupying the central coastal area of present-day Ghana. The Fante were conquered by Asante in 1807. The Fante aligned themselves with the British against Asante.

Omanhene The ruler of a polity or state.


Adit A tunnel driven into the side of a mountain to access ore deposits.

Amalgamation Addition of mercury to gold-bearing material. The mercury and gold combine to form an alloy called amalgam from which the mercury can be separated later by dissolving in acid or with heat. The process is most effective on coarse, visible free gold.

Dore bars Unrefined gold bars containing small amounts of impurities such as silver.

BIOX Bio-oxidation, a patented process where bacteria are used to breakdown ores containing sulphides.

Bond issue The sale of a corporate debt instrument. Issuing bonds is one way for companies to borrow money. The company promises to repay the amount borrowed (the principal) with interest by a specified date.

Bullion Precious metals in the form of bars or ingots.

Call options Derivative contracts giving the holder the right, without obligation, to buy an underlying asset at a fixed price at a future date.

Capital gains The increase in the price of an asset between the time it is sold and when it was originally bought.

Cash cost An indication of the average cost of producing one troy ounce of gold.

It is calculated by dividing the direct costs associated with mine production — mine labour, extraction costs and processing costs — by the troy ounces produced in a given period.

Convertible bonds A corporate debt instrument used by companies to borrow money. Interest is usually paid, but the holder, rather than receiving repayment of the principal, has the right within a certain time frame to convert the bond into equity shares in the borrowing company.

Crosscut A tunnel driven through an ore-bearing reef.

Cyanidation A method of extracting gold developed in 1887 by J. S. MacArthur.

A solution of sodium or calcium cyanide is added to finely ground ore (which may or may not have been roasted) to release the gold from the ore complex.

Cyanidation is followed by separation processes to recover the gold.

Some of the gold mining and financial terms are derived from AGC's 1997 annual report and www.investorwords.com.

18 Derivatives Financial instruments whose behaviour and value are determined by the behaviour and value of an underlying asset such as a commodity or currency.

Options are a type of derivative.

Discount rate The rate used to adjust future expected income streams to a present value. Discounting reflects the effects of inflation on the value of money as well as borrowing rates. The higher the discount rate used the lower the present value of the future cash flows.

Downside protection Protection from falling prices.

Drawdowns Disbursements from an agreed loan.

Due diligence The investigation of a company before making an investment.

EBITDA Earnings before interest, tax, depreciation and amortisation. EBITDA reflects a company's operating cash flow.

Escrow accounts A limited access account set up in a borrower's name to provide a lender with greater confidence and access to the repayment of the obligation.

Flotation (1) An initial public offer, see `1P0'.

Flotation (2) A metallurgical process where ore is concentrated by first grinding it, then water and frothing chemicals are added. Air is blown through the mixture attracting the desired mineral to the bubbles, this causes the mineral to float. The froth is skimmed off for further refinement.

Forward selling market A market where the price of goods are fixed today even though the goods will not be delivered until some point in the future. Forward selling attempts to avoid the adverse effects of price movements in the future.

Gearing The proportion of a company's capital that is made up of debt as opposed to equity. Gross gearing is calculated by dividing total borrowings by shareholders' funds, whereas net gearing subtracts from the total borrowings figure the amount of cash and other liquid assets the company may hold.

Grade In the case of gold mining, the relative gold content found in ore.

Hedge book/hedge portfolio A collection of investments in derivatives.

Hostile takeover A takeover that proceeds without the support of the target company's board of directors.

Interest cover The calculation of a company's pre-tax income divided by its total interest expense. It shows how many times over income can service debt payments.

IPO Initial public offering; the first sale of a company's stock to the public.

19 Level An underground storey accessed via a shaft. Each level at the Obuasi mine is approximately 100 feet apart.

Libor London interbank offer rate. The rate charged by banks when they lend to other banks Liquidity risk The risk of being unable to raise cash quickly, or dispose of assets quickly.

Margin call A demand for a collateral payment from a counterparty, usually in the form of cash, to cover an adverse movement in the price of a financial instrument.

Mark-to-market The price of a security at the close of trading each day to calculate profits and losses to determine if margin requirements are satisfactory.

Market capitalization The value of a company as measured by the share price multiplied by the number of shares in issue at a given time.

Net present value (NPV) calculation Net present value is one way of assessing investment opportunities. The calculation looks at future cash flows from an investment and based on the cost of borrowing and inflation adjusts these income streams to a current value. See also 'discount rate'.

Ore Rock containing at least one mineral of commercial value that can be economically extracted.

Ounce Troy ounce. A troy ounce is approximately 10% heavier than an avoirdupois ounce. One troy ounce equals 31.1g, see table on page 23.

Proven reserves The existence of ore where the physical character, continuity, size, shape, quality, mineral content as well as tonnage have been defined, and detailed technical and economic studies justify extraction.

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