The troubled Ghanaian miner, along with its partner AngloGold, have managed to obtain private political risk insurance in Africa up to seven years, a length previously unheard of. With it they increase the likelihood that other majors with properties in the country, Bulyanhulu owner Barrick Gold among them, will follow suit.

What is certain is that there will be a big change in the way that Ashanti goes about financing its development work. Whilst previously reliant on its hedge-book - one of the most extensive in the industry - to generate cash for development, a more measured approach in the future is very probable.

Ashanti's troubles stem from positions taken, on the back of some finance department statements (from the UK in particular) of a gradual decrease in gold stocks, that prices would be depressed in the near future. Uproar in the markets, and lobbying from other producers, led to a gradual phasing in of auctions. Prices rose dramatically and Ashanti became exposed to margin calls on its derivatives that were impossible to meet. Restructuring and rescue efforts have been continuing all year, including the sale of the Geita mine in Tanzania.

Geita is probably the company's most prized asset, a low cost producer (in the $175/oz region) with a long project resource life, just as several of its other assets near the end of theirs. Restructuring, and several loans from interested banks such as Barclays, made the sale of a half share in the mine and the funding of it by one mean or another a necessity. Well-capitalised AngloGold, part of the metals conglomerate AngloAmerican, quickly snapped up the asset. One condition of the sale was that it make the arrangements to bring a bank syndicate behind the project.

Geita has been largely constructed on-balance sheet, although during the crisis a $35 million inter-company loan and a $100 million bridge loan from Barclays Capital funded continuing work. The purpose of the 7-year deal is to retire both of these facilities and put in place a long-term package on the asset. The sale price of the half-share, $335 million in cash, goes towards the restoration of Ashanti's precarious finances.

Barclays Capital, Dresdner Kleinwort Benson and NM Rothschild are the lead arrangers of the loan, and are in the process of soliciting commitments at co-arranger level. According to sources close to the deal, the majority of these have come in, with final allocations and documentation still to come. Close was conditional upon the approval of Ashanti shareholders, including the Ghanaian government and mining group Lonmin, which was gained on 27 November 2000.

The deal is a less risky one than several prospects available in Africa, and will have been buoyed by the positive reception of Bulyanhulu, demonstrating as it did strong confidence not only in the state of the gold market, but also the operating environment in Tanzania. The country has a good record of stability, recent troubles on the semi-autonomous island of Zanzibar aside, and has a relatively benign attitude towards mining operations. The offshore accounting structures essential to a limited recourse deal have been given approval, and the government has shown little opposition to the change in ownership.

The most significant detail, however, lies in the sourcing of political risk insurance (PRI) in the private sector. At the time of Bulyanhulu most market observers assumed that some form of ECA or multilateral cover was still needed, since that $200 million deal was covered by the Export Development Corporation and MIGA. But as Mark Arnerson, treasurer at Ashanti put it, "we hadn't envisaged using PRI, either public or private when we first started development, so when we got round to this new project financing the window was really closed". ECA involvement, for instance, was out of the question, and depth in the private market for $135 million is feasible.

The arrangers, as well as the sponsors, remain unwilling to confirm the identity of the private insurers concerned, although market rumour suggests that AIG and Zurich are at the interested parties. Both Arneson and his counterpart at AngloGold, Mark Linehan, note that Tanzania's stability and the experience of the sponsors is crucial. Ashanti has a long operating history in Africa, and has often dispensed with PRI for on balance-sheet financings, and AngloGold's financial strength and experience is well known. Moreover, the debt has a prepayment clause that should mean that it would amortise at a rapid pace. The sponsors say that they are impressed with the private market's capacity, although they are quick to point out that this doesn't amount to a rejection of the way the multilaterals do business.

Geita operates with project level hedging arranged through Anglo, and Ashanti has pledged to continue with margin free trading up to 2002. Corporate level support is seen as unlikely because of the joint venture nature of the deal and the desire of both partners to mitigate as much of the project risk as possible. Ashanti, however, has announced that it is showing a small gain on its hedge book this year, and has managed to force costs across the group down to $181/oz.

Geita, as well as other properties in Tanzania held by the majors, has a lot of potential for future expansion. Moreover, current thinking in the mining community points to a greater reliance on project level debt, if only because many of the large corporates are rapidly moving outside of their core territories. Anglo will only say that it will examine prospects on a case-by-case basis (its parent is now looking at a Zambian copper financing with its joint venture partners). Arneson is more positive: ?I have to say that the logic of tying debt to the underlying assets in a portfolio is attractive?.