Restoring Confidence in Ashanti Goldfields
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Holmes Report
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Restoring Confidence in Ashanti Goldfields

In 1999, Ashanti found itself in an investment environment where gold was selling at an all time low price and mining was clearly “old line” in an investment world enamored with the seemingly endless returns of the tech stocks.

Paul Holmes

Between 1996 and 1999, Golin/Harris’ efforts focused on building North American investor awareness of Ashanti Goldfields of Ghana, West Africa. But in 1999, Ashanti found itself in an investment environment where gold was selling at an all time low price and mining was clearly “old line” in an investment world enamored with the seemingly endless returns of the tech stocks.
 
Then, in September 1999 as the price of gold suddenly skyrocketed $86 in 11 days, Ashanti instead of cheering was scrambling for its very existence. The sudden rise in the gold price set off a collapse in Ashanti's financial derivative program, which made the company liable for more than a half a billion dollars in new debt on top of more than $400 million of debt already on the company's books.
 
With insufficient working capital, Ashanti confronted a crisis that had the potential of bankruptcy, and only intensified with a dissident shareholder lawsuit filed in January 2000, a banking crisis in March 2000 and the forced asset sale in December 2000. Ashanti’s stock plummeted from $10, to $5, then $3 and finally $1.625. The IR effort focused on guiding Ashanti through the 14 month crisis and restoring investor interest in 2001. The result was bring investors back to a company many had considered dead forever.
 
Research played a key role in Ashanti’s communications, helping to target concerns and build messages to address those issues. Each phase of the program was based on research that identified analyst and investor opinions. Research showed that the key issues were: lack of understanding of gold derivative investments; operational failures; plans for debt repayment; and lack of exposure to the gold price.
 
Messages were shaped to addressed these points. In addition, shareholder tracking mechanisms were built to research the buying and selling of the stock and direct communications accordingly. Thirdly, analyst perceptions were tracked through a research effort to monitor analyst comments. At first daily research briefings were supplied to management, followed later by weekly, monthly and ad hoc research around key events.
 
The IR program was designed based on the concerns identified in the research with phased objectives to deal with each stage of the crisis: 1) Stabilize and manage communications to restore calm to the investment community; 2) Educate and inform investors through communications and 3) Recouple with investors to rebuild investment interest and restore Ashanti’s stock value.
 
Regular discussions with management and the legal team and consistent use of the opinion research were used to design programming for each development in the crisis. Conference calls with management and briefs were supplemented with all hands planning meetings in London in October 2000 and again in January 2001. Golin/Harris’ recommended strategy focused on using the good communications that had existed with the investment community, increasing the level of transparency and providing regular updates to maintain calm in a period of total uncertainty.
 
By providing a 24/7 source of information to investors in North America we combated the fears over distance, lack of understanding of complex issues and the general inability to speak with the Africa-based management. The second element of the strategy was to return to the basics focusing communications on Ashanti’s operations to emphasize the mines as the key assets and the value driver for an investment in the company. Thirdly research showed that the financial derivative issues confronting Ashanti were not well understood by even seasoned investors and analysts, so an education effort was built to create understanding and illustrate the company's means of managing itself out of a seemingly endless crisis. Finally the strategy was to get out in front of the crisis and use communications to lead opinion and set the agenda.
 
In the first hours of the crisis Ashanti's management issued confusing and sometimes contradictory statements and was unavailable due to legal constraints. As communications regained its footing, we re-established an open dialogue with an investor conference call, followed with regular updates via press releases, managed media contact and updates from management. This was done to combat a rampant rumor mill. All told more than 60 press releases were issued during the 14 months of the crisis and 21 press releases in the restoration phase (2001) to provide investors with updates on key developments.
 
A listening post operation was established in North America via Golin/Harris whereby we actively spoke with investors to ascertain their concerns and report back to management. The concerns were addressed through messaging in future press releases and conference call scripts, as well as through direct mail and one-on-one investor communications. One of the most significant issued identified and which Golin/Harris provided counsel lead to the reformulation of Ashanti’s board.
 
While legal concerns, shareholder lawsuits, and ongoing negotiations with creditors, made it difficult for the executives to speak, communications focused on windows of opportunities for management to define the problems on their own terms as opposed to wild-eyed media speculations. In February and October 2000 and 2001, Ashanti’s CEO delivered strategic speeches at four major industry conferences in which he put to rest speculation and defined managements’ efforts. The speeches were reprinted and mailed to investors worldwide and posted on the company's Internet page to set Ashanti’s communications agenda.
 
Research identified that even professional investors and analysts did not understand the nature of the crisis and complex financial investments that had lead to the company's crisis. Beginning with analyst conference calls and a white paper on the subject, an effort focused on educating all of the audiences on extremely complex financial issues. We followed this up with investor briefings in March and May 2000 and on-going informational mailings.
 
Communications that prior to the crisis had emphasized future potentials to investors were shifted to core messages to highlight Ashanti’s key assets. In 2000, we emphasized in communications the strength operations as a means of highlighting the assets that would save Ashanti as well as a means of restoring investor interest and management credibility. We began this early in the crisis with a presentation by the Chief Operating Officer at a key gold investor conference in North America and one-on-one meetings in New York and Toronto that highlighted operations.
 
Resetting the agenda: Beginning in the fall of 2000 communications again took the lead on issues. Just as we lead investors back to the operational strengths by beginning to talk about these issues long before attention was shifted, as investors now are focusing on the operational strengths we are again using the early adapter technique to shift the agenda towards a forward looking horizon.
 
This began with a new landmark speech by the Chief Executive at a key North American investor event in October 2000 and was repeatedly emphasized on a quarterly results conference calls. Also in the summer of 2001 a new company IR web page was launched. Outreach peaked in July and August 2001 with the analyst and investor meetings in London, Zurich, New York, Toronto, and San Francisco and another defining speech at a key investor conference in October 2001.
 
The objective was to restore Ashanti’s stock price and that meant getting the analysts and investors back on board. The change in opinions is best seen the written reports: analysts who at the end of 1999 and early 2000 used words such as “debacle, uncertainty, pressure and reduce,” were by the summer of 2001 once again praising Ashanti with words such as “recovering, out performance, raising estimates, accomplished a turnaround, impressive, steady progress and buy.”
 
In December 2001, Ashanti’s stock was at $3.79 – up over 100% from the $1.875 level on January 1, 2001 – while the Gold Stock Index was up 8% and the Dow Jones was off 7.5%. Average daily trading volume nearly doubled between January and September 2001, driven by a return of institutional shareholders. For example, after the August 2001 road show: one institution (TD Asset Management) purchased 525,000 shares and another fund (Tocqueville) increased its position by 100,000 shares or 44%, while analysts at both BMO Nesbitt Burns and Goldman Sachs issued positive research reports after meeting management.
 
From the bleak days of October 1999, where Ashanti’s existence seemed doubtful, few would have believed investors would ever return to the stock. Ashanti survived. While that might not seem like a result, keeping investors calm, fending off hostile shareholders and buying management the time to address its problems was the first big success. In 2001, communications set the agenda, Ashanti outperformed the gold sector becoming one of its hot investment – creating more than $200 million in new market capitalization.
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