LONDON, Oct 5 (Reuters) - Lonmin Plc, the London-listed mining company, said on Tuesday it was in talks that could lead to full ownership of Ghana's Ashanti Goldfields Co Ltd in which it already owns 32 percent.

Talks are at an early stage but a deal would effectively complete the reinvention of Lonmin into a fully fledged mining group. Lonmin was formed from the rump of the late Tiny Rowland's former African trading conglomerate Lonrho Plc.

The news came as Ashanti said it faced heavy margin calls on its hedge book after the recent gold price surge.

Industry sources familiar with the talks said the purchase price was likely to be close to current market price and it could be an all-share deal. It could value Ashanti at around 600 million pounds ($992 million).

Lonmin's shares rose one percent, or six pence, to close at 646 pence. Ashanti's shares traded in London added $1.77 or 20.64 percent to $10.375 before going into reverse on uncertainty created by a separate Ashanti statement on its hedging policy in the volatile gold market.

The company is also listed in New York, Toronto and Sydney.

Apart from the Ashanti stake, Lonmin has 73 percent of Lonrho Platinum, the smallest of South Africa's three major platinum miners and has gold mines in Zimbabwe. The deal would create one of the continent's leading gold companies.

Talks are being held in London with U.S. investment bank Goldman Sachs advising Ashanti and rival Morgan Stanley Dean Witter acting for Lonmin.

GHANA GOVERNMENT ROLE CRUCIAL

Both parties are also in touch with the Ghanaian government which owns 20 percent in Ashanti.

Analysts say the Ghanaian government's influence could force an all-paper deal as it will allow Lonmin's shares to be listed on Ghana's Accra Stock Exchange where it is one of the biggest stocks.

The sources said the due diligence was likely to take between two and three weeks. Most of Ashanti's assets are in Ghana with some mines in Tanzania.

Industry analysts welcomed the talks saying Lonmin was finally tackling the problem it seemed to have got stuck with following the slide of Ashanti's share price.

Several factors including fluctuations in gold price and strikes by miners have eroded Ashanti's shares. In New York they have fallen from around $24 to a recent low of six dollars in three years.

From a holding that is valued at around 220 million pounds Lonmin's earnings was only one to 1.24 percent in the form of dividends.

``Now if they get a 100 percent of the company they will hands on the whole cash flow. The way gold price is running Lonmin's paper will go up anyway,'' said Roger Chaplin, analyst with T. Hoare Cannacord.

HEDGING A THORNY ISSUE

A key issue in the talks would also be the issue of Ashanti's hedges as turmoil in the bullion market persists.

The company said on Tuesday that while it had structured its hedging arrangements with some counterparties to allow a degree of flexibility in the event of prices rising, the recent sudden and unexpected rise in the price of gold has led to certain counterparties being entitled to margin calls at the cost of Ashanti's reserves.

Telephone calls made on Tuesday to Ashanti offices in Ghana and London failed to produce information from the miner about the identity of its hedging counterparties or the level of margin exposure faced.

``This would certainly affect the valuation of the deal,'' industry sources said.

As on end of last year Ashanti had 23 million ounces of reserves calculated at $300 per ounce. The price fell after that to around $250/ounce but recovered again and was over $324 on Tuesday.

($1-.6048 Pound)