Randgold is expected to table a counter-bid this week for Ashanti, the Ghanaian gold mining company, valuing it at up to $2 billion.
There were unconfirmed reports in South Africa, where Randgold's holding company is based, that chief executive Mark Bristow may seek a merger partner from among Canadian mining groups such as Placer Dome or Barrick Resources. The latter has $1bn of free cash on its balance sheet.
Randgold's earlier offer for Ashanti was trumped last week by AngloGold, which started the bidding war for Ghana's most valuable asset last May when it offered $1bn. Its latest offer, which chief executive Bobby Godsell said last week was 'final', is around $1.4bn and has the support of the Ashanti board, where Sam Jonah is chief executive.
Godsell is also backed by Lonmin, Ashanti's biggest investor with 28 per cent. Lonmin, created out of the former Lonhro minerals empire, has said it will not support a higher bid from Randgold unless there is a fully underwritten cash alternative. So far, Randgold has indicated that it will only bid for Ashanti via a shares offer. But if Bristow comes back with an offer that represents a large premium to what is on the table from AngloGold, it could throw the bidding process into turmoil.
Ashanti wants the wealthier AngloGold to win the bidding battle as it desperately needs funds to develop its flagship Obuasi mine near Accra. But it will have to listen to its shareholders if there is support for Randgold, which has been promised funds from international banks such as Britain's HSBC and HVP of Germany.
The Ghanaian government, which owns 17 per cent of Ashanti, and has a blocking share, is expected to make a statement after it receives advice from French investment bank Soci?t? G?n?rale.
AngloGold, which is 51 per cent owned by Anglo-American, the London-based mining colossus, needs to win the battle for Ashanti as last year it lost out in the struggle to acquire Normandy, Australia's largest gold producer. Lonmin wants AngloGold to win because it aims to sell its shares in Ashanti, and it believes it would be much easier to find buyers if the Accra-based company was owned by a large multinational, such as Anglo. Randgold is a minnow by comparison. Lonmin needs the cash from a sale of its Ashanti stake to develop its African platinum businesses.
Analysts are sceptical that Randgold will win the auction for Ashanti and suspect that the bidding contest has been orchestrated by the Accra government.