By Doreen Walton By BBC World Service business reporter in Accra, Ghana

The government of Ghana has given a $1.48bn (�870m) merger between two gold mining firms, Ghana's Ashanti Goldfields and South Africa's AngloGold its seal of approval.

Ashanti's Obuasi mine needs more investment to exploit its deep-level ore reserves.

The approval brought an end to an international bidding battle which had lasted months and paved the way for the creation of a new gold mining giant on a par with world number one Newmont Mining Corporation of the US.

"The Government arrived at this decision based on AngloGold's superior operational experience in deep level mining, capital endowment and its record of higher dividend payout of all major gold mining companies in the last five years," Information Minister Nana Akomea said.

A competing and higher $1.7bn bid by London-based Randgold Resources was rejected by Ashanti's board.

Randgold chief executive Mark Bristow said he was relaxed about the decision - although he still insisted that AngloGold was undervaluing Ashanti.

"We spend about $10-15m a year on exploring opportunities... and we have other fish to fry," he told BBC News Online.

"Now that Ashanti is out of the picture, we have a big gap to fill as a major independent African gold player."

African gold

The new group that the merger will bring into being will be named AngloGold Ashanti.

The new group may have the largest gold reserve base in the world.

"We're changing the name because this is a merger, it's a partnership," AngloGold chief executive Bobby Godsell told BBC World Business Report.

"It's the bringing together of two of the leading African gold companies."

AngloGold will swap 29 of its own shares for every 100 Ashanti shares.

Acceptance

There had been some concerns that the Ghanaian authorities might have blocked the deal.

There are worries in many parts of west and east Africa of the increasing powers of South African companies.

Ashanti employs thousands of people in Ghana, many middle class Ghanaians are shareholders, and the company is seen as a national heirloom.

The government holds a 17% stake in the company and a golden share which gives it the power to veto any sale.

Mutually beneficial

AngloGold, a subsidiary of the global mining giant Anglo American, wants to merge with Ashanti goldfields because it has a pool of highly skilled black workers and valuable gold deposits which it believes will boost its international mining operations.

Ashanti chief executive Sir Sam Jonah will be President of the new group

"It brings us huge reserves," said Mr Godsell.

In fact, the new group may have the largest gold reserve base in the world.

Between them, AngloGold and Ashanti are believed to have 93.2m ounces in proven and probable reserves.

Ashanti stands to gain from the deal too.

It needs the money and technical expertise that AngloGold can provide in order to further develop its mines.

AngloGold is expected to invest $190m in Ashanti's Obuasi mine to exploit its deep-level ore reserves.

"The decision marked the opening of a new chapter for Ashanti, and the future holds great promise," Ashanti's chief executive Sir Sam Jonah told BBC World Business Report.