By YEHIURA HRIEHWAZI in Brisbane
AUSTRALIA’S largest gold miner, Newcrest Mining Ltd, last week made a bold bid to buy out Lihir Gold Ltd (LGL) for A$9.2 billion (K23 billion)
However, Lihir board of directors rejected the bid, saying the company and its mines in New Ireland, Australia and West Africa were undervalued and rejected the offer outright.
In the meantime, Lihir announced it has appointed Graeme Hunt – a 30-year veteran in the mining industry – as its new chief executive officer.
If the Newcrest offer of cash and shares were accepted, it would have created the world’s fifth-biggest producer of the precious yellow metal with 10 mines in five nations.
Lihir announced last Thursday that it rejected the 100% takeover bid which Newcrest made last Monday and said the offer was inadequate.
Newcrest offered one of its shares for every nine of Lihir’s plus A$0.225 cash.
Earlier, last Feb 15, it made an initial proposal of one of its shares for every 9.5 Lihir shares, Newcrest said in a statement.
According to Bloom-berg news service, the bid valued Lihir shares at A$3.87 (K9.69) each, 28% more than the closing price last March 31.
According to Bloomberg, shares in Lihir, rose as much as 32%, sparking a rise in gold mining stocks.
The mining industry and analysts were speculating that Newcrest could make another higher offer if another company threw in a new bid.
“They could agree a higher price with the Lihir board,” Prasad Patkar, who helps manage about A$1.6 billion (K5 billion) at Platypus Asset Management in Sydney, including Lihir shares, said.
A bid of about A$4.50 (K11.26) might be acceptable, he said.
“They seem to be saying: ‘We’ll sell but for a better price,’ and they don’t want to be bound by conditions that could prevent a competing bid.”
Lihir, the second-largest gold mining company on the Australian stock exchange, rose A$0.90 to A$3.93 at 1:45pm last Thursday, Sydney time.
Melbourne-based Newcrest, which confirmed the offer, fell 1.6% to A$32.30 (K80.85).
Newmont Mining Corp, the largest US gold producer, and BHP Billiton Ltd, are among mining companies that may make acquisitions this year as revived metal prices buoy finances, Citigroup Inc said last week.
Mining companies may have A$91.3 billion (K228.54 billion) of surplus cash, after paying dividends and capital expenditure, by 2012, according to the broker.
“While the board recognised the strategic merits of the combination of the two companies, following careful review and analysis, directors unanimously determined that the offer did not represent good value,” LGL said in the statement.