By YEHIURA HRIEHWAZI in Brisbane
NEWCREST mining, which is bidding to purchase Lihir Gold Limited (LGL) for A$9.2 (K24.9 billion), said last Friday it will spend A$1.91 billion (K5.2 billion) to build Australia’s largest underground gold mine.
The largest Australian gold miner’s bid to buy Lihir last week was rejected by LGL board, saying the offer to buy 100% of Lihir was undervalued and Newcrest is currently discussing the offer with some of Lihir’s major shareholders.
Newcrest announcement to develop the Cadia East gold and copper deposit near Orange in central western New South Wales appears to be a strategic move to display its strength and financial ability after the cold shoulder reception from LGL.
Newcrest CEO, Ian Smith, said this investment would enhance Newcrest’s portfolio of long life, low cost assets and was a key part of Newcrest’s organic growth strategy to increase annual production by at least 40% to 2.3Moz by financial year 2014.
In relation to the proposed combination with LGL, Mr Smith said the Cadia East development demonstrated the strength of Newcrest’s organic growth pipeline and the growth options available to the company – whether or not the Lihir proposal proceeds.
“As we have said from the beginning, the proposed combination of Newcrest and Lihir has a great deal of logic and is compelling – but not vital,” Mr Smith said.
“Newcrest shareholders – and potentially existing Lihir shareholders also – will benefit from an increase in the underlying long-term value of this company as we continue to generate and implement high quality projects such as Cadia East.”
Newcrest Mining Limited is Australia’s largest gold miner and third largest mining company.
One of the top 10 gold mining companies in the world, Newcrest has seven operating mines in Australia, Indonesia and Papua New Guinea, with a market capitalisation of nearly A$17 billion.
The Cadia East orebody is one of the world’s largest gold deposits, comprising a Mineral Resource of 2,347Mt containing 33.2Moz of gold and 6.59Mt of copper, along with a current Ore Reserve of 18.7Moz of gold and 3.16Mt of copper.
It will underpin production from the Cadia Valley for at least the next 30 years.
The project is based on the construction of an underground mine adjacent to the existing Cadia Hill open pit mine, and an expansion of the existing Cadia Valley processing plant capacity from 24mtpa to 26mtpa.
It will be Australia’s largest underground mine and one of the largest underground mines in the world.
Newcrest is also developing Hidden Valley gold mine in Morobe province in join venture with Harmony Gold of South Africa.