Monday, April 12, 2010

Newcrest (ASE:NCM) and Lihir (ASE:LGL) Deal

Newcrest Mining still interested in Lihir, but not at any cost

The assertion by Newcrest Mining (ASE:NCM) that its offer to acquire Lihir Gold Ltd (ASE:LGL) was "full and fair," along with the invitation to talk more with the company, seems to imply they still want to make a deal, but there isn't going to be any major new offers which would be far beyond the one they already made; although it seems to leave so wiggle room to increase it slightly.

What has been put on the table by Newcrest is to trade of share of Newcrest for nine shares of Lihir, plus an additional 22.5 cent a share. That would also be minus any dividend added by Lihir up till June 30, 2010.

With Newcrest in a strong position as far as its financials go, they don't have to make this deal in order to grow in the future, but it is a deal that should work well for them and Lihir. Newcrest has a market cap of around $24.5 billion with net debt of only about $200 million.

Newcrest said they'll continue to pursue the deal only if shareholders from both companies get value out of it, and the support of shareholders on both sides are there.

Lihir has rejected the offer by Newcrest, believing it undervalues the growth of the company and its current assets.

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