Australia's Lihir Gold rejects Newcrest's A$9.2-billion offer

Australia's largest gold miner, Newcrest Mining Ltd saw its ambition to become the world's fourth largest gold company fade after Lihir Gold, the country's second-largest gold miner, rejected its A$9.2-billion takeover offer.

Melbourne-based Newcrest, the country's largest gold producer and one of the world's top 10 gold mining companies by production, reserves and market capitalisation, said today that it had approached the board of Lihir with a proposal to combine the two companies to create the world's fourth largest gold company with a portfolio of low cost, long life, high margin assets.

Under the offer made on 29 March 2010, which was after an initial approach made to Lihir on 15 February 2010, Newcrest offered one of its share for every nine Lihir shares plus 22.5 cents cash per Lihir share, valuing the whole deal at A$9.2 billion.

The Proposal would result in Lihir shareholders owning approximately 35 per cent of the combined company, and sharing in the benefits of the combination.

But the board of Lihir today rejected the deal as it said that the offer did not represent good value for its shareholders as it undervalued the company, both in terms of its existing business, and in terms of the potential value the company expected to deliver to shareholders in the future.

Although Newcrest has offered a 35-per cent premium to Lihir's closing share prices on 12 February 2010, Lihir said that Newcrest's offer did not include a sufficient premium for control.