Newcrest Mining and Lihir Gold entered into a merger agreement in early May 2010 that values Lihir at about A$9.5 billion. Payment will be in cash and Newcrest shares. The agreement followed rejection by Lihir of two earlier Newcrest offers made in mid-February and late-March. Lihir directors unanimously recommended that its shareholders vote in favor of the agreement in the absence of a superior proposal and subject to an independent expert’s opinion that it is in the best interests of Lihir shareholders.
The acquisition will be by way of a scheme of arrangement in Papua New Guinea. Lihir’s flagship property, the Lihir gold mine, is located on Lihir island in Papua New Guinea’s New Ireland province.
The Lihir mine and Newcrest’s Cadia Valley, New South Wales, and Telfer, Western Australia, operations in Australia are projected to generate a base load production of 2.5 million oz/y for the combined company for many years to come. The company will also operate a number of smaller producing mines and will have several attractive development and exploration projects.
Newcrest produced 417,000 oz of gold and 21,000 mt of copper during the first quarter of 2010. The Newcrest board approved the Cadia East underground gold and copper project during the quarter, which will underpin production from the Cadia Valley for at least the next 30 years (E&MJ, May 2010, p. 4). Project construction has begun at Cadia East, and first ore is expected in the second half of 2012, with appreciable production and commissioning during 2013.
Lihir Gold produced 230,000 oz of gold during the first quarter of 2010. On Lihir island, a major expansion to lift gold production to more than 1.1 million oz/y is more than 50% complete. Annual throughput will increase to a maximum of around 11 million to 12 million mt.
