TORONTO (miningweekly.com) – North American analysts were divided this week, on whether Newmont Mining might, or ought to, get into the ring with an offer for smaller rival Lihir Gold.
Lihir has rejected a proposal from Australia’s biggest gold-miner, Newcrest Mining, and is understood to be looking for white knights willing to put up a higher price.
The name that has come up most often in speculation and unsourced ‚reports‘ is Colorado-based Newmont, currently the world’s second-biggest gold producer by production.
Lihir has mines in Australia, Papua New Guinea and the Côte d’Ivoire, and produces about one-million ounces a year of gold. The company has said it expects to be up to 1,5-million ounces or so by the middle of this decade.
The Australian Financial Revilist of crushing plants in indiaew reported on Monday that Newmont was already holding preliminary talks with Lihir advisers.
Some commentators have also suggested Canadians Barrick Gold, Goldcorp or Kinross might be interested.
It would definitely make sense for Newmont to consider the role of white knight to Lihir, said John Ing, president and gold analyst at Toronto-based Maison Placements Canada.
Newmont has excess cash flow and, after relatively flat production levels for some tisvedala jaw crushers sparesme, is under pressure to grow gold output, he said. Adding Lihir and its growth prospects would be a good way to boost the company’s pipeline.
But Dahlman Rose & Co analyst Adam Graf disagreed, pointing out that, with Lihir already in play, Newmont or any competing buyer would need to put in some sort of premium.
Gold producers like Newmont and Barrick are going to be generating lots of operational cash flow, that they could use for merger and acquisition activity, he said cost of 135tph cement grinding plantin an interview.
But even if Newmont comes in with a friendly offer for Lihir, „it’s unlikely to be a bargain for Newmont shareholders,” Graf said.
Newmont spokesperson Omar Jabara declined to comment on the reports. “Our policy is to not comment on rumours and speculation around M&A,” he told Mining Weekly Online.
On a February conference call, though, the company’s executives spent more time than usual discussing the potential for growth by acquisition.
Acquisitions are necessary for growth “from time to time”, CEO Richard O’Brien said then. He said the company would be prepared to look at new areas of the world.
Newcrest is offering Lihir shareholders one of its own shares for every nine Lihir shares, as well as A$0,225 cash a share, which the smaller company has dismissed as too low.
On Monday, Newcrest indicated it would be prepared to “improve” the structure of its offer, giving shareholders more flexibility to opt for cash or shares in return for their Lihir stake.
Jefferies and Co analyst Michael Dudas wrote last week that he expects Newcrest to sweeten its offer.
“We believe Lihir Gold could be a good strategic fit for both North American majors interested in acquiring strong assets in politically stable regions such as Papua New Guinea,” he added in a research note.
Lihir has done well in the last few years to increase its resource base and production prospects, Ing said.
There is also no question that Lihir would be a good fit for Newcrest, but a move from Barrick, the industry leader, is probably less likely, he suggested.
Ing said it is “still early days” to speculate on how the story will play out, especially as Newcrest is the only suitor so far to show its hand.
“It’s no question that Lihir will go out, it’s just a question of at what price,” he continued.
Lihir Gold’s shares are listed on the ASX, TSX, Nasdaq and the Port Moresby exchange.