Australian gold miner Lihir Gold has rejected a 9.2 billion Australian dollar ($8.45 billion) takeover offer from rival Newcrest Mining, saying it failed to capture the growth potential in its biggest mine and in West Africa.
The bid from Newcrest, Australia's biggest gold miner, marks the latest in a flurry of mining takeovers in Australia, powered by metals demand from fast-growing China and India.
Newcrest's all-share offer, worth A$9.2 billion or A$3.87 a share, represented a 28 percent premium to Lihir Gold's closing price on Wednesday. The combined market capitalization of the two firms based on their last closing price would be $23.1 billion.
"It did not include a sufficient premium for control," Lihir Chairman Ross Garnaut said in a statement.
Lihir said the board recognized the strategic merits of the combination of the two companies, but the offer did not represent good value for its shareholders.
Shares in Lihir Gold surged at the opening to trade up 31.7 percent at A$3.99, while Newcrest shares opened flat, before turning down 0.4 percent at A$32.70.
An analyst said the bid made sense for Newcrest, but it could afford to pay more.
"Lihir would provide Newcrest with a platform in West Africa, and Newcrest could add value to Lihir's operations. It has an extensive skill set in underground mining that could be used in West Africa," said Lyndon Fagan, an analyst at RBS.
He said a counter bidder could enter the fray, but said there would be limited synergies as Lihir's main operation is on a remote island off Papua New Guinea.
Lihir also named former BHP Billiton senior executive Graeme Hunt as its new chief executive on Thursday.
Newcrest offered 1 share for every 9 Lihir shares plus A$0.225 cash, less any interim dividend declared for the half year ended June 2010.
Lihir gave Newcrest some access to its books on an exclusive basis in talks leading up to the offer.
"There is considerable option value in the huge gold resource at Lihir Island, which increased 31 percent to 43 million ounces in 2009, and also in the company's assets in West Africa," Chairman Garnaut said.
Gold prices hit an all-time high of $1,226.10 an ounce on December 3, 2009, although have since recoiled to around $1,113.
In 2009 Lihir produced 1.12 million ounces of gold, with production in 2010 forecast to be between 960,000 ounces and 1.06 million ounces, according to data on its website.
In June 2008, Lihir bought Equigold NL, giving it gold mines in Queensland state and in Ivory Coast in West Africa.
Lihir is also exploring elsewhere in Ivory Coast, where it has exploration licenses either granted or under application in the highly prospective Birimian greenstone belts.
Newcrest is also co-developing gold mines in Papua New Guinea with Harmony Gold Mining of South Africa containing an estimated 15.2 million ounces of gold.
The tie-up is Newcrest's first step into Papua New Guinea.
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