Lihir and Equigold Merge, ASX Down 3%

123jump.com Staff
20 Mar, 2008
New York City

Lihir Gold agreed to merge with Equigold to create leading independent gold producer in the world with a market capitalization of $9 billion and 25 million ounces of proven reserves. The comdined company plans to mine 1.2 million ounces of gold in 2009. The merger will exchange 33 Lihir shares for every 25 Equigold stocks.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index lost 3.1% after miners declined on a weak precious metal prices.[/R]

Market Sentiments

ASX 200 index lost 3.1% or 161.6 to close at 5,127.50.

The preliminary market turnover was 2.35 billion shares worth $13.84 billion with 351 stocks closing up, 773 closing down and 300 unchanged. The most active was Telstra, with 77.25 million shares worth $328.1 million.

Market Driver

Australia''s second-largest locally-traded metals miner, Lihir Gold Ltd agreed to merge with Equigold NL to create a global gold mining leader with a diversified portfolio of operations.

Equigold shareholders will receive 33 Lihir shares for every 25 Equigold shares.

Based on the closing prices of Lihir shares a day before the deal announcement, Equigold stock was valued at $5.33 in the offering.

The combined group will have assets in Australia, West Africa and Papua New Guinea, producing in excess of 1.2 million ounces of gold a year from 2009 at a cash cost in the lowest quartile of global producers.

The market capitalization of the combined group will be approximately A$9 billion and will be in top 30 companies in Australia and among the world''s largest gold producers.

Following the merger, Lihir would have approximately 25 million ounces in reserves and operations at Lihir Island in PNG, Ballarat in Victoria, Mt Rawdon in Queensland and at Bonikro in Ivory Coast, Africa.

LGL Chairman Ross Garnaut said the merger would lead to the creation of an exciting new global gold major. ""The new entity will be well placed to take advantage of on-going strength in the gold price to deliver increased returns to shareholders. We will have a robust balance sheet, virtually no hedging and an excellent growth profile,"" he said.

The proposed merger is subject to a number of conditions including the approval of Equigold shareholders, regulators and the Federal Court.

The transaction is expected to be completed by early June 2008. Equigold stock rose 7.7% while Lihir stock fell 11%.

Gainers and losers

Of the ASX 200 index stocks, City Pacific Ltd led the gainers with a rise of 20.8% followed by increases in Corp Express Australia of 12%, in Boom Logistics of 6.5%, in Transfield Services of 6.4%, and in QBE Insurance of 6%.

Of the ASX 200 index stocks, AED Oil Ltd led the decliners with a fall of 16.3% followed by losses in Centennial Coal of 15.8%, in Lynas Corp Ltd of 15.1%, in Sundance Resource of 14.6% and in ABC Learning of 14.5%.

Newcrest Mining drops the most on a decline in metal prices

Asia''s largest gold producer by market value, Newcrest Mining Ltd''s share fell 13.1% today marking its worst decline in more than five years a sharp pull back in gold prices. Gold fell to its lowest in a month, leading a drop in commodity prices, after the dollar rallied and continued worries on the demand outlook as the U.S. economy continues to deteriorate.

Gold bullion plunged 11% from a record on March 17 after the Federal Reserve cut its overnight-lending rate less than traders forecast.

Gold for immediate delivery yesterday fell by the most in four months, dropping 3.9%. The metal extended the decline today, falling as much as 2.8% to $917.91 and closed at $920.06. Gold reached a record $1,032.70 on March 17 after rallying for 7-years.

Foster''s Group Ltd and Lion Nathan Ltd to scrap ready-to-drink (RTD) products

Foster''s Group Ltd and Lion Nathan Ltd have indicated that they would drop ready-to-drink (RTD) products with a high alcohol content and energy additives from their Australian portfolios in response to community concerns about alcohol abuse.

Foster''s today announced it would immediately move to cease the production and marketing of added energy and higher alcohol RTD products in Australia.

Foster’s would voluntarily cease manufacturing and marketing alcohol beverages containing ''energy'' additives such as caffeine and taurine. In addition, the company has formally committed to a voluntary limit of two standard drinks (20 grams of alcohol) per single serve container and 7% alcohol by volume across its RTD product portfolio.

The decision by Australia''s two biggest liquor makers to cut brands such as Cougar XS bourbon and cola, which has 2.1 standard drinks, follows Australian Prime Minister Kevin Rudd''s announcement of a $53.5 million campaign to battle alcohol abuse.

Binge drinking costs Australia $15.3 billion annually in absenteeism and health care, and accounts for 40% of police work, according to the Alcohol and Other Drugs Foundation. Foster''s share fell 1.8%.

Perilya in talks with CBH

Perilya Ltd and CBH Resources Ltd today requested a trading halt in their share to facilitate talks on a possible merger. Perilya advised the Australian Stock Exchange that the talks had reached a stage where they warranted a trading halt in Perilya shares.

A combined company would be worth $487 million, based on yesterday''s closing prices. Perilya and CBH have mines within two kilometers of each other at Broken Hill.

A merger would bring together two companies, which produce lead, silver and zinc in New South Wales State, struggling to revive shareholders'' confidence in their expansion plans.

Toho Zinc Co, CBH''s largest shareholder, wanted to remove CBH''s chairman last year and Perilya began a review in February after its share market value halved last year.

CBH''s share has lost 34% in the past 12 months and Perilya has declined 73%, compared to a 12% fall in the benchmark index ASX 200.

Perilya''s first-half profit fell 84% because of a decline in zinc prices and disruptions to production, while CBH''s earnings fell 60% on lower metal output and prices.

QBE''s shares gains from takeover speculation

Takeover rumors of global insurance giant, QBE Insurance Ltd propped up its share which rose as much as 10% today. The insurance giant with a market value of $20 billion has been a victim of media speculation, which hinted that it could be a takeover target. QBE share was up 6% at the close against a 3% fall in the broader market. The Group however denied any takeover approaches.

""In response to your query today regarding the increase in the QBE share price over the past 24 hours, we advise that QBE is not aware of any information that has not been announced that could explain the movement in QBE''s share price, in particular, QBE is not aware of a takeover approach as speculated by Dow Jones today, the insurer said in its response to the Exchange today.

QBE shares also gained 7% yesterday. The market was however taken aback by the speculation since the insurer is usually a predator. Its Chief executive Frank O''Halloren indicated in February that QBE, which has been expanding aggressively in America, could afford to acquire a company that generated between $1.6 billion and $1.8 billion in net written premiums a year.