Australian Deficit; Lihir Rejects Newcrest Bid

Darlington Musarurwa
01 Apr, 2010
New York City

Australian stocks gained on a rise in commodities prices but gains were trimmed after February deficit widened. Lihir Gold rejects Newcrest Mining A$9.2 billion takeover bid. Australian trade deficit widened to A$1.8 billion in February and manufacturing growth slowed.

[R]3:00 AM New York, 7:00 PM Sydney – Australian stocks gained on a rise in commodities prices but gains were trimmed after February deficit widened. Lihir Gold rejects Newcrest Mining A$9.2 billion takeover bid. Australian trade deficit widened to A$1.8 billion in February and manufacturing growth slowed.[/R]

Australian stocks rose 0.7% lifted by commodity stocks as the spot price of gold rose by $4.90 to $1,112 per ounce ahead of the long Easter weekend beginning tomorrow.

Gains were pared as the country’s trade deficit widened, according to a government report. Investors also worried over a private report showing that Australia’s manufacturing growth slowed in March.

In Sydney trading ASX 200 rose 0.7% or 32.2 to 4,907.70.

Of the ASX 200 index stocks, 101 rose, 75 fell, and 24 were unchanged. Lihir Gold led gainers in the index shares with a rise of 33.3% after the company rejected a A$9.2 billion takeover bid from U.S. firm Newcrest Mining.

The Australian dollar fell 0.1% to 91.59 U.S. cents.

Lihir Rejects Newcrest Mining Offer

Lihir Gold Ltd reported today that it has rejected the A$9.2 billion takeover bid from Newcrest Mining because “it did not represent good value for LGL shareholders.”

The offer was on the basis of 1 Newcrest share for every 9 LGL shares plus A$0.225 cash per LGL share, less any interim dividend declared for the half year ended June 2010.

LGL Chairman Ross Garnaut said the offer undervalued LGL, both in terms of its existing business, and in terms of the potential value the company expected to deliver to shareholders in the future.

“Directors and management made certain that Newcrest was given the opportunity to make an offer that would deliver full value for our shareholders, but the Board’s assessment was that the offer ultimately received was inadequate. We felt we had an obligation to shareholders to reject the offer,” said Garnaut.

Trade Deficit Widens to A$1.8 billion

Australian Bureau of Statistics reported today that February trade deficit rose A$804 million from a revised deficit in January to A$1.8 billion in February.

Exports fell 1% to A$19.9 billion as non-monetary gold decreased 28% and non-rural goods fell A$25 million.

However rural goods climbed 2% while service exports gained 1%.

According to the ABS, imports gained 2% to A$21.8 billion as consumption goods gained 5%, non-industrial transport equipment 16%, non-monetary gold 33% and capital goods 2%.

Intermediate and other merchandise goods dropped 1% and service imports jumped 3%.

Australia Job Vacancies Rise 12.1% in Feb

Separately, the online edition said total job vacancies rose 12.1% to 169,000 in February from November 2009.

Job vacancies in the private sector advanced 13.7% to 152,200, while vacancies in the public sector fell 0.6% to 16,800.

Australia’s Manufacturing Growth Slows in March

The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index declined 3.6 points to 50.2 in March, just above the 50 point level separating expansion from contraction.

Manufacturing growth was mainly affected by softening in construction materials demand and a decrease in overall selling prices and slower growth in new orders.

Australian Industry Group Chief Executive Heather Ridout said said the manufacturing sector is battling strong headwinds of weak demand, a strong dollar and rising interest rates.

ASX Movers

ING Industrial Fund led decliners in the S&P ASX 200 index with a loss of 3.3% followed by losses in Sigma Pharmaceuticals Limited of 3.2%, in Sundance Resources Limited of 3.2%, in Carsales.com Ltd 2.9% and in Ardent Leisure Group 2.5%.

Lihir Gold Limited led gainers in the S&P ASX 200 index with a rise of 33.3% followed by gains in Paladin Energy Ltd 6.3%, in CSR Limited of 6.0% and in St Barbara Limited of 5.8%.

Other Movers

Avoca Resources Limited the gold mining and Exploration Company increased 5.5% to A$2.09.

BHP Billiton plc added 0.8% to A$43.95 after the mining company, West Australian Premier Colin Barnett yesterday said that he would meet senior executives from mining companies BHP Billiton and Rio Tinto next week to restart talks on the miners’ plans for an iron ore joint venture in the state’s Pilbara region.

CSR Limited climbed 6.0% to A$1.75 after the company said it has received a conditional offer from Bright Food Group Co. to acquire CSR’s sugar and renewable energy business, Sucrogen, for A$1.75 billion.

Lihir Gold Limited surged 33.3% to A$4.04 after the gold producers announced that it has rejected an offer from Newcrest Mining Ltd.

Macarthur Coal Limited gained 5.8% to A$14.87 after the company rejected a $3 billion bid from Peabody Energy Corporation, saying it undervalued the growth prospects of the Company.

Rio Tinto Limited the metal and mineral production advanced 1.5% to A$79.60.

Sigma Pharmaceuticals Limited fell 3.2% to A$0.45 after the company was downgraded to “underperform” from “neutral” by Macquarie Group Ltd.