LGL rejects acquisition proposal from Newcrest Mining Ltd

LIHIR GOLD Ltd (LGL) on Wednesday rejected an offer from Newcrest Mining Ltd to acquire 100 percent of LGL's issued ordinary shares through a scheme of arrangement.

The offer, which was received on 29 March 2010, 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. Based on Newcrest's closing share price as at 31 March 2010, the offer was equivalent to A$3.87 per share and valued the company at approximately A$9.2 billion.

While the Board recognized the strategic merits of the combination of the two companies, following careful review and analysis, directors unanimously determined that the offer did not represent good value for LGL shareholders. This was particularly the case given the conditions and exclusivity arrangements that Newcrest proposed.

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. "It also did not include a sufficient premium for control," Dr Garnaut said.

"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," he said.

In the course of discussions leading to the offer, LGL provided Newcrest with access to limited due diligence items. The due diligence was subject to a confidentiality deed and 9 month standstill agreement and gave Newcrest an opportunity to put forward an offer that LGL's Board may have considered to be in the interests of shareholders.

"LGL has an excellent portfolio of operating mines in three countries and has achieved record production outcomes every year for the last four years, reaching output of 1.124 million ounces in 2009. We have major growth projects currently being developed in PNG and in West Africa, which will deliver increasing returns over the coming years, lifting average annual gold production by approximately 40 percent from current levels to 1.45 million ounces from 2012 to 2016.

"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.

"We were keen to ensure that our shareholders capture the full value of that growth," Dr Garnaut said.

"The Board is strongly of the view that LGL is undervalued in the marketplace, and that view has been expressed to us on a number of occasions by shareholders. We have recently made management changes and taken other steps that will assist us in the process of rebuilding market confidence and correcting that valuation shortfall.

"In that context, it was clear to the Board that the Newcrest offer failed to provide full value for the underlying assets with an appropriate takeover premium," Dr Garnaut said.
"The world class, long life nature of LGL's pure gold assets would add a great deal to the value of Newcrest, as it would to some other companies, and the offer price did not provide an appropriate sharing of the potential benefits of the proposed combination," Dr Garnaut said.

LGL's Board remains committed to maximising value for its shareholders and this will continue to be the only criterion by which any further proposals or strategic options will be evaluated.

PNG building boom attracts Fiji firm

THE booming building industry in Papua New Guinea has at least attracted Fiji's leading manufacturer of concrete, masonry blocks Standard Concrete Industries.

Basic Industries Ltd chief executive officer Mosese Volavola said they were aggressively pursuing expansions into these markets to make up for the 20 per cent to 30 per cent drop in revenue in Fiji's 'quiet' construction industry.

He said SCI, a major division of Basic Industries, aimed to penetrate the "promising" PNG market. Mr Volavola said Tahiti and New Caledonia were also in their expansion plans.

"We're now looking outside Fiji to make up for the drop in revenue because while the local market is quiet and subdued, we're picking up on exports," Mr Volavola told the Fiji Times.

"We're currently selling our products to Vanuatu, Samoa, American Samoa, Tonga and Cook Islands and now we're targeting other island nations, particularly Papua New Guinea," Mr Volavola said.

"And this should be good because instead of laying people off and reducing our operations, exports are still keeping us going."

Mr Volavola said the demand for cement and concrete building materials was high given the recent signing of two multi-billion dollar contracts for the extraction of natural gas.

"There is no direct shipping to PNG at the moment and that is what we are looking at right now. Hopefully, by the second quarter of 2010, we should achieve the PNG market and the other option is to establish our operation there," he said. "That of course will depend on the size of the market to determine the viability of our operation but in PNG, the market is there, it's big with a population of around six million the PNG market is very promising."

Mr Volavola said many of Fiji's neighbours did not have good quality sand, gravel or rocks available locally and Fiji was a cheaper option for quality over Australia and New Zealand, complemented by a regular shipping service.

SCI national manager masonry and export Umesh Kumar said their increase in exports over the last five years was attributed to the quality of products manufactured locally.

Harmony continues growth despite challenges

 HARMONY Gold Mining Company Limited (Harmony) with operations in PNG has announced that the past quarter saw continued focus on safety and disciplined mining, but was not without its challenges.

The South African based company in releasing the production update for third quarter 2010 financial year (FY2010) based on preliminary estimates, gold production for the quarter decreased between 1,000kg and 1,300kg compared with the previous quarter.

Loss-making shafts that were closed during the quarter resulted in a reduction of approximately 620kg of gold, as compared with the previous quarter. Restructuring costs in respect of these closures amount to approximately R120 million. Going forward, only care and maintenance costs for the closed shafts will be incurred. "Longer term the effect of this decision will be shown to have been the correct one, lowering the cash costs and eliminating losses, however, the first 3 to 6 months of these decisions are always painful", said Harmony's Chief Executive Officer, Graham Briggs.

The remaining loss in kilograms was from South African operations, of which the main contributing operations to this decrease include Tshepong, Masimong, Joel and Kusasalethu (previously known as Elandsrand). Tshepong and Masimong had a slow start-up after the Christmas break. Joel saw lower grades, mainly as a result of the commissioning of the plant and Kusasalethu faced ore-pass problems during the quarter, which are being investigated.

Hidden Valley continued its commissioning process, with the silver flotation circuit being commissioned in the March quarter. As mentioned in the previous quarter, we expect the Hidden Valley mine and processing plant to reach its original design capacity and throughput in the June 2010 quarter. The mine`s March quarter results will be capitalised.

"This has been a difficult quarter. Shortly after having recorded 99 days fatality-free, a fatal accident occurred at Evander. Slow start ups following the Christmas break and the closure of shafts resulted in a decrease in forecasted production and Kusasalethu, in particular, had a disappointing quarter. Our management team is working hard to try and understand the ore pass situation better and aims to find a solution as soon as possible. Having just visited Hidden Valley, good progress is being made in dealing with the commissioning phase. In general, we expect to see improved results during the June 2010 quarter, with all of our management teams dedicated to meeting production targets," Briggs said.

Harmony`s results for the third quarter of FY2010 ending 31 March 2010 will be announced on Monday, 10 May 2010 at 09h00 and 15h00 SA time.

InterOil responds to allegations

INTEROIL CORPORATION (NYSE: IOC) (POMSoX: IOC) believes that allegations made in an article concerning certain litigation which has been ongoing in Texas since 2005, have been raised now in an attempt to divert attention from the successful operations of the company. 

Operations conducted by the company which were evaluated by independent engineering evaluations consultants, GLJ Petroleum Consultants Ltd., resulted in an increase in our gross best case contingent resources estimate by 889 million barrels of oil equivalent resources, to a revised total of 8.2 tcf of natural gas and 156 million barrels of condensate, in the past fiscal year.  The article was timed to benefit recent short selling activities.  The "short" interest in InterOil increased to 3,548,056 shares in mid-March.

InterOil's policy is to not provide commentary on ongoing litigation beyond the description of it appropriately and consistently set forth in our Annual Information Statement and Form 40-F available on our website or from the SEC.

In our Annual Information Form (AIF), filed on March 1, 2010 the Company continued to disclose that Company's Chief Executive Officer, Phil Mulacek, and his controlled entities Petroleum Independent & Exploration Corporation and P.I.E. Group, LLC, together with the Company and certain of its subsidiaries, are defendants in Todd Peters, et. al. v. Phil Mulacek et. al.; Cause No. 05-040-03592-CV; pending in the 284th District Court of Montgomery County, Texas.  Appropriate details concerning this long running action are provided.

InterOil and its subsidiaries were not party to, nor otherwise involved in, the Nikiski Partners filing referenced in the article.

Mining tracks ahead in PNG

PAPUA NEW GUINEA is continuing to be at the forefront of exciting developments in the mining and resources industries, building a strong framework for future growth within the nation.

Kina Securities CEO Syd Yates said despite the slower recovery in the US and European economies, key sectors of the global economy are moving in full swing to ensure supply chains for resources are available.

"Record results delivered by global mining companies working in PNG have continued to send a timely message to the world that there are strong development and exploration opportunities within the Nation. With the global economy continuing to show signs of a recovery, this message becomes all the more important.

"However, there unfortunately continues to be negative issues raised in the local and international media concerning site and location disruptions, which again reflect poorly on the prospects of the nation," Mr Yates said in the company's Kina Communiqué'

Last week Papua New Guinea ranked poorly as a place to invest in mining by the New York-based mining consultancy company Beare Dolbear.

Beare Dolbear's "2010 Where NOT to Invest" report ranked PNG in 21st place out of 25 major mining countries.

It ranked PNG in the bottom group of countries according to the way it handles social issues such as poverty, in the second bottom group on mine permitting delays, and near the bottom on corruption.

Global gold producer Lihir Gold Limited recently announced it had delivered a record underlying profit of US$290 million for the year ending 31 December 2009. This reflected a significant increase of 57 per cent when compared to the previous year's activities.

The company indicated the strong result was primarily due to the group achieving the major milestone of producing and selling more than one million ounces of gold in a year, combined with reduced unit costs and strong gold prices.

Lihir Gold chief executive officer Phil Baker said that a record performance from the Lihir Island operation in PNG and a full year's contribution from the Bonikro and Mt Rawdon assets acquired in mid-2008 had also enabled the solid underlying profit result.

However, the company also reported $413 million in impairment charges and operational losses associated with its Ballarat operation, leading to an overall loss of $234 million.

Despite this, Mr. Baker said the company had achieved a number of strong results throughout the year.

"The excellent production outcome of 1.12 million ounces for the year, together with rising gold prices, translated into record revenues for the company. For the first time in LGL's history, total revenues surpassed US$1 billion," Mr. Baker said.

"The record performance at Lihir Island has confirmed the significant progress we've made in our drive for operational excellence and cost competitiveness," he said.

Clearly the global hunger for resources continues to excite exploration and new development opportunities throughout PNG. This has been reflected by ongoing developments of the LNG pipeline and other key projects throughout the Nation.

Earlier this year international mining organisation Nautilus Minerals announced that it had officially received the final Environmental Permit for the development of its Solwara 1 Project for the next 25 years, expiring 2035.

This historic announcement takes PNG yet another step closer to successfully hosting the world's first undersea copper and gold mining operation. The milestone also symbolises the start of an exciting new era for the global mining industry, which is now benefiting from the development of innovative techniques designed to collect valuable minerals from depths of more than 1,500 metres under the sea.

Throughout the past decade, the Nation's mining and natural resources sector has developed into a genuine cornerstone of the domestic economy.

Importantly the industry is continuing to provide strong opportunities for growth and development which will become all the more important as the global economic recovery continues to take effect.

A strong and diverse mining industry is integral to a prosperous national economy, with the sector creating many productive investment opportunities across PNG and generating numerous flow-on employment options for locals.

PNG's mining sector is now being recognised internationally as a diverse and well-managed sector and the positive benefits of this will continue to emerge for years to come.

Horizon gets PNG, Maari boost

THE sale of a 50 percent stake in PRL 4 in Papua New Guinea and the production start-up from the OMV-operated Maari oil field in New Zealand has had a huge impact on Horizon Oil's balance sheet.

According to PNG Industry news, Horizon posted a net profit of $US56.6 million (K155 million) for the half-year ended December 31, 2009, due to a $US54.1 million (K148 million) gain on the sale of the stake in Petroleum Retention License (PRL) 4 to Talisman Energy.

This compares with the net profit of $US1.9 million (K5.2 million) made in the half-year ending June 30, 2009.

Revenues were also up 200 percent to $US24.4 million (K67 million) over the same period as production climbed from 164,444 barrels of oil to 403,302bbl.

Horizon said planning for drilling of the Stanley-2 and Elevala-2 wells in PRL 4 and 5 respectively was progressing well, with Stanley-2 scheduled to spud in the third quarter of 2010.

More gas on the cards for Oil Search

OIL Search plans to focus 2010 exploration efforts on finding more gas to underpin liquefied natural gas expansion in Papua New Guinea and expects to resolve the remaining issues for PNG LNG this quarter reports PNG Industry news.

Managing director Peter Botten said in a statement key exploration activities this year included drilling the Wasuma, Korka and Mananda Attic wells, as well as onshore and offshore seismic in Southern Highlands province.

He added the company would also continue its seismic and drilling program in the Middle East and North Africa.

While development activities will focus on gas conservation and improving facilities, infrastructure reliability as well as extending facility life to support the PNG LNG project, Oil Search is still looking to get the most out of its oil assets.

This includes drilling one or two development wells on the Moran field; appraising the Agogo deep play, which had encountered oil in several intervals in a previously untested footwall forelimb compartment; and carrying out a workover campaign in the Kutubu, Moran and SE Gobe fields.

Botten said the new deep intervals at Agogo will be flow tested to determine hydrocarbon content, reservoir productivity and the potential for further development opportunities.

"Importantly, the discovery of oil in the Agogo footwall forelimb has opened up a new play fairway in the Fold Belt and has significant implications for the development of analogous structures below existing fields and the prospectivity on trend in adjacent licences."

Botten also touched on progress for the PNG LNG project.

"The remaining issues to financial close, including the signing of the final SPA (sales purchase agreement), which will result in the PNG LNG plant's initial capacity being fully contracted, are expected to be resolved during the first quarter of 2010 with first draw-downs from the project financing facility expected shortly before financial close," he said.

Meanwhile, Oil Search reiterated that full-year 2010 production would be about 10 percent lower than in 2009 at 7.2-7.4 million barrels of oil equivalent.

The company posted a net profit after tax of $US133.7 million (K367 million) for 2009, down from $US313.4 million (K860 million) in 2008, due to lower production and lower oil prices.

Revenue for the year was down 37 percent from 2008 to $US512.2 million (K1.4 billion) while production was 5 percent lower to 8.1MMboe, due to natural decline at its mature PNG oil fields, facilities downtime and the sale of the Middle East producing assets in May 2008.