We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type |
---|---|---|---|
Lihir Gold, Limited (MM) | NASDAQ:LIHR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 39.25 | 0 | 01:00:00 |
By:
|
/s/ Stuart MacKenzie | |
|
||
Name
|
Stuart MacKenzie | |
Title:
|
Group Secretary & General Counsel | |
|
||
Date: July 22, 2010 |
SCHEME
BOOKLET |
Financial Advisers
|
Legal Adviser | |
|
| cash, A$, AUD, Australian dollars and cents are to Australian currency; | |
| US$, USD and US dollars are to United States currency; and | |
| K or PNG kina are to PNG currency. |
IMPORTANT NOTICES
|
IFC | |||
IMPORTANT DATES
|
2 | |||
LETTER FROM THE CHAIRMAN OF LGL
|
3 | |||
LETTER FROM THE CHAIRMAN OF NEWCREST
|
6 | |||
1
REASONS TO VOTE IN FAVOUR OF OR
AGAINST THE SCHEME
|
8 | |||
2
SCHEME HIGHLIGHTS
|
11 | |||
3
HOW TO VOTE
|
15 | |||
4
FREQUENTLY ASKED QUESTIONS
|
17 | |||
5
SUMMARY OF THE SCHEME
|
32 | |||
6
MATTERS RELEVANT TO THE VOTE ON
THE SCHEME
|
42 | |||
7
PROFILE OF LGL
|
58 | |||
8
PROFILE OF NEWCREST
|
79 | |||
9
PROFILE OF THE MERGED GROUP
|
111 | |||
10
AUSTRALIAN, PNG, US AND UK TAXATION
IMPLICATIONS
|
126 | |||
11
INDEPENDENT EXPERTS REPORT
|
133 | |||
12
INDEPENDENT TECHNICAL
SPECIALISTS REPORT
|
284 | |||
13
INVESTIGATING ACCOUNTANTS REPORT
|
373 | |||
14
IMPLEMENTATION OF THE SCHEME
|
385 | |||
15
ADDITIONAL INFORMATION
|
394 | |||
16
GLOSSARY
|
415 | |||
ATTACHMENTS
|
||||
A
NOTICE OF MEETING
|
423 | |||
B
MERGER IMPLEMENTATION AGREEMENT
|
427 | |||
C
SCHEME OF ARRANGEMENT
|
454 | |||
D
DEED POLL
|
474 |
Date | Event | |
Thursday, 12 August 2010
at 5.00pm, New York time
|
Latest time for LGL ADS holders to deliver voting instructions to the LGL ADS Depositary. | |
|
||
Saturday, 21 August 2010
at 11.00am
|
Latest time for lodgement of Proxy Forms with the LGL Registry. | |
|
||
Saturday, 21 August 2010
at 7.00pm
|
Date and time for determining eligibility to vote at the Scheme Meeting. | |
|
||
Monday, 23 August 2010
at 11.00am
|
Scheme Meeting for approval of the Scheme by the LGL Shareholders.
The Scheme Meeting will be held at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port Moresby, PNG. The meeting will commence at 11.00am. |
|
|
||
Friday, 27 August 2010
|
Second Court Hearing for approval of the Scheme by the Court. | |
|
||
Friday, 27 August 2010,
New York time
|
LGL ADSs are suspended from trading at the close of trading on NASDAQ. | |
|
||
Monday, 30 August 2010
|
Effective Date
The date specified in the order made by the Court following the Second Court Hearing as being the date that the Scheme becomes Effective. LGL Shares are suspended from trading at the close of trading on ASX and POMSoX. |
|
|
||
Tuesday, 31 August 2010
|
New Newcrest Shares commence trading on ASX and POMSoX on a deferred settlement basis. | |
|
||
Tuesday, 31 August 2010
at 5.00pm, New York time
|
Latest time for LGL ADS holders to deliver a Scheme Consideration election to the LGL ADS Depositary. | |
|
||
Monday, 6 September 2010
at 7.00pm
|
Record Date
Determination of entitlements to the Scheme Consideration. |
|
|
||
Monday, 6 September 2010
at 9.00pm
|
Election Date
Latest time for lodgement of the enclosed Election Form with the LGL Registry or making a Scheme Consideration election by logging on to the LGL website at www.lglgold.com and following the relevant instructions. |
|
|
||
Monday, 13 September 2010
|
Implementation Date
All Scheme Shares transferred to Newcrest. Scheme Consideration provided to Scheme Participants by Newcrest in accordance with the Scheme. |
|
|
||
Tuesday, 21 September 2010
|
Final day for despatch of confirmations of issue for New Newcrest
Shares and despatch of cheques for payment of Cash Consideration.
New Newcrest Shares commence trading on ASX and POMSoX on a normal settlement basis (assuming the New Newcrest Shares are admitted to the official list of ASX and POMSoX) following despatch of confirmations of issue for New Newcrest Shares. |
Letter from the Chairman of LGL continued | 4 |
| the relative contributions of LGL and Newcrest to the combined entity; | |
| the estimated value of the Scheme Consideration (which the Independent Expert estimates to be A$4.20A$4.32 per LGL Share based on Newcrests recent trading prices) compared to the underlying value of LGL, which the Independent Expert estimates to be A$4.28A$4.83 per LGL Share; |
| the Independent Expert noted that the Scheme Consideration is fair (albeit marginally) on the basis of a comparison of these valuation ranges. However, it acknowledged the inherent uncertainties in the theoretical valuation methodology it used to determine the underlying value of LGL and therefore notes that conclusions as to fairness based on theoretical valuation analysis should be treated with caution; | ||
| in this regard, the Independent Expert notes that, on one view, LGLs competitive sale process described above will provide the best possible evidence of LGLs current underlying value. If LGLs competitive sale process does not result in a superior proposal, the Independent Expert believes there are strong market based grounds to conclude that the Scheme Consideration is the highest value available to LGL Shareholders, represents full underlying value and is therefore by definition fair and reasonable; and |
| the Independent Experts view that by the time LGL Shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. |
Lihir Gold Limited Scheme Booklet | 5 |
| read this Scheme Booklet in full; | |
| vote in favour of the Scheme at the Scheme Meeting; and | |
| consider your preferences for the mix and match elections and elect to receive either the Maximum Share Consideration or Mixed Consideration. |
1 | Based on the pro forma market capitalisation of A$25.5 billion of both companies as at 21 July 2010. |
Lihir Gold Limited Scheme Booklet | 7 |
1.1 | Reasons to vote in favour of the Scheme | |
ü | The LGL Directors unanimously recommend that LGL Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal. | |
ü | The Independent Expert has concluded that the Proposal is in the best interests of LGL Shareholders, in the absence of a superior proposal. | |
ü | The Scheme Consideration represents a substantial premium over historical trading prices for LGL Shares. Based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date, the implied value of the Scheme Consideration is A$4.03 per LGL Share, which represents: |
| a 32.9% premium to the closing price of LGL Shares on ASX on 31 March 2010, being the last ASX Trading Day prior to LGL announcing it had rejected a proposal from Newcrest (which it received on 29 March 2010); | ||
| a 33.3% premium to the one month VWAP of the LGL Shares traded on ASX to 31 March 2010; and | ||
| a 35.4% premium to the three month VWAP of LGL Shares traded on ASX to 31 March 2010. |
With regard to the premium offered, the Independent Expert noted that between the announcement of Newcrests approach on 1 April 2010 and 13 July 2010, Newcrests shares underperformed global gold equities (in US$ terms) by around 10%, potentially reflecting among other factors the fall in the copper price over that period. Furthermore, the Independent Expert believes that, in the absence of Newcrests proposal, LGL Shares would almost certainly have risen since 1 April 2010, reflecting the rise in the gold price and the fall in the Australian dollar over that period. | ||
As a result, the Independent Expert concluded that while it is likely that the underperformance of Newcrest Shares relative to other gold companies has reduced the effective premium provided by the Consideration, the premium remains significant. | ||
LGL Shareholders should be aware that the implied value of the Scheme Consideration may increase or decrease prior to the Implementation Date because of movements in the price of Newcrest Shares. | ||
ü | LGL Shareholders will have the opportunity to participate in the strategic and financial benefits of the Merged Group . Newcrest anticipates that these benefits will include: |
| Asia Pacifics largest gold company and one of the worlds largest gold companies; | ||
| diversified portfolio of world-class assets; | ||
| attractive growth profile; | ||
| lowest quartile position on the global cash cost curve; | ||
| increased scale, financial strength and access to debt to capture future large-scale growth opportunities; | ||
| potential synergies; | ||
| strong operational and management capabilities to drive further value opportunities; and | ||
| increased liquidity of Newcrest Shares and potential for upward re-rating of Newcrest as a result of increased scale. |
Lihir Gold Limited Scheme Booklet | 9 |
ü | The price of LGL Shares may fall if the Scheme is not approved (in the absence of a Superior Proposal) given the LGL Share price increased significantly on the announcement of the Newcrest initial proposal and has subsequently tracked the Newcrest Share price on a basis consistent with the terms of the recommended proposal. | |
1.2 | Reasons to vote against the Scheme | |
û | LGL Shareholders may not agree with the LGL Directors unanimous recommendation or the Independent Experts conclusion. | |
û | The Merged Group will be subject to a number of risks to which LGL is not currently exposed. | |
Newcrest anticipates that these risks will include: |
| exposure to the market price of copper; | ||
| exposure to foreign exchange risk in countries where LGL does not have existing operations such as Indonesia and Fiji; | ||
| indebtedness of Newcrest following the implementation of the Scheme; | ||
| Newcrest may not meet its goals for production and operating costs and its development plans may not be realised; | ||
| exposure to the exploration and new project uncertainty of the Newcrest operations; | ||
| integration risks associated with the merger of the Newcrest and LGL businesses; and | ||
| exposure to the risks associated with operations and developments in other countries in which LGL does not currently operate, such as Indonesia and Fiji, including political and environmental conditions in these regions. |
Further details of these risks can be found in sections 9.5 and 9.6. | ||
û | LGL Shareholders may prefer LGL to be exposed to the opportunity for increased value from remaining as a standalone entity. | |
LGL Shareholders may believe that LGL will deliver greater returns to LGL Shareholders over the long term by remaining as an independent company. LGL Shareholders may consider that this is not the right time for LGL to enter into a merger. | ||
In assessing and recommending the Scheme, the LGL Board evaluated the benefits of LGL continuing as a standalone entity against other strategic alternatives. | ||
In deciding that it should recommend the improved Newcrest offer to LGL Shareholders on 4 May 2010, LGL Directors determined that, on balance, the earlier and more certain near-term value uplift for LGL Shareholders from the Newcrest proposal would be better on a time-adjusted and risk-adjusted basis than longer-term value prospects and upside from strategic options otherwise available to LGL as a standalone company. | ||
Further, if the Scheme is implemented, LGL Shareholders 100% interest in LGL will be exchanged for an interest of approximately 35.5% 1 to 36.8% of the Merged Group (depending on Scheme Consideration elections under the limited mix and match facility). | ||
û | LGL Shareholders may prefer to hold shares in a pure gold company. | |
LGL shareholders may wish to maintain an interest in LGL as an independent entity because they seek an investment in a listed company with the specific characteristics of LGL, including the fact that it is a company with a pure gold exposure. | ||
If the Scheme is implemented, LGL Shareholders will cease to hold shares in a company with pure gold operations and will instead hold shares in the Merged Group, which will be an entity with a mixture of gold only and gold-copper assets in its portfolio. | ||
Essentially, LGL Shareholders will become exposed to movements in the price of copper as well as the price of gold, with the copper price directly affecting the profitability of the Merged Group. |
Note | ||
1 | Based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date. |
1 Reasons to vote in favour of or against the Scheme continued | 10 |
û | LGL Shareholders may consider that a proposal which is more attractive for LGL Shareholders may materialise in the future. | |
The implementation of the Merger would mean that LGL Shareholders will not obtain the benefit of any such proposal. | ||
It is important to note that LGL undertook a competitive sale process by providing a number of large global gold companies with access to an extensive data room following Newcrests approach. As at the date of this Scheme Booklet, the LGL Board has not received a Competing Proposal. | ||
The Independent Expert has noted that by the time LGL Shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. |
| the Mixed Consideration under which the Scheme Participant elects to receive one New Newcrest Share for every 8.43 LGL Shares and A$0.225 cash per Scheme Share that they hold (less any dividend recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date); or | |
| the Maximum Share Consideration under which the Scheme Participant elects to receive all of their Scheme Consideration in New Newcrest Shares (subject to scale-back as set out below); or | |
| the Maximum Cash Consideration under which the Scheme Participant elects to receive all of their Scheme Consideration in cash (subject to scale-back as set out below). |
Note | ||
1 | This number may be increased to take account of the issue of any new LGL Shares under the LGL Executive Share Plan or the LGL Employee Share Ownership Plan. |
2 Scheme highlights continued | 12 |
Lihir Gold Limited Scheme Booklet | 13 |
| the relative contributions of LGL and Newcrest to the Merged Group; | |
| the estimated value of the Scheme Consideration (which the Independent Expert estimates to be A$4.20A$4.32 per LGL share based on Newcrests recent trading prices) compared to the underlying value of LGL, which the Independent Expert estimates to be A$4.28A$4.83 per share; |
| the Independent Expert noted that the Scheme Consideration is fair (albeit marginally) on the basis of a comparison of these valuation ranges. However, it acknowledged the inherent uncertainties in the theoretical valuation methodology it used to determine the underlying value of LGL and therefore notes that conclusions as to fairness based on theoretical valuation analysis should be treated with caution; | ||
| in this regard, the Independent Expert notes that, on one view, LGLs competitive sale process described above will provide the best possible evidence of LGLs current underlying value. If LGLs competitive sale process does not result in a superior proposal, the Independent Expert believes there are strong market based grounds to conclude that the Scheme Consideration is the highest value available to LGL Shareholders, represents full underlying value and is therefore by definition fair and reasonable; and |
| the Independent Experts view that by the time LGL Shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. |
Notes | ||
1 | Based on the maximum total amount of cash that may be paid by Newcrest of A$1.0 billion and the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date. LGL Shareholders will receive less than 35.5% of the total issued capital where the Newcrest VWAP is less than $32.06 per share, or greater than 35.5% of the total issued capital where the Newcrest VWAP is greater than $32.06 per share. | |
2 | 36.8% ownership is based on the minimum total amount of cash that may be paid by Newcrest of A$533 million. |
2 Scheme highlights continued | 14 |
HOW TO VOTE | 15 |
3 How to vote continued | 16 |
FREQUENTLY ASKED QUESTIONS | 17 |
QUESTION | ANSWER | |
Why have LGL
Shareholders received
this Scheme Booklet?
|
On 4 May 2010, LGL and Newcrest announced that they had entered into the Merger Implementation Agreement. Under this agreement, LGL agreed to propose the Scheme to LGL Shareholders, which if implemented, will result in Newcrest acquiring all of the issued shares in LGL in consideration for the Scheme Consideration. | |
|
||
|
The Scheme cannot be implemented unless it is approved by the Required Majority of LGL Shareholders at the Scheme Meeting to be held on 23 August 2010 at 11.00am at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port Moresby, Papua New Guinea, and by the Court at the Second Court Hearing. | |
|
||
|
This Scheme Booklet contains information relevant to the decision of LGL Shareholders whether or not to vote in favour of the Scheme at the Scheme Meeting. | |
|
||
What is the Scheme?
|
The Scheme is a statutory scheme of arrangement under Part XVI of the PNG Companies Act between LGL and its shareholders. | |
|
||
|
A summary of the Scheme is set out in section 5. A copy of the Scheme is included in Attachment C to this Scheme Booklet. | |
|
||
What is the effect of the
Scheme?
|
If the Scheme is implemented:
all existing LGL Shares at the Record Date will be transferred to Newcrest;
|
|
|
||
|
in consideration each Scheme Participant (whether or not they voted in
favour of or against the Scheme) will receive their Scheme Consideration;
|
|
|
||
|
LGL will become a wholly-owned subsidiary of Newcrest; and
|
|
|
||
|
LGL will subsequently cease to be listed on ASX, POMSoX and NASDAQ.
|
|
|
||
What are LGL
Shareholders choices in
relation to the Scheme?
|
An LGL Shareholder may:
vote in favour of the Scheme at the Scheme Meeting;
vote against the Scheme at the Scheme Meeting;
|
|
|
||
|
sell their LGL Shares before the Effective Date which is expected to be 30
August 2010; or
|
|
|
||
|
do nothing.
|
|
|
||
|
The LGL Directors recommend that LGL Shareholders exercise their right to vote and, in the absence of a Superior Proposal, vote in favour of the Scheme. | |
|
||
|
LGL Shareholders should note that even if they do nothing or vote against the Scheme, if the conditions precedent to the implementation of the Scheme are satisfied (or waived, where permitted) and the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting, and by the Court at the Second Court Hearing, then the Scheme will be implemented and all LGL Shares will be acquired by Newcrest for the Scheme Consideration. | |
|
||
|
Under the Scheme, unless Scheme Participants make a valid Scheme Consideration election, they will be deemed to have elected the Maximum Share Consideration (subject to scale-back). |
4 Frequently asked questions continued | 18 |
QUESTION | ANSWER | |
Assessment of the Scheme
|
||
|
||
What do the LGL
Directors recommend?
|
The LGL Directors unanimously recommend that LGL Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal. The LGL Directors also unanimously recommend that LGL Shareholders elect to receive either the Mixed Consideration or the Maximum Share Consideration. | |
|
||
|
Each LGL Director will vote the voting rights attached to all LGL Shares over which he or she has control in favour of the Scheme, in the absence of a Superior Proposal. | |
|
||
|
Section 6 sets out the reasons for the LGL Directors unanimous recommendation. | |
|
||
What is the
Independent
Experts
conclusion?
|
The Independent Expert has concluded that the Proposal is in the best
interests of LGL Shareholders, in the absence of a superior proposal.
In reaching its conclusion, the Independent Expert took into account a range of matters, including: |
|
|
||
|
the relative contributions of LGL and Newcrest to the Merged Group;
|
|
|
||
|
the estimated value of the Scheme Consideration (which the Independent
Expert estimates to be A$4.20A$4.32 per LGL Share based on Newcrests recent
trading prices) compared to the underlying value of LGL, which the Independent
Expert estimates to be A$4.28A$4.83 per LGL Share;
|
|
|
||
|
the Independent Expert noted that the Scheme Consideration is fair (albeit
marginally) on the basis of a comparison of these valuation ranges. However,
it acknowledged the inherent uncertainties in the theoretical valuation
methodology it used to determine the underlying value of LGL and therefore
notes that conclusions as to fairness based on theoretical valuation analysis
should be treated with caution;
|
|
|
||
|
in this regard, the Independent Expert notes that, on one view, LGLs
competitive sale process described above will provide the best possible
evidence of LGLs current underlying value. If LGLs competitive sale process
does not result in a superior proposal, the Independent Expert believes there
are strong market based grounds to conclude that the Scheme Consideration is
the highest value available to LGL Shareholders, represents full underlying
value and is therefore by definition fair and reasonable; and
|
|
|
||
|
the Independent Experts view that by the time LGL Shareholders vote on the
Scheme, potential counter-bidders will have had ample time to consider their
positions and, if interested, submit an alternative proposal to LGL.
|
|
|
||
|
In arriving at its conclusion, the Independent Expert had regard to the possible effect of the Minerals Resource Rent Tax and the previously proposed Resource Super Profits Tax on Newcrest. | |
|
||
|
Furthermore, the Independent Expert is of the view that LGLs share price is likely to fall, potentially significantly, if the proposal does not proceed (absent an alternative proposal). | |
|
||
|
The Independent Experts Report is set out in section 11 and LGL Shareholders should read it as part of their consideration of whether to vote in favour of the Scheme. |
Lihir Gold Limited Scheme Booklet | 19 |
QUESTION | ANSWER | |
What are the reasons
to vote in favour of the
Scheme?
|
Possible reasons to vote in favour of the Scheme include the following:
The LGL Directors unanimously recommend that LGL Shareholders vote
in favour of the Scheme, in the absence of a Superior Proposal.
|
|
|
||
|
The Independent Expert has concluded that the Proposal is in the best interests
of LGL Shareholders, in the absence of a superior proposal.
|
|
|
||
|
The Scheme Consideration represents a substantial premium over historical trading
prices for LGL Shares.
|
|
|
||
|
With regard to the premium offered, the Independent Expert noted that between the
announcement of Newcrests approach on 1 April 2010 and 13 July 2010, Newcrests
shares underperformed global gold equities (in US$ terms) by around 10%,
potentially reflecting among other factors the fall in the copper price over that
period. Furthermore, the Independent Expert believes that, in the absence of
Newcrests proposal, LGL shares would almost certainly have risen since 1 April
2010, reflecting the rise in the gold price and the fall in the Australian dollar
over that period.
|
|
|
||
|
As a result, the Independent Expert concluded that while it is likely that the
underperformance of Newcrest shares relative to other gold companies has reduced
the effective premium provided by the consideration, the premium remains
significant.
|
|
|
||
|
LGL Shareholders will have the opportunity to participate in any strategic and
financial benefits of the Merged Group. Newcrest anticipates that these benefits
will include:
|
|
|
||
|
Asia Pacifics largest gold company and one of the worlds largest gold companies;
|
|
|
||
|
diversified portfolio of world-class assets;
|
|
|
||
|
attractive growth profile;
|
|
|
||
|
lowest quartile position on the global cash cost curve;
|
|
|
||
|
increased scale, financial strength and access to debt to capture future
large-scale growth opportunities;
|
|
|
||
|
potential synergies;
|
|
|
||
|
strong operational and management capabilities to drive further value
opportunities; and
|
|
|
||
|
increased liquidity of Newcrest Shares and potential for upward re-rating as a
result of increased scale.
|
|
|
||
|
The price of LGL Shares may fall if the Scheme is not approved (in the absence of
a Superior Proposal) given the LGL Share price increased significantly on the
announcement of the Newcrest initial proposal and has subsequently tracked the
Newcrest Share price on a basis consistent with the terms of the recommended
proposal.
|
|
|
||
|
LGL Shareholders should review section 6.1, which sets out more detail on possible reasons for LGL Shareholders to vote in favour of the Scheme. |
4 Frequently asked questions continued | 20 |
QUESTION | ANSWER | |
Why might LGL
Shareholders vote
against the Scheme?
|
Possible reasons not to vote in favour of the Scheme include the following:
LGL Shareholders may not agree with the LGL Directors unanimous recommendation or
the Independent Experts conclusion.
|
|
|
||
|
||
|
The Merged Group will be subject to certain risks to which LGL is not currently
exposed. Newcrest anticipates that these risks will include:
|
|
|
||
|
exposure to the market price of copper;
|
|
|
||
|
exposure to foreign exchange risk arising from the increased international currency
exposures of the Merged Group;
|
|
|
||
|
economic, financial and share market risks applying to the Merged Group;
|
|
|
||
|
indebtedness of Newcrest following the implementation of the Scheme and its
potential need for further capital;
|
|
|
||
|
Newcrest may not meet its goals for production and operating costs and its
development plans may not be realised;
|
|
|
||
|
exposure to the exploration and new project uncertainty of the Newcrest operations;
|
|
|
||
|
integration risks associated with the merger of the Newcrest and LGL businesses; and
|
|
|
||
|
exposure to the risks associated with operations and developments in other
countries in which LGL does not currently operate, such as Indonesia and Fiji,
including political and environmental conditions in these regions.
|
|
|
||
|
Further details of these risks can be found in section 9.5.
|
|
|
||
|
LGL Shareholders may prefer LGL to be exposed to the opportunity for increased
value from remaining as a standalone entity.
|
|
|
||
|
LGL Shareholders may believe that LGL will deliver greater returns to LGL
Shareholders over the long term by remaining as an independent company. LGL
Shareholders may consider that this is not the right time for LGL to enter into a
merger.
|
|
|
||
|
In assessing and recommending the Scheme, the LGL Board evaluated the benefits of LGL
continuing as a standalone entity against other strategic alternatives.
|
|
|
||
|
In deciding that it should recommend the improved Newcrest offer to LGL Shareholders
on 4 May 2010, LGL Directors determined that, on balance, the earlier and more
certain near-term value uplift for LGL Shareholders from the Newcrest proposal would
be better on a time-adjusted and risk-adjusted basis than longer-term value prospects
and upside from strategic options otherwise available to LGL as a standalone company.
|
|
|
||
|
Further, if the Scheme is implemented, LGL Shareholders 100% interest in LGL will be
exchanged for an interest of approximately 35.5%
1
to 36.8% of the Merged
Group (depending on Scheme Consideration elections under the limited mix and match
facility).
|
1 | Based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date. |
Lihir Gold Limited Scheme Booklet | 21 |
QUESTION | ANSWER | |
Why might LGL
Shareholders vote
against the Scheme?
continued
|
LGL Shareholders may prefer to hold shares in a pure gold company.
LGL shareholders may wish to maintain an interest in LGL as an independent
entity because they seek an investment in a listed company with the specific
characteristics of LGL, including the fact that it is a company with a pure
gold exposure.
|
|
|
||
|
If the Scheme is implemented, LGL Shareholders will cease to hold shares in a
company with pure gold operations and will instead hold shares in the Merged
Group, which will be an entity with a mixture of gold only and gold-copper
assets in its portfolio.
|
|
|
||
|
Essentially, LGL Shareholders will become exposed to movements in the price
of copper as well as the price of gold, with the copper price
directly affecting
the profitability of the Merged Group.
|
|
|
||
|
LGL Shareholders may consider that a proposal which is more attractive for
LGL Shareholders may materialise in the future.
|
|
|
||
|
The implementation of the Merger would mean that LGL Shareholders will not
obtain the benefit of any such proposal.
|
|
|
||
|
It is important to note that LGL undertook a competitive sale process by
providing a number of large global gold companies with access to an extensive
data room following Newcrests approach. As at the date of this Scheme
Booklet, the LGL Board has not received a Competing Proposal.
|
|
|
||
|
The Independent Expert has noted that by the time LGL Shareholders vote on
the Scheme, potential counter-bidders will have had ample time to consider
their positions and, if interested, submit an alternative proposal to LGL.
|
|
|
||
|
LGL Shareholders should review section 6.2, which sets out more detail on possible reasons for LGL Shareholders to vote against the Scheme. | |
|
||
What are the risks associated with
the Scheme?
|
LGL Shareholders should be aware that there are risks associated with the Merged Group, and with share investment in mining companies and share ownership in general. There can be no guarantee that the benefits anticipated by Newcrest associated with the Merged Group will be achieved. | |
|
||
|
In this regard, LGL draws LGL Shareholders attention to the summary of risks associated with the Merged Group and an investment in the Merged Group contained in sections 9.5 and 9.6. | |
|
||
|
LGL Shareholders are already exposed to the risks associated with LGLs business and operations and this will continue if they become shareholders in Newcrest as a result of the implementation of the Scheme, although their exposure to these risks will be diversified as LGL Shareholders will hold a diluted investment in LGL once the Scheme has been implemented. LGL draws LGL Shareholders attention to the summary of risks associated with LGLs business and operations contained in section 7.8. |
4 Frequently asked questions continued | 22 |
QUESTION | ANSWER | |
Scheme Consideration
|
||
|
||
What will LGL
Shareholders
receive if the
Scheme is approved?
|
If the Scheme is implemented and an LGL Shareholder holds LGL Shares on the
Record Date, they will be a Scheme Participant and will receive the Scheme
Consideration for each Scheme Share that they hold.
Newcrest will also provide a limited mix and match facility in relation to the Scheme Consideration, which gives Scheme Participants greater flexibility in relation to the form of Scheme Consideration that they will receive. Under the limited mix and match facility, Scheme Participants can elect to receive their Scheme Consideration in one of three alternative forms: |
|
|
||
|
Mixed Consideration; or
|
|
|
||
|
Maximum Share Consideration; or
|
|
|
||
|
Maximum Cash Consideration.
|
|
|
||
|
Full details of the Scheme Consideration alternatives are set out in section 5.4. | |
|
||
|
If a Scheme Participant does not make a valid Scheme Consideration election, they will be deemed to have elected the Maximum Share Consideration and, accordingly, will receive the Maximum Share Consideration if the Scheme is implemented. | |
|
||
|
The LGL Directors unanimously recommend that LGL Shareholders elect to receive either the Mixed Consideration or the Maximum Share Consideration. | |
|
||
|
Please note that Ineligible Overseas Shareholders may not be eligible to receive New Newcrest Shares as Scheme Consideration. See below and section 14.14 for further information. | |
|
||
|
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders should refer to section 5.15 for further details about the consideration they will receive. | |
|
||
|
LGL ADS holders should refer to section 14.15 of this Scheme Booklet for information applicable to them. |
Lihir Gold Limited Scheme Booklet | 23 |
QUESTION | ANSWER | |
What is the implied value of the
Scheme Consideration?
|
The implied value of the Scheme Consideration based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, being the last ASX Trading Day prior to the Announcement Date, is A$4.03 per LGL Share. | |
|
||
|
The implied value of the Scheme Consideration based on the closing price of Newcrest Shares on ASX of A$33.31 on 21 July 2010, being the last ASX Trading Day prior to the date of this Scheme Booklet, is A$4.18 per LGL Share. LGL Shareholders should be aware that the implied value of the Scheme Consideration may increase or decrease prior to the Implementation Date because of movements in the price of Newcrest Shares. | |
|
||
|
Additionally, the value of the Scheme Consideration will be adjusted down by the value of any dividend recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date. | |
|
||
|
If the Scheme proceeds according to the timetable contained in the Scheme Booklet, then LGL will not declare or pay an interim dividend. On the basis of LGLs assurance to Newcrest that LGL is committed to implementing the Scheme in accordance with the Merger Implementation Agreement and the timetable contained in the Scheme Booklet, Newcrest has confirmed that, if the Newcrest Board resolves to pay a dividend in respect of the year ended 30 June 2010, the record date for that dividend will be after the Implementation Date (such that Scheme Participants who are issued New Newcrest Shares under the Scheme and who still hold those shares as at the record date for that dividend will receive that dividend). This confirmation is subject to the Scheme timetable not being delayed as a result of a breach by LGL of its obligations under the Merger Implementation Agreement. | |
|
||
How do LGL Shareholders make a valid
Scheme Consideration election?
|
LGL Shareholders can make a valid
Scheme Consideration election by
completing the Election Form that
accompanies this Scheme Booklet in
accordance with the instructions set
out in the Election Form.
An LGL Shareholder can also make a Scheme Consideration election by logging on to the LGL website at www.lglgold.com and following the relevant instructions. To be valid, the Election Form must be received by the LGL Registry or the online instruction form completed by no later than 9.00pm on 6 September 2010. |
|
|
||
What if LGL Shareholders do not make
a valid Scheme Consideration
election?
|
LGL Shareholders that do not make a valid Scheme Consideration election will be deemed to have made a valid Maximum Share Consideration election and, accordingly, will receive the Maximum Share Consideration for each Scheme Share they hold if the Scheme is implemented. | |
|
||
Can LGL Shareholders change their
Scheme Consideration election?
|
An LGL Shareholder can change their
Scheme Consideration election by
logging on to the LGL website at
www.lglgold.com and following the
relevant instructions by 9.00pm on 6
September 2010.
If an LGL Shareholder cannot use the process on the LGL website, they can request a replacement Election Form. Replacement Election Forms can be obtained by visiting www.investorcentre.com and following the prompts, or by contacting the LGL Shareholder information line on 1300 749 597 (within Australia) or +61 3 9415 4665 (outside Australia) between 8.30am and 5.00pm (Australian Eastern Standard Time) Monday to Friday. |
|
|
||
|
The last valid Election Form received by the LGL Registry or valid online instruction completed by 9.00pm on 6 September 2010 will be used for the purposes of determining that LGL Shareholders Scheme Consideration election. |
4 Frequently asked questions continued | 24 |
QUESTION | ANSWER | |
How will the mix and
match facility operate?
|
All valid Mixed Consideration elections will be satisfied in full.
The outcome of valid Maximum Share Consideration elections and valid Maximum Cash Consideration elections will depend on the amount of available New Newcrest Shares and cash after all valid Scheme Consideration elections have been received. The total number of New Newcrest Shares to be issued and the maximum amount of cash to be paid in aggregate by Newcrest under the Scheme will not exceed the Share Consideration Cap and the Cash Consideration Cap respectively. |
|
|
||
|
To the extent that valid Maximum Share Consideration elections and Maximum Cash Consideration elections can be satisfied in full, Scheme Participants who make (or are deemed to have made) a valid Maximum Share Consideration election will receive 100% New Newcrest Shares and Scheme Participants who have made a valid Maximum Cash Consideration election will receive 100% cash. The number of New Newcrest Shares or the amount of cash they will receive in excess of the proportions set out in the Mixed Consideration will be calculated by converting the number of New Newcrest Shares or the amount of cash (as applicable) they would have otherwise received. For this purpose, New Newcrest Shares will be valued at the Newcrest VWAP. | |
|
||
|
To the extent that valid Maximum Share Consideration elections and Maximum Cash Consideration elections cannot be satisfied in full, they will be scaled-back on a pro-rata basis. This may mean that Scheme Participants making a valid election to receive either the Maximum Share Consideration or the Maximum Cash Consideration may receive an outcome that is between the maximum of their election and what they would have received had they elected to receive Mixed Consideration. | |
|
||
|
If an LGL Shareholder elects to receive the Mixed Consideration, the number of New Newcrest Shares issued to that LGL Shareholder as Share Consideration will not depend on the Newcrest VWAP. If an LGL Shareholder elects to receive the Maximum Cash Consideration or Maximum Share Consideration, the number of New Newcrest Shares and the amount of cash they receive will be a function of the Newcrest VWAP (see above). | |
|
||
|
The outcome of the Scheme Consideration elections will be announced to ASX, POMSoX and NASDAQ by LGL and Newcrest as soon as possible following the Record Date. | |
|
||
How will fractional
entitlements to shares
be treated?
|
If the number of LGL Shares an LGL Shareholder holds on the Record Date means that their aggregate entitlement to New Newcrest Shares is not a whole number, then any fractional entitlement to New Newcrest Shares of 0.5 or more will be rounded up to the nearest whole number and any fractional entitlement of less than 0.5 will be rounded down. | |
|
||
When will the Scheme
Consideration be
provided?
|
If the Scheme is implemented, the Scheme Consideration will be provided to the Scheme Participants on or following the Implementation Date in accordance with the Scheme. As at the date of this Scheme Booklet, the Implementation Date is expected to be 13 September 2010. | |
|
||
|
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders should refer to section 5.15 for further details about the timing for payment of the consideration they will receive. |
Lihir Gold Limited Scheme Booklet | 25 |
QUESTION | ANSWER | |
How will the Share
Consideration be provided?
|
New Newcrest Shares will be issued on the Implementation Date. Confirmations of issue for New Newcrest Shares will be sent by prepaid post to the relevant Scheme Participants addresses as shown in the LGL Register at the Record Date as soon as possible following implementation of the Scheme, and in any event, within five Business Days after the Implementation Date. | |
|
||
How will the Cash
Consideration be paid?
|
Cheques for the Cash Consideration will be despatched by prepaid post to the relevant Scheme Participants addresses as shown in the LGL Register at the Record Date within five Business Days after the Implementation Date. | |
|
||
How will overseas LGL
Shareholders be treated under
the Scheme?
|
If an LGL Shareholders address as shown in the LGL Register is in a jurisdiction other than PNG, Australia (and its external territories), the United States, the United Kingdom (certain LGL Shareholders only see section 14.14(a)), Canada, Singapore, Hong Kong, New Zealand, the Peoples Republic of China, Indonesia, France, Japan, Ireland or Switzerland, they may be an Ineligible Overseas Shareholder for the purposes of the Scheme and may not be able to receive New Newcrest Shares under the Scheme. | |
|
||
|
The Scheme will apply to Ineligible Overseas Shareholders that are not able to receive New Newcrest Shares under the Scheme in the exact same way as it applies to all other LGL Shareholders (including the ability to vote at the Scheme Meeting and the ability to make a Scheme Consideration election), save that New Newcrest Shares to which the Ineligible Overseas Shareholder would otherwise have been entitled to receive under the Scheme will be issued to the Sale Agent as Newcrests nominee rather than to the Ineligible Overseas Shareholder. The Sale Agent will sell those New Newcrest Shares on-market together with all the New Newcrest Shares subject to the Cash Out Facility and remit the gross proceeds to Newcrest. Newcrest will then remit the proportionate proceeds from that sale to the Ineligible Overseas Shareholder, without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions for tax required by law or any revenue authority). Please see section 5.15 for further details. | |
|
||
|
If an Ineligible Overseas Shareholder makes a Maximum Cash Consideration election and that election is able to be satisfied in full, then the Ineligible Overseas Shareholder will receive cash only and the above process regarding New Newcrest Shares will not apply to that Ineligible Overseas Shareholder. Any Cash Consideration payable to Ineligible Overseas Shareholders (other than with respect to the sale of New Newcrest Shares under the Sale Agent process referred to above) will be paid by cheque despatched within five Business Days after the Implementation Date. | |
|
||
|
If an Ineligible Overseas Shareholder does not wish to have the Sale Agent sell New Newcrest Shares as described above, they can choose to not participate in the Scheme by selling their LGL Shares before the Effective Date (expected to be 30 August 2010). | |
|
||
|
Section 14.14 contains further detail regarding the entitlements of overseas LGL Shareholders. |
4 Frequently asked questions continued | 26 |
QUESTION | ANSWER | |
Is there a cash out
facility for LGL
Shareholders who
would otherwise
receive a small
holding of New
Newcrest Shares
under the Scheme?
|
An LGL Shareholder may make an Unmarketable Parcel Election when completing their Scheme Consideration election. If they do so they will be an Electing Unmarketable Parcel Shareholder and, in the event that they would receive 14 New Newcrest Shares or less under the Scheme, all the New Newcrest Shares that they would have otherwise received will instead be issued to the Sale Agent. The Sale Agent will sell those New Newcrest Shares (together with all New Newcrest Shares which would otherwise be issued to Ineligible Overseas Shareholders and other Electing Unmarketable Parcel Shareholders) on-market and remit the gross proceeds to Newcrest. Newcrest will then remit the proportionate proceeds from that sale to the LGL Shareholder, without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions for tax required by law or any revenue authority). | |
|
||
|
An LGL Shareholder who holds no more than 122 LGL Shares as at the Record Date and who elects to receive the Mixed Consideration would receive 14 New Newcrest Shares or less under the Scheme. An LGL Shareholder who holds more than 122 LGL Shares as at the Record Date may also receive 14 New Newcrest Shares or less under the Scheme if they elect to receive the Maximum Cash Consideration, but their election is scaled back. | |
|
||
|
Refer to section 5.15 for further details about this facility. | |
|
||
When can LGL
Shareholders start
trading their New
Newcrest Shares?
|
Once the Scheme becomes Effective, trading in New Newcrest Shares issued under the Scheme is expected to commence on ASX and POMSoX on 31 August 2010 on a deferred settlement basis. Once confirmations of issue for New Newcrest Shares have been issued (which must occur within five Business Days after implementation of the Scheme), trading in New Newcrest Shares on ASX and POMSoX will commence on a normal settlement basis (assuming the New Newcrest Shares are granted quotation on ASX and POMSoX). Newcrest has stated that it does not intend to list its ADRs on NASDAQ or any other US national securities exchange after the Scheme is implemented. See sections 9.3(c) and 14.9 for additional information. | |
|
||
|
If Scheme Participants trade in their New Newcrest Shares during the deferred settlement period and prior to receipt of their confirmation of issue, they do so at their own risk, as the exact amount of New Newcrest Shares that will be issued to Scheme Participants if the Scheme is implemented will not be determined until the Implementation Date (other than those Scheme Participants that make Mixed Consideration elections, whose allocation of New Newcrest Shares is fixed). | |
|
||
Will LGL
Shareholders have
to pay any
brokerage or stamp
duty
on the transfer of
their Scheme Shares
under the Scheme?
|
No brokerage or stamp duty will be payable by Scheme
Participants on the transfer of their Scheme Shares under the
Scheme or the receipt by Scheme Participants of the Scheme
Consideration.
If LGL Shareholders dispose of their LGL Shares before the Implementation Date or dispose of their New Newcrest Shares, including on a deferred settlement basis, they may have to pay brokerage. |
Lihir Gold Limited Scheme Booklet | 27 |
QUESTION | ANSWER | |
How will entitlements
under the LGL Executive
Share Plan be treated
under the Scheme?
|
The LGL Board has determined that, if LGL Shareholders approve the Scheme at the Scheme meeting, pro-rata entitlements to unvested share rights issued under the LGL Executive Share Plan will vest (calculated by reference to the scheduled Implementation Date), and participants will receive LGL Shares which will be acquired by Newcrest under the Scheme. See section 15.7 for further information. | |
|
||
How will entitlements
under the LGL Employee
Share Ownership Plan be
treated under the
Scheme?
|
The LGL Shares granted under the LGL Employee Share Ownership Plan will vest on the Effective Date and will be acquired by Newcrest under the Scheme. See section 15.7 for further information. | |
|
||
Scheme Meeting, voting and approval | ||
|
||
When and where will the
Scheme Meeting
be held?
|
The Scheme Meeting will be held at 11.00am on 23 August 2010 at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port Moresby, Papua New Guinea. | |
|
||
What voting majority is
required to approve the
Scheme?
|
The Scheme cannot be implemented unless it is approved by the Required Majority of LGL Shareholders at the Scheme Meeting. The Required Majority of LGL Shareholders is at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by LGL Shareholders voting in person, by proxy, by attorney or, in the case of corporate LGL Shareholders, by a corporate representative. | |
|
||
Who is entitled to vote?
|
Each LGL Shareholder who is registered on the LGL Register as at 7.00pm on 21 August 2010 is entitled to attend and vote at the Scheme Meeting. The Notice of Meeting is set out in Attachment A to this Scheme Booklet. For further details regarding voting entitlement, and voting by proxy, attorney or corporate representative, see section 3. | |
|
||
|
LGL ADS holders should refer to section 14.15 of this Scheme Booklet for voting information applicable to them. | |
|
||
Is voting compulsory?
Should LGL
Shareholders vote?
|
Voting is not compulsory.
However, LGL Shareholders should exercise their right to vote as each LGL Share is equally important in determining whether the Scheme will be implemented. |
|
|
||
|
Approval of the Scheme by the Required Majority of LGL Shareholders at the Scheme Meeting is required in order for the Scheme to be implemented. Further information on how to vote is set out in section 3. | |
|
||
If LGL Shareholders wish
to vote on the Scheme,
how do they vote?
|
LGL Shareholders can vote at the Scheme Meeting:
in person;
by proxy; or
|
|
|
||
|
by attorney.
|
|
|
||
|
Corporate LGL Shareholders can vote at the Scheme Meeting through a corporate representative. | |
|
||
|
See section 3 for further information on how to vote. The Proxy Form for the Scheme Meeting accompanies this Scheme Booklet. |
4 Frequently asked questions continued | 28 |
QUESTION | ANSWER | |
Are Newcrest Shareholders entitled
to vote?
|
No, only LGL Shareholders are entitled to vote at the Scheme Meeting. Any person who holds both Newcrest Shares and LGL Shares will be entitled to vote their LGL Shares at the Scheme Meeting. | |
|
||
How will the LGL Directors be voting?
|
Each LGL Director will vote the voting rights attached to all LGL Shares over which he or she has control in favour of the Scheme, in the absence of a Superior Proposal. | |
|
||
What if LGL Shareholders cannot or
do not wish to attend the
Scheme
Meeting?
|
If an LGL Shareholder cannot attend
the Scheme Meeting to be held on 23
August 2010 in person, they should
complete and return the Proxy Form
enclosed with this Scheme Booklet.
Proxy Forms must be completed and received by the LGL Registry by 11.00am on 21 August 2010. |
|
|
||
|
For further details regarding voting at the Scheme Meeting and submitting the Proxy Form, see section 3. | |
|
||
What happens if LGL Shareholders
vote against the Scheme or do not
vote?
|
If an LGL Shareholder does not vote,
or votes against the Scheme, then
the Scheme may not be approved. The
Scheme cannot be implemented unless
it is approved by the Required
Majority of LGL Shareholders at the
Scheme Meeting.
If the Scheme is not implemented, the benefits in section 6.1(d) will not be realised and the LGL Share price may fall. However, even if an LGL Shareholder does not vote or votes against the Scheme, this does not mean that the Scheme will not be approved. |
|
|
||
|
If the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting, and by the Court at the Second Court Hearing, and if the conditions precedent to the implementation of the Scheme are satisfied (or waived, where permitted), then the Scheme will be implemented. All LGL Shares will be transferred to Newcrest and Scheme Participants will receive their Scheme Consideration regardless of whether they voted against the Scheme or did not vote at all. | |
|
||
|
Even if an LGL Shareholder votes against the Scheme or does not vote at all, they should still submit an Election Form. If a Scheme Participant does not make a valid Scheme Consideration election they will be deemed to have made a valid Maximum Share Consideration election and accordingly, will receive the Maximum Share Consideration for each LGL Share they hold if the Scheme is implemented. Further information about the Scheme Consideration alternatives is detailed in section 5.4. | |
|
||
When will the results of the Scheme
Meeting be available?
|
The results of the Scheme Meeting will be available shortly after the conclusion of that meeting and will be announced to ASX, POMSoX and NASDAQ once available. The results will also be published on the LGL website (www.lglgold.com) soon after the Scheme Meeting. | |
|
||
What steps are required after the
Scheme Meetings?
|
If the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting, LGL will make an application to the Court to approve the Scheme. Section 14 contains further details of the implementation steps and approvals required, and section 15.20 sets out certain other conditions precedent that must be satisfied (or waived, where permitted), before the Scheme can be implemented. |
Lihir Gold Limited Scheme Booklet | 29 |
QUESTION | ANSWER | |
Other questions
|
||
|
||
Can LGL Shareholders sell
their LGL Shares
now?
|
Yes. LGL Shareholders can sell their LGL
Shares on-market at any time before 4.00pm
on the Effective Date, which is currently
expected to be 30 August 2010.
Holders of LGL ADSs traded on NASDAQ should note that, because of time zone differences, the last time that LGL ADSs can be traded on that market, subject to the Scheme becoming Effective, will be the close of trading on 27 August 2010, New York time. |
|
|
||
|
However, if LGL Shareholders sell their LGL Shares prior to 4.00pm on the Effective Date, they will not be entitled to receive the Scheme Consideration if the Scheme is implemented. | |
|
||
|
If the Scheme becomes Effective: | |
|
||
|
LGL Shares will be suspended from
trading on ASX and POMSoX at the close of
trading on the Effective Date; and
|
|
|
||
|
LGL ADSs will cease trading on NASDAQ at
the close of trading on 27 August 2010,
New York time.
|
|
|
||
|
If the Scheme becomes Effective, no transfers in respect of LGL Shares the subject of the Scheme will be registered after the Record Date, expected to be 7.00pm on 6 September 2010. | |
|
||
What are the Australian, PNG,
US and UK tax
consequences
of the Scheme for
LGL Shareholders?
|
Section 10 provides a general description
of the material Australian, PNG, US and UK
taxation consequences of the Scheme for
LGL Shareholders.
LGL Shareholders should consult with their own independent tax adviser regarding the consequences of acquiring, holding or disposing of LGL Shares and Newcrest Shares in light of current tax laws and their particular investment circumstances and anticipated future circumstances. |
|
|
||
|
Holders of LGL Shares subject to tax laws of other countries are cautioned that this Scheme Booklet does not contain any advice regarding the tax consequences of the Scheme for LGL Shareholders under those tax laws. Such holders are advised to contact their accountant or other professional tax adviser regarding the tax effects of the Scheme on their particular circumstances. | |
|
||
What is Newcrests dividend
policy?
|
Newcrest reviews its results each half year and determines an appropriate level of dividend, taking into account the levels of profits for that half year, anticipated cash commitments and cash available for dividends. Further information about Newcrests dividend policy is available in section 8.8. | |
|
||
Will LGL Shareholders be
entitled to the Newcrest
dividend for the year ended 30
June 2010?
|
On the basis of LGLs assurance to Newcrest that LGL is committed to implementing the Scheme in accordance with the Merger Implementation Agreement and the timetable contained in the Scheme Booklet, Newcrest has confirmed that, if the Newcrest Board resolves to pay a dividend in respect of the year ended 30 June 2010, the record date for that dividend will be after the Implementation Date (such that Scheme Participants who are issued New Newcrest Shares under the Scheme and who still hold those shares as at the record date for that dividend will receive that dividend). This confirmation is subject to the Scheme timetable not being delayed as a result of a breach by LGL of its obligations under the Merger Implementation Agreement. | |
|
||
Will LGL be declaring an
interim dividend for the half
year ended
30 June 2010?
|
If the Scheme proceeds according to the timetable contained in this Scheme Booklet, LGL will not recommend, declare or pay, or resolve to recommend, declare or pay, an interim dividend for the half year ended 30 June 2010. |
4 Frequently asked questions continued | 30 |
QUESTION | ANSWER | |
Is the Scheme
subject to any
conditions?
|
There are a number of conditions precedent that will need to be
satisfied (or waived, where permitted) before the Scheme can be
implemented. These are outlined in section 15.20.
As at the date of this Scheme Booklet, neither Newcrest nor LGL is aware of any circumstances which would cause any of the conditions precedent to the implementation of the Scheme not to be satisfied by the required date. |
|
|
||
Who will manage the
Merged Group
following the
Scheme?
|
Newcrest management will control the management of the Merged Group. Details of the Newcrest Board and senior management are set out in sections 8.18 and 8.19. | |
|
||
What happens if the
Scheme is not
approved or the
conditions
|
If the Scheme is not approved by the Required Majority of LGL Shareholders at the Scheme Meeting or by the Court at the Second Court Hearing, or the conditions precedent outlined in section 15.20 are not satisfied (or waived, where permitted): | |
precedent to the
Scheme
are not satisfied?
|
Scheme Participants will not receive the Scheme Consideration;
Scheme Shares will not be transferred to Newcrest and LGL
Shareholders will retain their direct interest in LGL;
|
|
|
||
|
LGL will continue to operate as an independent entity under
the management of the current LGL Board and management;
|
|
|
||
|
LGL Shareholders will continue to be exposed to the risks
associated with an investment in LGL (see section 7.8 for
further details); and
|
|
|
||
|
the LGL Share price may fall.
|
|
|
||
What happens if a
Superior Proposal
is received by LGL?
|
Under the terms of the Merger Implementation Agreement, if LGL receives a Competing Proposal that it may consider to be superior to the Scheme and proposes to change, qualify or withdraw its recommendation that LGL Shareholders approve the Scheme, it must notify Newcrest five Business Days prior to doing so to allow Newcrest to propose a variation to the Scheme so that the Scheme would be superior to the Competing Proposal. | |
|
||
|
If a Superior Proposal is received by LGL, LGL Directors will carefully consider the proposal, announce it on ASX, POMSoX and NASDAQ, and advise LGL Shareholders of their recommendation. | |
|
||
When is the break
fee payable?
|
Under the Merger Implementation Agreement, LGL must pay to Newcrest a break fee of US$60 million if certain specified events occur, including if the LGL Board or any LGL Director recommends or supports a Superior Proposal. Please refer to section 15.17 for an explanation of the triggers of the break fee. |
Lihir Gold Limited Scheme Booklet | 31 |
QUESTION | ANSWER | |
What are the forms
accompanying this Scheme
Booklet?
|
Enclosed with this Scheme Booklet are:
A Proxy Form
If an LGL Shareholder wishes
to appoint a proxy in respect of the Scheme
Meeting they should complete and sign the
Proxy Form and return it to the LGL Registry
in accordance with the instructions on the
form so that it is received by no later than
11.00am on 21 August 2010 (or, if the Scheme
Meeting is adjourned, at least 48 hours
before the resumption of the Scheme Meeting
in relation to the resumed part of the Scheme
Meeting).
|
|
|
||
|
An Election Form
LGL Shareholders can use
this form to make a Scheme Consideration
election. To make a valid Scheme
Consideration election using an Election
Form, LGL Shareholders must complete the
Election Form in accordance with the
instructions set out in that form and return
it to the LGL Registry. To be valid, the
Election Form must be received by the LGL
Registry or the online instruction form
completed by no later than 9.00pm on 6
September 2010.
|
|
|
||
|
An LGL Shareholder who wishes to elect that,
in the event that they would receive 14 New
Newcrest Shares or less as consideration
under the Scheme, those New Newcrest Shares
instead be sold by the Sale Agent as
described in section 5.15, should also submit
an Election Form and select this option on
the Election Form.
|
|
|
||
|
LGL Shareholders can also make a valid Scheme
Consideration election or Unmarketable Parcel
Election, or effect a change to a previous
election, by logging on to the LGL website at
www.lglgold.com and following the relevant
instructions. To be valid, the online
instruction must be completed by no later
than 9.00pm on 6 September 2010.
|
|
|
||
|
If an LGL Shareholder does not make a valid
Scheme Consideration election, they will be
deemed to have elected the Maximum Share
Consideration and, accordingly, will receive
the Maximum Share Consideration for each
Scheme Share they hold if the Scheme is
implemented.
|
|
|
||
|
LGL Shareholders may complete an Election
Form regardless of whether or not they intend
to vote on, or in favour of, the Scheme.
|
|
|
||
|
LGL ADS holders will receive additional
information regarding the Scheme, and how
they may participate in the Scheme, from the
LGL ADS Depositary. See Section 14.15 for
additional information.
|
|
|
||
Further information
|
||
|
||
What if LGL Shareholders
want further information?
|
If, after reading this Scheme Booklet, an LGL Shareholder has any questions about their LGL Shares or any other matter in this Scheme Booklet, they should call the LGL Shareholder information line on 1300 749 597 (within Australia) or +61 3 9415 4665 (outside Australia) between 8.30am and 5.00pm (Australian Eastern Standard Time) Monday to Friday. | |
|
||
|
If an LGL Shareholder is in any doubt about what they should do or anything in this Scheme Booklet, they should consult their legal, investment, taxation or other professional adviser without delay. |
SUMMARY OF THE SCHEME |
Lihir Gold Limited Scheme Booklet | 33 |
(a) | all Scheme Shares will be transferred to Newcrest; | |
(b) | each Scheme Participant will receive their Scheme Consideration from Newcrest in consideration for their Scheme Shares; | |
(c) | LGL will become a wholly-owned subsidiary of Newcrest; and | |
(d) | LGL will subsequently cease to be listed on ASX, POMSoX and NASDAQ. |
(a) | the Mixed Consideration under which the Scheme Participant will receive one New Newcrest Share for every 8.43 LGL Shares and A$0.225 cash per LGL Share (less any dividend recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date); or | |
(b) | the Maximum Share Consideration under which the Scheme Participant will receive all of their Scheme Consideration in New Newcrest Shares (subject to scale-back as set out below); or | |
(c) | the Maximum Cash Consideration under which the Scheme Participant will receive all of their Scheme Consideration in cash (subject to scale-back as set out below). |
5 Summary of the Scheme continued | 34 |
1 | This number may be increased to take account of the issue of any new LGL Shares under the LGL Executive Share Plan or the LGL Employee Share Ownership Plan. | |
2 | Please also see section 3.8. |
Lihir Gold Limited Scheme Booklet | 35 |
MIXED CONSIDERATION PER LGL SHARE | ||||||||||||||||
NUMBER OF NEW | TOTAL SCHEME | |||||||||||||||
NEWCREST VWAP (A$) | NOTES | CASH (A$) | NEWCREST SHARES | CONSIDERATION (A$) | ||||||||||||
$28.68
|
1 | $ | 0.225 | 0.1186 | $ | 3.63 | ||||||||||
$29.00
|
$ | 0.225 | 0.1186 | $ | 3.67 | |||||||||||
$30.00
|
$ | 0.225 | 0.1186 | $ | 3.78 | |||||||||||
$30.25
|
$ | 0.225 | 0.1186 | $ | 3.81 | |||||||||||
$30.50
|
$ | 0.225 | 0.1186 | $ | 3.84 | |||||||||||
$30.75
|
$ | 0.225 | 0.1186 | $ | 3.87 | |||||||||||
$31.00
|
$ | 0.225 | 0.1186 | $ | 3.90 | |||||||||||
$31.25
|
$ | 0.225 | 0.1186 | $ | 3.93 | |||||||||||
$31.50
|
$ | 0.225 | 0.1186 | $ | 3.96 | |||||||||||
$32.06
|
2 | $ | 0.225 | 0.1186 | $ | 4.03 | ||||||||||
$32.25
|
$ | 0.225 | 0.1186 | $ | 4.05 | |||||||||||
$32.50
|
$ | 0.225 | 0.1186 | $ | 4.08 | |||||||||||
$32.75
|
$ | 0.225 | 0.1186 | $ | 4.11 | |||||||||||
$33.00
|
$ | 0.225 | 0.1186 | $ | 4.14 | |||||||||||
$33.25
|
$ | 0.225 | 0.1186 | $ | 4.17 | |||||||||||
$33.50
|
$ | 0.225 | 0.1186 | $ | 4.20 | |||||||||||
$33.75
|
$ | 0.225 | 0.1186 | $ | 4.23 | |||||||||||
$33.96
|
3 | $ | 0.225 | 0.1186 | $ | 4.25 | ||||||||||
$34.00
|
$ | 0.225 | 0.1186 | $ | 4.26 | |||||||||||
$34.25
|
$ | 0.225 | 0.1186 | $ | 4.29 | |||||||||||
$34.50
|
$ | 0.225 | 0.1186 | $ | 4.32 | |||||||||||
$34.75
|
$ | 0.225 | 0.1186 | $ | 4.35 | |||||||||||
$35.00
|
$ | 0.225 | 0.1186 | $ | 4.38 | |||||||||||
$36.00
|
$ | 0.225 | 0.1186 | $ | 4.50 | |||||||||||
$37.00
|
$ | 0.225 | 0.1186 | $ | 4.61 | |||||||||||
$38.00
|
$ | 0.225 | 0.1186 | $ | 4.73 | |||||||||||
$39.37
|
4 | $ | 0.225 | 0.1186 | $ | 4.89 |
1 | Minimum one day VWAP of Newcrest Shares in the 12 months prior to 21 July 2010. | |
2 | Closing price of Newcrest Shares on 3 May 2010 (being the last trading day prior to the Announcement Date). | |
3 | VWAP for the five days to 21 July 2010. | |
4 | Maximum one day VWAP of Newcrest Shares in the 12 months prior to 21 July 2010. |
5 Summary of the Scheme continued | 36 |
SCENARIO A | SCENARIO B | SCENARIO C | SCENARIO D | |||||||||||||
ELECTIONS (% LGL SHARES OUTSTANDING)
1
|
||||||||||||||||
Mixed Consideration
|
33 | % | 10 | % | 10 | % | 0 | % | ||||||||
Maximum Share Consideration
|
33 | % | 10 | % | 80 | % | 96 | % | ||||||||
Maximum Cash Consideration
|
33 | % | 80 | % | 10 | % | 4 | % | ||||||||
MIXED CONSIDERATION ELECTION
|
||||||||||||||||
Cash
|
$ | 0.225 | $ | 0.225 | $ | 0.225 | $ | 0.225 | ||||||||
New Newcrest Shares
|
$ | 4.03 | $ | 4.03 | $ | 4.03 | $ | 4.03 | ||||||||
Total Scheme Consideration
|
$ | 4.25 | $ | 4.25 | $ | 4.25 | $ | 4.25 | ||||||||
MAXIMUM SHARE CONSIDERATION ELECTION
|
||||||||||||||||
Cash
|
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.057 | ||||||||
New Newcrest Shares
|
$ | 4.25 | $ | 4.25 | $ | 4.25 | $ | 4.20 | ||||||||
Total Scheme Consideration
|
$ | 4.25 | $ | 4.25 | $ | 4.25 | $ | 4.25 | ||||||||
MAXIMUM CASH CONSIDERATION ELECTION
|
||||||||||||||||
Cash
|
$ | 1.04 | $ | 0.50 | $ | 4.00 | $ | 4.25 | ||||||||
New Newcrest Shares
|
$ | 3.21 | $ | 3.75 | $ | 0.26 | $ | 0.00 | ||||||||
Total Scheme Consideration
|
$ | 4.25 | $ | 4.25 | $ | 4.25 | $ | 4.25 |
1 | Excludes the issue of any new LGL Shares under the LGL Executive Share Plan. |
Lihir Gold Limited Scheme Booklet | 37 |
5 Summary of the Scheme continued | 38 |
Lihir Gold Limited Scheme Booklet | 39 |
ELECTION | ADVANTAGES | DISADVANTAGES | ||
Mixed Consideration
|
Share in the
ongoing benefits of
combining the two
companies.
|
Exposure to the risks associated
with holding New Newcrest Shares.
|
||
|
||||
|
Australian and UK
resident Scheme
Participants may
obtain
scrip-for-scrip
Australian and UK
capital gains tax
roll-over relief to
the extent they
receive New
Newcrest Shares in
consideration for
the transfer of
their Scheme
Shares. Refer to
section 10 for
further
information.
|
Exposure to risks of equity markets.
|
||
|
||||
|
Provides
certainty as to the
form of Scheme
Consideration
received, including
immediate liquidity
on the cash
component of that
Scheme
Consideration.
|
|||
|
||||
Maximum Share
Consideration |
Increased
opportunity to
share in the
ongoing benefits of
combining the two
companies.
|
Increased exposure to the risks
associated with holding New Newcrest
Shares.
|
||
|
||||
|
Australian and UK
resident Scheme
Participants may
obtain
scrip-for-scrip
Australian and UK
capital gains tax
roll-over relief to
the extent they
receive New
Newcrest Shares in
consideration for
the transfer of
their Scheme
Shares. Refer to
section 10 for
further
information.
|
Exposure to risks of equity markets.
|
||
|
||||
Maximum Cash
Consideration |
Provides
immediate liquidity
on all or a greater
proportion of the
Scheme
Participants
holding of Scheme
Shares.
|
Reduced exposure to the ongoing
benefits of combining the two
companies.
|
||
|
||||
|
Reduced exposure
to the risks
associated with
holding New
Newcrest Shares.
Reduced exposure
to risks of equity
markets.
|
For Australian resident Scheme
Participants, no Australian roll-over
relief on the cash component of the Scheme
Consideration.
|
5 Summary of the Scheme continued | 40 |
(a) | the Scheme being approved by the Required Majority of LGL Shareholders at the Scheme Meeting; | |
(b) | the Scheme being approved by the Court at the Second Court Hearing; | |
(c) | no LGL Regulated Event or LGL Material Adverse Change occurring; | |
(d) | no Newcrest Regulated Event or Newcrest Material Adverse Change occurring; | |
(e) | no Superior Proposal being announced and recommended by the LGL Board; | |
(f) | all necessary Regulatory Approvals being obtained; and | |
(g) | all required consents, waivers and releases of liability required under Key Material Contracts being obtained. |
(a) | Australian tax consequences | |
Australian tax consequences for LGL Shareholders are set out in section 10.1. | ||
(b) | PNG tax consequences | |
PNG tax consequences for LGL Shareholders are set out in section 10.2. | ||
(c) | US tax consequences | |
US tax consequences for LGL Shareholders are set out in section 10.3. | ||
(d) | UK tax consequences | |
UK tax consequences for LGL Shareholders are set out in section 10.4. |
Lihir Gold Limited Scheme Booklet | 41 |
(a) | procure that the Sale Agent sells all the New Newcrest Shares issued to the Sale Agent; and | |
(b) | as soon as reasonably practicable, procure the remittance to the Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders of their proportionate share of the gross proceeds of sale without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions of tax required by law or any revenue authority). Receipt of this amount will satisfy in full the rights of each Ineligible Overseas Shareholder and Electing Unmarketable Parcel Shareholder to the Share Consideration component of the Scheme Consideration. |
matters relevant to the vote on the scheme The Mount Rawdon process plant in Queensland, Australia. |
Lihir Gold Limited Scheme Booklet | 43 |
| the relative contributions of LGL and Newcrest to the Merged Group; | |
| the estimated value of the Scheme Consideration (which the Independent Expert estimates to be A$4.20A$4.32 per LGL Share based on Newcrests recent trading prices) compared to the underlying value of LGL, which the Independent Expert estimates to be A$4.28A$4.83 per LGL Share; |
| the Independent Expert noted that the Scheme Consideration is fair (albeit marginally) on the basis of a comparison of these valuation ranges. However, it acknowledged the inherent uncertainties in the theoretical valuation methodology it used to determine the underlying value of LGL and therefore notes that conclusions as to fairness based on theoretical valuation analysis should be treated with caution; | ||
| in this regard, the Independent Expert notes that, on one view, LGLs competitive sale process described above will provide the best possible evidence of LGLs current underlying value. If LGLs competitive sale process does not result in a superior proposal, the Independent Expert believes there are strong market based grounds to conclude that the Scheme Consideration is the highest value available to LGL Shareholders, represents full underlying value and is therefore by definition fair and reasonable; and |
| the Independent Experts view that by the time LGL Shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. |
| a 32.9% premium to the closing price of LGL Shares on ASX on 31 March 2010, being the last ASX Trading Day prior to LGL announcing it had rejected a proposal from Newcrest (which it received on 29 March 2010); | |
| a 33.3% premium to the one month VWAP of LGL Shares traded on ASX to 31 March 2010; and | |
| a 35.4% premium to the three month VWAP of LGL Shares traded on ASX prior to 31 March 2010. |
6 Matters relevant to the vote on the Scheme continued | 44 |
Source: IRESS, LGL and Newcrest Company announcements. |
Notes | ||
1 | Based on the closing price of Newcrest Shares on ASX of A$36.00 on 25 June 2010. | |
2 | Based on the closing price of Newcrest Shares on ASX of A$30.38 on 5 May 2010. |
Lihir Gold Limited Scheme Booklet | 45 |
Source: IRESS, Company announcements. |
(d) | Scheme Participants will have the opportunity to participate in the strategic and financial benefits of the Merged Group |
| the fifth largest gold company in the world by gold reserves; | |
| the fifth largest gold company in the world by gold resources; | |
| the fifth largest gold producer in the world; | |
| a world-class operator of long-life mines with three of the worlds top 15 producing gold mines. 1 |
Note | ||
1 | Reserve and resource comparisons against third-party mines have been based on publicly available information. LGL Shareholders should note that these third parties may report under different reporting codes and using different assumptions in determining reserves and resources (for example, the forward price of gold or cut-off grades) than LGL or Newcrest. |
6 Matters relevant to the vote on the Scheme continued | 46 |
Source: Company announcements. |
Source: Bloomberg, Company announcements. | ||
Note | ||
1 | Includes Measured, Indicated and Inferred Resources. |
Lihir Gold Limited Scheme Booklet | 47 |
Source: Company announcements. | ||
Note | ||
1 | Data as at 31 December 2009. Kinross production is reported in Gold-Equivalent ounces and has been shown above as gold-only production by adjusting for contained silver based on the conversion factor disclosed in the 2009 Annual Report at page 37. |
Source: Company announcements. |
| three key long-life producing assets with upside potential (Cadia, Lihir Island and Telfer); | |
| four shorter-life operations (Gosowong, Bonikro, Mount Rawdon and Cracow); | |
| significant brownfield growth potential (Gosowong, Bonikro and Hidden Valley); | |
| two large established resource growth options (Wafi-Golpu and Namosi); |
6 Matters relevant to the vote on the Scheme continued | 48 |
| significant greenfield growth potential in Côte dIvoire and Morobe Province, PNG; | |
| complementary mix of pure gold and gold-copper assets; and | |
| cash costs in the lowest quartile of the industry. 1 |
| open pit, bulk underground and selective underground skills; | |
| metallurgical expertise in flotation and refractory processing; | |
| copper concentrate marketing skills; | |
| strong technical expertise; and | |
| proven exploration skills. |
Source: Company websites. | ||
Note | ||
1 | As at the three months ended 31 March 2010 and including expected synergies. Refer to section 6.1(d)(iv) Lowest quartile position on the global cash cost curve. |
Lihir Gold Limited Scheme Booklet | 49 |
| No asset will represent more than 40% of the gold reserve base or more than 32% of combined 2009 gold production. | |
| Australia will represent 53% of the combined gold reserve base and 48% of combined 2009 gold production. | |
| PNG will represent 42% of the combined gold reserve base and 32% of combined 2009 gold production. |
Source: Company announcements. |
Source: LGL and Newcrest company announcements. |
Source: LGL and Newcrest company announcements. |
6 Matters relevant to the vote on the Scheme continued | 50 |
(iii) | Attractive growth profile |
Source: | Newcrests 2009 Full Financial Year Results Presentation filed with ASX on 17 August 2009, and LGLs BMO Presentation of March 2010 filed with ASX on 1 March 2010. |
| Wafi-Golpu in PNG (currently 50% owned by Newcrest) with an existing resource base of 10.2 M ounces of gold and 1.8 M tonnes of copper and an exploration target in excess of 20 M ounces of gold and four M tonnes of copper for the region. Wafi-Golpu is expected to have a material resources upgrade by 30 June 2010; | |
| within the Morobe province in PNG (currently 50% owned by Newcrest), Newcrest has a significant exploration footprint covering an area of over 3,200 square kilometres; | |
| Namosi in Fiji (currently 69.94% owned by Newcrest), which has a total current resource of 5.7 M ounces of gold and 5.5 M tonnes of copper, has numerous targets that are scheduled to be drilled in the short term. Recent results have been promising with higher gold and copper grade intersections at Waivaka; and | |
| the Telfer gold/copper mine in Western Australia, which has the potential to develop into a sizeable polymetallic region. Opportunities such as OCallaghans polymetallic discovery should further reduce Telfers operating cost and continue to add longer-term value. |
Note | ||
1 Source: Newcrests 2009 Full Financial Year Results Presentation filed with ASX on 17 August 2009. |
Lihir Gold Limited Scheme Booklet | 51 |
| logistics and supply chain efficiencies; | |
| fleet and equipment maintenance costs; | |
| proven approaches to productivity improvement; | |
| ability to sharpen the focus of the projects and exploration spend; | |
| lower funding costs; and | |
| removal of duplicated corporate costs. |
Note | ||
1 | Combined market capitalisation equal to the sum of the Newcrest market capitalisation and the value of the equity component of the Scheme Consideration based on the Newcrest closing share price on 3 May 2010. |
6 Matters relevant to the vote on the Scheme continued | 52 |
| open pit, bulk surface and underground mining expertise, as well as selective underground mining techniques; | |
| recognised strength in low-cost, fast underground development rates; | |
| metallurgical expertise in flotation and refractory gold ore processing; | |
| expertise in exploration; | |
| significant production and technical expertise in developing gold-copper porphyries and marketing copper concentrates. The combination of Newcrest and LGL will facilitate the development of future gold-copper opportunities, widening the growth opportunities available to the Merged Group; | |
| strong technical expertise with a focus on innovation and automation and leading industry knowledge of bulk underground mining methods, specifically sub-level and block caving; | |
| maintenance focus delivering cost reductions and productivity improvements; | |
| recognised industry leaders in greenfield and brownfield exploration; and | |
| valuable experience in PNG, in particular in relation to approach to community, environment and relations with the PNG Government. |
Source: Iress, company announcements. |
Lihir Gold Limited Scheme Booklet | 53 |
Note: Reflects total market capitalisation (not free float). Source: Factset, company announcements. |
6 Matters relevant to the vote on the Scheme continued | 54 |
(c) | LGL Shareholders may prefer to be exposed to the opportunity for increased value from LGL remaining as an independent entity |
(e) | LGL Shareholders may consider that a proposal which is more attractive for LGL Shareholders may materialise in the future |
Note | ||
1 | Based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date. | |
2 | Based on a 2009 average exchange rate of US$1/A$0.79. |
Lihir Gold Limited Scheme Booklet | 55 |
(a) | LGL Shareholders will not receive the Scheme Consideration; | |
(b) | LGL Shares will not be transferred to Newcrest (they will be retained by LGL Shareholders) and existing LGL Shareholders will retain their direct interest in LGL; | |
(c) | LGL will continue to operate as an independent entity under the management of the current LGL Board and management; | |
(d) | LGL Shareholders will continue to be exposed to the risks associated with an investment in LGL (see section 7.8 for further details); and | |
(e) | the LGL Share price may fall from current levels in the absence of the Scheme. This has been highlighted by the Independent Expert in section 8.1 of the Independent Experts Report, where the Independent Expert notes that the price of LGL Shares is likely to fall, potentially significantly, in the absence of an alternative proposal. |
6 Matters relevant to the vote on the Scheme continued | 56 |
Lihir Gold Limited Scheme Booklet | 57 |
profile of lgl 58 Mining operations at Lihir Island. |
Lihir Gold Limited Scheme Booklet | 59 |
7 Profile of LGL continued | 60 |
(i) | Indicated Mineral Resources of 918 k ounces of contained gold at an average grade of 1.33 g/t. This estimate has been updated since August 2009, and is based on drilling up to the end of November 2009. The updated estimate reflects mining depletion, a reduction in the cut-off grade to 0.5 g/t from 0.6 g/t in line with the revised gold price assumption of US$900 per ounce and a revised geological model. | |
(ii) | Ore Reserves of 760 k ounces of gold at an average grade of 1.38 g/t gold. This compares with the previous stated estimate of 930 k ounces at October 2006. The movement in Ore Reserves is due to mining depletion of 275 k ounces, an increase in the gold price assumption from US$550 per ounce to US$900 per ounce, changes in the resource model, pit re-optimisation, changes to cost assumptions and reduction in cut-off grade from 0.6 g/t to 0.5 g/t. |
Note | ||
1 | Equigold NL has since been renamed LGL Mount Rawdon Operations Pty Ltd. |
Lihir Gold Limited Scheme Booklet | 61 |
7 Profile of LGL continued | 62 |
3 MONTHS | YEAR ENDED | YEAR ENDED | ||||||||||||||
TO 31 MARCH | 31 DECEMBER | 31 DECEMBER | ||||||||||||||
2010 | 2009 2 | 2008 1,2 | ||||||||||||||
Mining
|
Mine production | Mt | Lihir Island | 10.46 | 46.37 | 50.7 | ||||||||||
|
Mount | |||||||||||||||
|
Rawdon | 3.15 | 11.34 | 10.0 | ||||||||||||
|
Bonikro | 3.61 | 11.70 | N/A | ||||||||||||
Processing
|
Tonnes treated | Mt | Lihir Island | 1.73 | 6.51 | 6.15 | ||||||||||
|
Mount | |||||||||||||||
|
Rawdon | 0.78 | 3.35 | 3.46 | ||||||||||||
|
Bonikro | 0.48 | 2.05 | 0.64 | ||||||||||||
|
Head grade | Au g/t | Lihir Island | 5.01 | 6.41 | 5.86 | ||||||||||
|
(Autoclave | |||||||||||||||
|
Feed Grade) | |||||||||||||||
|
Mount | |||||||||||||||
|
Rawdon | 0.97 | 1.11 | 1.03 | ||||||||||||
|
Bonikro | 1.83 | 2.39 | 2.19 | ||||||||||||
|
Gold recovery | % | Lihir Island | 81.1 | 81.3 | 82.5 | ||||||||||
|
Mount | |||||||||||||||
|
Rawdon | 90.2 | 90.9 | 89.8 | ||||||||||||
|
Bonikro | 94.2 | 94.9 | 90.0 | ||||||||||||
|
Gold produced | kozs | Lihir Island | 180.3 | 853.4 | 771.5 | ||||||||||
|
Mount | 22.9 | 107.8 | 102.4 | ||||||||||||
|
Rawdon | (53.6 | ||||||||||||||
|
attributable to LGL) | |||||||||||||||
|
Bonikro | 26.6 | 150.0 | 36.7 | ||||||||||||
Cash costs
|
Total costs | US$/oz | Lihir Island | 510 | 394 | 406 | ||||||||||
|
Mount | |||||||||||||||
|
Rawdon | 572 | 396 | 411 | ||||||||||||
|
Bonikro | 503 | 416 | 307 | ||||||||||||
|
(Dec quarter) |
Notes | ||
1 | The Kirkalocka operation, acquired as part of LGLs merger with Equigold NL, produced 9.4 k ounces of gold in the period from acquisition on 17 June 2008 to cessation of production on 14 August 2008. | |
2 | In the years ended 31 December 2009 and 31 December 2008, the Ballarat operation produced 12.6 k ounces of gold and 10.4 k ounces of gold, respectively. |
Lihir Gold Limited Scheme Booklet | 63 |
TONNES | AVERAGE GRADE | CONTAINED OUNCES | ||||||||||
(MT) | (AU G/T) | (MOZS) | ||||||||||
Measured
|
59.4 | 2.48 | 4.7 | |||||||||
Indicated
|
494 | 2.41 | 38.3 | |||||||||
TOTAL
|
43.0 | |||||||||||
Inferred
|
87.3 | 1.95 | 5.5 |
Notes | ||
1 | Cut-off grade of 1.0 g/t. Rounding, conforming to the JORC Code, may cause some computational discrepancies. | |
2 | Stated resources numbers have been adjusted to account for mining depletion during the period up to 31 December 2008. | |
3 | The number of contained ounces does not indicate the ounces that will be ultimately recovered. The resources ultimately recovered and available for sale depends on whether, and to the degree which, mineral resources are converted to ore reserves. |
RESERVE | TONNES | AVERAGE GRADE | CONTAINED GOLD | |||||||||||||
CATEGORY | (MT) | (AU G/T) | (MOZS) | |||||||||||||
Reserves at 30 June 2009
|
Probable | 269.2 | 2.77 | 23.9 | ||||||||||||
Stockpiled ore
|
Proved | 61.6 | 2.46 | 4.9 | ||||||||||||
Total reserves
|
330.8 | 2.71 | 28.8 |
Notes | ||
1 | Reserve tonnages have been depleted by 2009 mining activity to 30 June 2009. Reserves quoted are those remaining below the June 2009 mining surface, within the ultimate pit design, based on the December 2008 Resource Model. | |
2 | Average cut-off grade for mill feed = 1.36 g/t Au. | |
3 | Reserves are based on a maximum profit, undiscounted pit shell with an assumed life-of-mine gold price of US$800 per ounce. The quantity of contained gold does not indicate the quantity that will be ultimately recovered. | |
4 | Stockpile totals reflect ore above cut-off on stockpile at 30 June 2009. | |
5 | Rounding, conforming to the JORC Code, may cause some computational discrepancies. |
7 Profile of LGL continued | 64 |
TONNES | AVERAGE GRADE | CONTAINED OUNCES | ||||||||||
(KT) | (AU G/T) | (KOZS) | ||||||||||
HIRÉ
|
||||||||||||
Akissi-so
|
||||||||||||
Indicated
|
3,248 | 3.4 | 352 | |||||||||
Inferred
|
512 | 3.1 | 50 | |||||||||
Assondji-so
|
||||||||||||
Indicated
|
797 | 3.5 | 90 | |||||||||
Inferred
|
219 | 3.2 | 22 | |||||||||
Agbalé
|
||||||||||||
Inferred
|
1,324 | 2.7 | 115 | |||||||||
Chapelle
|
||||||||||||
Inferred
|
3,636 | 2.2 | 263 | |||||||||
OUMÉ
|
||||||||||||
Dougbafla East
|
||||||||||||
Indicated
|
5,148 | 1.3 | 217 | |||||||||
Inferred
|
407 | 1.2 | 15 | |||||||||
TOTAL
|
||||||||||||
Indicated
|
9,193 | 2.2 | 659 | |||||||||
Inferred
|
6,098 | 2.4 | 465 |
Notes | ||
1 | As at 31 December 2009, LGLs interest is 98% of the exploration assets listed. | |
2 | A cut-off grade of 0.5 g/t has been applied for calculation of Resources at Assondji-So, Chappelle, Agbalé and Dougbafla East, compared with 0.7 g/t previously. Akissi-So cut-off grade remains unchanged at 0.7 g/t. | |
3 | The number of contained ounces does not indicate the ounces that will be ultimately recovered. The ounces ultimately recovered and available for sale depends on whether, and to the degree which, mineral resources are converted to reserves. |
Lihir Gold Limited Scheme Booklet | 65 |
TONNES | AVERAGE GRADE | CONTAINED OUNCES | ||||||||||
(MT) | (AU G/T) | (AU KOZS) | ||||||||||
Indicated
|
21.5 | 1.33 | 918 | |||||||||
Inferred
|
8.4 | 1.13 | 306 | |||||||||
Total resources
|
29.9 | 1.27 | 1,224 |
Notes | ||
1 | As at 31 March 2010. | |
2 | Cut-off grade 0.5 g/t. Rounding, conforming to the JORC Code, may cause some computational discrepancies. | |
3 | The number of contained ounces does not indicate the ounces that will be ultimately recovered. The ounces ultimately recovered and available for sale depends on whether, and to the degree which, mineral resources are converted to ore reserves. |
TONNES | AVERAGE GRADE | CONTAINED OUNCES | ||||||||||
(MT) | (AU G/T) | (AU KOZS) | ||||||||||
Proved
|
| | | |||||||||
Probable
|
16.1 | 1.41 | 729 | |||||||||
Subtotal
|
16.1 | 1.41 | 729 | |||||||||
Stockpile (proved)
|
1.1 | 0.86 | 31 | |||||||||
TOTAL
|
17.2 | 1.38 | 760 |
Notes | ||
1 | Reserves quoted for 31 March 2010 are those remaining below the 31 March 2010 mining surface, based on the February 2010 resources model. | |
2 | Cut-off grade of 0.5 Au g/t as calculated using current costs. | |
3 | Reserves are based on a maximum profit with an assumed life of mine gold price of US$900 per ounce. The quantity of contained gold does not indicate the quantity that will ultimately be recovered. | |
4 | Stockpile is ore above the cut-off as at 31 March 2010. | |
5 | Rounding, conforming to the JORC Code, may cause some computational discrepancies. |
AVERAGE GRADE | CONTAINED OUNCES | AVERAGE GRADE | CONTAINED OUNCES | |||||||||||||||||
TONNES (MT) | (AU G/T) | (AU KOZS) | (AG G/T) | (AG KOZS) | ||||||||||||||||
Measured
|
2.3 | 0.75 | 60 | 2.21 | 160 | |||||||||||||||
Indicated
|
48.4 | 0.73 | 1,140 | 2.28 | 3,550 | |||||||||||||||
TOTAL
|
1,190 | 3,710 | ||||||||||||||||||
Inferred
|
7.1 | 0.61 | 140 | 1.94 | 440 |
Notes | ||
1 | As at 1 January 2010. | |
2 | The Measured and Indicated Mineral Resources are inclusive of the Ore Reserves. | |
3 | Cut-off grade of 0.31 Au g/t. as calculated using current costs. | |
4 | Rounding, confirming to the JORC Code, may cause some computational discrepancies. |
7 Profile of LGL continued | 66 |
TONNES | AVERAGE GRADE | CONTAINED OUNCES | AVERAGE GRADE | CONTAINED OUNCES | ||||||||||||||||
(MT) | (AU G/T) | (AU KOZS) | (AG G/T) | (AG KOZS) | ||||||||||||||||
Proved
|
1.5 | 0.82 | 38 | 2.26 | 105 | |||||||||||||||
Probable
|
30.1 | 0.81 | 786 | 2.37 | 2,292 | |||||||||||||||
Subtotal
|
31.6 | 0.81 | 825 | 2.36 | 2,398 | |||||||||||||||
Stockpile (proved)
|
0.4 | 0.79 | 10 | 2.79 | 36 | |||||||||||||||
TOTAL
|
32.0 | 0.81 | 835 | 2.37 | 2,433 |
Notes | ||
1 | Reserves quoted for 1 January 2010 are those remaining below the 1 January 2010 mining surface with the June 2009 total design, based on the April 2009 resource model. | |
2 | Cut-off grade of 0.31 g/t Au as calculated using current costs. | |
3 | Reserves are based on a maximum profit with an assumed life of mine gold price of US$800 per ounce. The quantity of contained gold does not indicate the quantity that will ultimately be recovered. | |
4 | Stockpile is ore above the cut-off as at 1 January 2010. | |
5 | Rounding, conforming to the JORC Code, may cause some computational discrepancies. |
Lihir Gold Limited Scheme Booklet | 67 |
NAME | CURRENT BALANCE | ISSUED CAPITAL % | ||||||
Fidelity Management and Research LLC and
Fidelity International Limited
|
213,276,728 | 9.00 | ||||||
Commonwealth Bank of Australia
|
156,902,786 | 6.62 | ||||||
BlackRock Investment Management (Australia) Ltd
|
262,344,786 | 11.07 |
| the highest recorded daily closing price for LGL Shares on ASX was A$4.44 on 25 June 2010; and | |
| the lowest recorded daily closing price for LGL Shares on ASX was A$2.44 on 20 August 2009. |
7 Profile of LGL continued | 68 |
Lihir Gold Limited Scheme Booklet | 69 |
7 Profile of LGL continued | 70 |
Lihir Gold Limited Scheme Booklet | 71 |
CONSOLIDATED ENTITY | ||||||||
US$M | ||||||||
2009 | 2008 | |||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
473.5 | 64.7 | ||||||
Receivables
|
15.1 | 21.0 | ||||||
Inventories
|
162.5 | 139.0 | ||||||
Derivative financial assets
|
9.3 | 0.4 | ||||||
Other assets
|
19.7 | 5.1 | ||||||
Assets classified as held for sale
|
8.5 | | ||||||
Total current assets
|
688.6 | 230.2 | ||||||
NON-CURRENT ASSETS
|
||||||||
Receivables
|
0.1 | 0.4 | ||||||
Inventories
|
333.3 | 255.0 | ||||||
Derivative financial assets
|
1.6 | 0.3 | ||||||
Deferred mining costs
|
299.5 | 257.0 | ||||||
Property, plant and equipment
|
1,888.8 | 2,104.0 | ||||||
Intangible assets
|
352.0 | 419.3 | ||||||
Available-for-sale financial assets
|
4.2 | 2.3 | ||||||
Deferred income tax asset
|
58.9 | 31.6 | ||||||
Investments in subsidiaries
|
| | ||||||
Total non-current assets
|
2,938.4 | 3,069.9 | ||||||
Total assets
|
3,627.0 | 3,300.1 |
7 Profile of LGL continued | 72 |
CONSOLIDATED ENTITY | ||||||||
US$M | ||||||||
2009 | 2008 | |||||||
LIABILITIES
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable and accrued liabilities
|
111.4 | 102.1 | ||||||
Provisions
|
26.9 | 18.5 | ||||||
Borrowings and finance facilities
|
0.7 | 0.3 | ||||||
Derivative financial liabilities
|
| 33.5 | ||||||
Deferred settlement payable
|
| 10.8 | ||||||
Liabilities classified as held for sale
|
7.0 | | ||||||
Total current liabilities
|
146.0 | 165.2 | ||||||
NON-CURRENT LIABILITIES
|
||||||||
Provisions
|
46.5 | 37.5 | ||||||
Borrowings and finance facilities
|
50.2 | 0.2 | ||||||
Derivative financial liabilities
|
| 18.9 | ||||||
Deferred income tax liability
|
145.6 | 142.5 | ||||||
Total non-current liabilities
|
242.3 | 199.1 | ||||||
Total liabilities
|
388.3 | 364.3 | ||||||
NET ASSETS
|
3,238.7 | 2,935.8 | ||||||
EQUITY
|
||||||||
Contributed equity
|
3,420.9 | 3,080.0 | ||||||
Reserves
|
(74.2 | ) | (305.9 | ) | ||||
(Accumulated loss)/retained earnings
|
(139.7 | ) | 129.8 | |||||
Total equity attributable to owners of the Company
|
3,207.0 | 2,903.9 | ||||||
Non-controlling interests
|
31.7 | 31.9 | ||||||
Total equity
|
3,238.7 | 2,935.8 |
Lihir Gold Limited Scheme Booklet | 73 |
CONSOLIDATED ENTITY | ||||||||
US$M | ||||||||
2009 | 2008 | |||||||
Continuing operations
|
||||||||
Revenue
|
1,087.4 | 748.6 | ||||||
Cost of sales
|
(618.8 | ) | (439.8 | ) | ||||
Gross profit from mining operations
|
468.6 | 308.8 | ||||||
Corporate expense
|
(46.2 | ) | (31.9 | ) | ||||
Project studies
|
(0.1 | ) | (2.6 | ) | ||||
Exploration expense
|
(9.4 | ) | (7.9 | ) | ||||
Operating profit before other income/(expenses)
|
412.9 | 266.4 | ||||||
Other income/(expenses)
|
||||||||
Hedging loss
|
(118.7 | ) | (75.5 | ) | ||||
Other income
|
7.2 | 0.3 | ||||||
Other expenses
|
(21.8 | ) | (31.3 | ) | ||||
Operating profit/(loss) before finance costs
|
279.6 | 159.9 | ||||||
Financial income
|
9.1 | 7.3 | ||||||
Financial expenses
|
(5.4 | ) | (0.5 | ) | ||||
Profit/(loss) before tax
|
283.3 | 166.7 | ||||||
Income tax expense
|
(104.6 | ) | (56.6 | ) | ||||
Net profit/(loss) after tax from continuing operations
|
178.7 | 110.1 | ||||||
Discontinued operations
|
||||||||
(Loss)/Profit from discontinued operation, net of income tax
|
(412.9 | ) | 0.7 | |||||
(Loss)/Profit for the period
|
(234.2 | ) | 110.8 | |||||
Other comprehensive income:
|
||||||||
Exchange difference on translation of foreign operations
|
104.6 | (154.9 | ) | |||||
Net change in fair value of cash flow hedges
|
21.4 | (32.7 | ) | |||||
Deferred hedging loss transferred to hedging loss expense
|
118.7 | 76.7 | ||||||
Net change in fair value of available for sale financial assets
|
3.0 | (2.2 | ) | |||||
Income tax on other comprehensive income
|
(30.4 | ) | (27.6 | ) | ||||
Other comprehensive income/(loss) for the period net of tax
|
217.3 | (140.7 | ) | |||||
Total comprehensive income/(loss)
|
(16.9 | ) | (29.9 | ) | ||||
Total comprehensive income/(loss) for the
period is attributable to:
|
||||||||
Owners of LGL
|
(16.7 | ) | (29.7 | ) | ||||
Non-controlling interests
|
(0.2 | ) | (0.2 | ) | ||||
|
(16.9 | ) | (29.9 | ) |
7 Profile of LGL continued | 74 |
CONSOLIDATED ENTITY | ||||||||
US$M | ||||||||
2009 | 2008 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Receipts from customers
|
1,085.5 | 747.7 | ||||||
Payments arising from suppliers and employees
|
(634.6 | ) | (539.7 | ) | ||||
Cash generated from operations
|
450.9 | 208.0 | ||||||
Insurance recoveries
|
4.5 | | ||||||
Close out of hedge book
|
(37.9 | ) | | |||||
Income tax refund received
|
| 4.6 | ||||||
Interest and finance charges paid
|
(0.3 | ) | (0.2 | ) | ||||
Net cash flow from operating activities
|
417.2 | 212.4 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Interest received
|
2.4 | 3.5 | ||||||
Purchase of property, plant and equipment
|
(370.8 | ) | (277.9 | ) | ||||
Interest and financing charges capitalised
|
(2.7 | ) | (2.9 | ) | ||||
Proceeds on disposal of share investments
|
4.7 | | ||||||
Proceeds on disposal of property, plant and equipment
|
2.0 | 0.1 | ||||||
Payments for acquisition of non-controlling interests
|
(10.8 | ) | (2.8 | ) | ||||
Loans to controlled entities
|
| | ||||||
Acquisition of subsidiary net of cash acquired
|
(0.4 | ) | 9.1 | |||||
Net cash flow used in investing activities
|
(375.6 | ) | (270.9 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Dividends paid
|
(35.5 | ) | | |||||
Drawdown of debt
|
50.0 | | ||||||
Repayment of debt
|
(0.1 | ) | (0.4 | ) | ||||
Proceeds of equity issue
|
348.5 | | ||||||
Underwriting expenses
|
(7.6 | ) | | |||||
Advance to subsidiary pre-acquisition
|
| (49.7 | ) | |||||
Payment for treasury shares
|
| (0.9 | ) | |||||
Net cash flow from/(used in) financing activities
|
355.3 | (51.0 | ) | |||||
Net increase/(decrease) in cash and cash equivalents
|
396.9 | (109.5 | ) | |||||
Cash and cash equivalents at beginning of year
|
64.7 | 174.2 | ||||||
Effects of exchange rate changes to cash held
|
11.9 | | ||||||
Cash and cash equivalents at end of year
|
473.5 | 64.7 |
Lihir Gold Limited Scheme Booklet | 75 |
7 Profile of LGL continued | 76 |
Lihir Gold Limited Scheme Booklet | 77 |
7 Profile of LGL continued | 78 |
8 Profile of Newcrest continued | 80 |
Lihir Gold Limited Scheme Booklet | 81 |
| maintaining a focus on gold; | |
| building a portfolio of low-cost, predominantly long-life gold assets, through exploration and acquisition in known gold regions (focus on South East Asia); | |
| optimising performance at each phase of the gold mining value chain (exploration, projects and operations); | |
| utilising its technical expertise across mining, transportation and metallurgical processes; | |
| constantly improving environmental performance, community involvement and safety outcomes; and | |
| developing our people in technical, commercial and leadership aspects of the industry. |
8 Profile of Newcrest continued | 82 |
Note | ||
1 | Other group companies include corporate and exploration entities. |
Lihir Gold Limited Scheme Booklet | 83 |
Note | ||
1 | Telfers cash costs were higher by A$8.6 million June year to date, directly attributable to the gas supply interruption caused by the explosion at Apache Energys Varanus Island gas plant in June 2008. |
8 Profile of Newcrest continued | 84 |
Notes | ||
1 | The figures shown represent 100% of the Mineral Resource and Ore Reserve. Cracow is an unincorporated joint venture between Newcrest (70%) and Catalpa Resources (30%). | |
2 | The figures shown represent 100% interest unless otherwise stated. Cracow is an unincorporated joint venture between Newcrest (70%) and Catalpa Resources (30%). | |
3 | The figures shown represent 100% of the Mineral Resource and Ore Reserve. Kencana is owned and operated by PT. Nusa Halmahera Minerals, an incorporated joint venture between Newcrest (82.5%) and PT Aneka Tambang (17.5%). |
Lihir Gold Limited Scheme Booklet | 85 |
Notes | ||
1 | The figures shown represent 100% of the Mineral Resources and Ore Reserve. Newcrest and Harmony Gold each hold a 50% interest in the Morobe Mining JV. | |
2 | The figures shown represent 100% unless otherwise stated. Newcrest and Harmony Gold each hold a 50% interest in the Morobe Mining JV. |
8 Profile of Newcrest continued | 86 |
Lihir Gold Limited Scheme Booklet | 87 |
| Investigation into the Waisoi deposit, including studies focused on previously identified mineralisation and drilling to test for possible depth extensions of the mineralisation. The studies consider potential mining options, as well as evaluating the infrastructure, permit requirements and services requirements. | |
| As at 30 June 2009, Mineral Resources for the Waisoi gold-copper deposits total 5.7 M ounces of gold and 5.5 M tonnes of copper. It is anticipated that a maiden Ore Reserve estimate for Waisoi will be completed in 2010. Nearby, on SPL1420, exploration drilling has identified higher grade copper and gold mineralisation in the Waivaka Corridor. Significant exploration expenditure is planned at Waivaka and other prospects in 2010 and beyond. |
| new design for drawbell blasting at Ridgeway; | |
| rapid development of the Cadia East exploration decline; | |
| new deep-sub-level caving processes at Telfer; | |
| block cave in production at Ridgeway Deeps; and | |
| hydrofracturing technique applied at Ridgeway Deeps. |
Note | ||
1 | The potential quantity and grade of this Exploration Target is conceptual in nature and is expressed in 100% equity terms. At this point there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. |
8 Profile of Newcrest continued | 88 |
9 MONTHS TO | YEAR ENDED | YEAR ENDED | ||||||||||||||||||
31 MARCH 2010 | 30 JUNE 2009 | 30 JUNE 2008 | ||||||||||||||||||
Mining |
Mine production
|
Mt | 76.7 | 93.0 | 119.8 | |||||||||||||||
Tonnes treated
|
Mt | 34.4 | 42.5 | 41.4 | ||||||||||||||||
Gold |
Head grade
|
g Au/t | 1.27 | 1.38 | 1.53 | |||||||||||||||
Gold recovery
|
% | 87.3 | 85.1 | 85.6 | ||||||||||||||||
Gold produced
|
koz | 1,236 | 1,631 | 1,781 | ||||||||||||||||
Copper |
Head grade
|
% | 0.21 | 0.24 | 0.23 | |||||||||||||||
Copper recovery
|
% | 87.3 | 86.4 | 83.7 | ||||||||||||||||
Copper produced
|
kt | 65.7 | 89.9 | 87.5 | ||||||||||||||||
Cash costs |
Gross cash costs
|
A$/oz | 362 | 445 | 249 | |||||||||||||||
Net cash costs
|
A$/oz | 349 | 468 | 255 | ||||||||||||||||
Total costs
|
A$/oz | 527 | 632 | 416 |
Note | ||
1 | Gross cash, net cash and total costs exclude the net impact after insurance proceeds of the June 2008 Varanus Island incident. |
| half year results presentation on 12 February 2010; | |
| presentation to the BMO Global Metals and Mining Conference on 1 March 2010; | |
| presentation to the Credit Suisse Asian Investment Conference on 24 March 2010; | |
| presentation on the March Quarterly Report on 22 April 2010; and | |
| presentation to the Merrill Lynch Global Metals Mining Conference on 11 May 2010. |
| June 2009 Quarterly Production Report (expected 22 July 2010); and | |
| Preliminary Final Report for Financial Year Ended 2010 (expected 16 August 2010). |
Lihir Gold Limited Scheme Booklet | 89 |
TONNES | AVERAGE GRADE | CONTAINED METAL | ||||||||||||||||||
(MILLION) | (G/T AU) | (% CU) | (MOZ AU) | (MT CU) | ||||||||||||||||
Cadia Province, NSW
|
3,016 | 0.45 | 0.26 | 44.0 | 7.98 | |||||||||||||||
Telfer Province, WA
5
|
634 | 0.96 | 0.12 | 19.6 | 0.76 | |||||||||||||||
Gosowong, Indonesia
1
|
3.7 | 24 | N/A | 2.8 | N/A | |||||||||||||||
Cracow, Qld
2
|
2.2 | 8.2 | N/A | 0.6 | N/A | |||||||||||||||
Morobe Mining JV, PNG
3
|
198 | 1.22 | 0.47 | 7.8 | 0.92 | |||||||||||||||
Namosi JV, Fiji
4
|
910 | 0.14 | 0.42 | 4.0 | 3.83 | |||||||||||||||
Marsden, NSW
|
216 | 0.17 | 0.33 | 1.2 | 0.71 | |||||||||||||||
TOTAL
|
80.0 | 14.2 |
Notes | ||
1 | The figures shown represent 100% of Mineral Resource. Kencana is owned and operated by PTNHM, an incorporated joint venture between Newcrest (82.5%) and PT Aneka Tambang (17.5%). | |
2 | The figures shown represent 70% of the Mineral Resource. Cracow is an unincorporated joint venture between Newcrest (70%) and Catalpa Resources (30%). | |
3 | The figures shown represent 50% of the Mineral Resource. Newcrest and Harmony Gold each hold a 50% interest in the Morobe Mining JV. | |
4 | The figures shown represent 69.94% of the Mineral Resource. | |
5 | Excluding OCallaghans. |
AVERAGE | AVERAGE | |||||||||||
TONNES | GRADE | GRADE | ||||||||||
(MILLION) | (G/T AG) | (MOZ AG) | ||||||||||
Gosowong, Indonesia
1
|
3.7 | 18 | 2.2 | |||||||||
Cracow, Qld
2
|
2.2 | 6.0 | 0.4 | |||||||||
Morobe Mining JV, PNG
3
|
41 | 32 | 42.0 | |||||||||
TOTAL
|
44.6 |
TONNES | WO 3 | CU | ZN | PB | WO 3 | CU | ZN | PB | ||||||||||||||||||||||||||||
(MILLION) | % | % | % | % | (MT) | (MT) | (MT) | (MT) | ||||||||||||||||||||||||||||
Total
|
78 | 0.33 | 0.29 | 0.50 | 0.25 | 0.26 | 0.22 | 0.39 | 0.19 |
Notes | ||
1 | The figures shown represent 100% of the Ore Reserve. Kencana is owned and operated by PTNHM, an incorporated joint venture between Newcrest (82.5%) and PT Aneka Tambang (17.5%). | |
2 | The figures shown represent 70% of the Ore Reserve. Cracow is an unincorporated joint venture between Newcrest (70%) and Catalpa Resources (30%). | |
3 | The figures shown represent 50% of the Ore Reserve. Newcrest and Harmony Gold each hold a 50% interest in the Morobe Mining JV. |
8 Profile of Newcrest continued | 90 |
TONNES | AVERAGE GRADE | CONTAINED METAL | ||||||||||||||||||
(MILLION) | (G/T AU) | (% CU) | (MOZ AU) | (MT CU) | ||||||||||||||||
Cadia Province, NSW
|
1,194 | 0.63 | 0.31 | 24.0 | 3.74 | |||||||||||||||
Telfer Province, WA
|
480 | 0.91 | 0.11 | 14.1 | 0.53 | |||||||||||||||
Gosowong, Indonesia
1
|
3.1 | 24 | N/A | 2.4 | N/A | |||||||||||||||
Cracow, Qld
2
|
0.70 | 7.2 | N/A | 0.2 | N/A | |||||||||||||||
Morobe Mining JV, PNG
3
|
56 | 1.16 | 0.71 | 2.1 | 0.40 | |||||||||||||||
TOTAL
|
42.8 | 4.67 |
AVERAGE | AVERAGE | |||||||||||
TONNES | GRADE | GRADE | ||||||||||
(MILLION) | (G/T AG) | (MOZ AG) | ||||||||||
Gosowong, Indonesia
1
|
3.1 | 16 | 1.6 | |||||||||
Cracow, Qld
2
|
0.70 | 5.3 | 0.1 | |||||||||
Morobe Mining JV, PNG
3
|
19.0 | 37 | 22.6 | |||||||||
TOTAL
|
24.3 |
Notes | ||
1 | The figures shown represent 100% of the Ore Reserve. Kencana is owned and operated by PTNHM, an incorporated joint venture between Newcrest (82.5%) and PT Aneka Tambang (17.5%). | |
2 | The figures shown represent 70% of the Ore Reserve. Cracow is an unincorporated joint venture between Newcrest (70%) and Catalpa Resources (30%). | |
3 | The figures shown represent 50% of the Ore Reserve. Newcrest and Harmony Gold each hold a 50% interest in the Morobe Mining JV. |
| 483,499,363 ordinary shares. | |
| 41,510 Newcrest Shareholders; and | |
| 946 Newcrest Shareholders with less than a marketable parcel of A$500 worth of ordinary shares. |
Lihir Gold Limited Scheme Booklet | 91 |
NAME | CURRENT BALANCE | ISSUED CAPITAL % | ||||||||
1 |
HSBC Custody Nominees (Australia) Limited
|
170,582,961 | 35.28 | |||||||
2 |
National Nominees Limited
|
130,041,577 | 26.90 | |||||||
3 |
J P Morgan Nominees Australia Limited
|
56,101,436 | 11.60 | |||||||
4 |
Citicorp Nominees Pty Limited
|
44,201,154 | 9.14 | |||||||
5 |
ANZ Nominees Limited
|
10,604,681 | 2.19 | |||||||
6 |
Cogent Nominees Pty Limited
|
3,984,842 | 0.82 | |||||||
7 |
AMP Life Limited
|
2,968,762 | 0.61 | |||||||
8 |
UBS Nominees Pty Limited
|
2,289,694 | 0.47 | |||||||
9 |
Queensland Investment Corporation
|
1,626,908 | 0.34 | |||||||
10 |
Australian Reward Investment Alliance
|
1,605,626 | 0.33 | |||||||
11 |
HSBC Custody Nominees (Australia) Limited A/C 3
|
1,263,891 | 0.26 | |||||||
12 |
Citicorp Nominees Pty Limited
|
1,217,899 | 0.25 | |||||||
13 |
Cogent Nominees Pty Limited
|
714,746 | 0.15 | |||||||
14 |
ANZ Nominees Limited
|
684,448 | 0.14 | |||||||
15 |
UBS Wealth Management Australia Nominees Pty Ltd
|
595,986 | 0.12 | |||||||
16 |
Suncorp Custodian Services Pty Limited and Suncorp Custodian
Services Pty Limited
|
558,552 | 0.12 | |||||||
17 |
Mr Damon Wells
|
520,995 | 0.11 | |||||||
18 |
Equity Trustees Limited
|
500,000 | 0.10 | |||||||
19 |
HSBC Custody Nominees (Australia) Limited GSCO ECA
|
492,501 | 0.10 | |||||||
20 |
RBC Dexia Investor Services Australia Nominees Pty Limited
|
446,447 | 0.09 | |||||||
Total | 431,003,106 | 89.1 |
CURRENT BALANCE | ISSUED CAPITAL % | |||||||
BlackRock Investment Management (Australia) Limited
|
71,058,580 | 14.70 | ||||||
Fidelity
|
53,940,769 | 11.16 | ||||||
Commonwealth Bank of Australia
|
51,959,058 | 10.75 |
8 Profile of Newcrest continued | 92 |
| the highest recorded daily closing price for Newcrest Shares on ASX was A$39.26 on 2 December 2009; and | |
| the lowest recorded daily closing price for Newcrest Shares on ASX was A$28.55 on 21 August 2009. |
| the highest recorded sale price for Newcrest Shares on ASX was A$36.47 on 28 June 2010; and | |
| the lowest recorded sale price for Newcrest Shares on ASX was A$29.73 on 5 May 2010. |
Lihir Gold Limited Scheme Booklet | 93 |
8 Profile of Newcrest continued | 94 |
AS AT 31 DECEMBER 2009 | AS AT 30 JUNE 2009 | AS AT 30 JUNE 2008 | ||||||||||||||||||||||
A$M | US$M | A$M | US$M | A$M | US$M | |||||||||||||||||||
REVIEWED | UNAUDITED | AUDITED | UNAUDITED | AUDITED | UNAUDITED | |||||||||||||||||||
CURRENT ASSETS
|
||||||||||||||||||||||||
Cash and cash equivalents
|
271.6 | 243.0 | 366.4 | 296.7 | 77.5 | 74.6 | ||||||||||||||||||
Trade and other receivables
|
273.6 | 244.7 | 272.6 | 220.8 | 218.2 | 209.9 | ||||||||||||||||||
Inventories
|
355.4 | 317.9 | 272.8 | 220.9 | 219.6 | 211.3 | ||||||||||||||||||
Financial derivative assets
|
20.3 | 18.2 | 13.5 | 11.0 | 6.9 | 6.6 | ||||||||||||||||||
Other
|
172.5 | 154.3 | 156.0 | 126.4 | 161.5 | 155.4 | ||||||||||||||||||
TOTAL CURRENT ASSETS
|
1,093.4 | 978.1 | 1,081.3 | 875.8 | 683.7 | 657.8 | ||||||||||||||||||
NON-CURRENT ASSETS
|
||||||||||||||||||||||||
Other receivables
|
9.1 | 8.1 | 9.1 | 7.3 | 0.3 | 0.3 | ||||||||||||||||||
Inventories
|
0.0 | 0.0 | 0.0 | 0.0 | 1.4 | 1.3 | ||||||||||||||||||
Property, plant and equipment
|
1,777.1 | 1,589.5 | 1,470.0 | 1,190.5 | 1,405.0 | 1,351.8 | ||||||||||||||||||
Exploration, evaluation and
development
|
2,308.1 | 2,064.5 | 2,441.2 | 1,977.2 | 1,470.2 | 1,414.5 | ||||||||||||||||||
Intangible assets
|
61.9 | 55.4 | 32.5 | 26.3 | 0.0 | 0.0 | ||||||||||||||||||
Deferred tax assets
|
356.2 | 318.6 | 403.5 | 326.8 | 490.7 | 472.1 | ||||||||||||||||||
Financial derivative assets
|
10.4 | 9.3 | 14.8 | 12.0 | 37.6 | 36.2 | ||||||||||||||||||
Other
|
155.5 | 139.1 | 163.6 | 132.5 | 235.0 | 226.1 | ||||||||||||||||||
TOTAL NON-CURRENT ASSETS
|
4,678.3 | 4,184.5 | 4,534.7 | 3,672.6 | 3,640.2 | 3,502.3 | ||||||||||||||||||
TOTAL ASSETS
|
5,771.7 | 5,162.6 | 5,616.0 | 4,548.4 | 4,323.9 | 4,160.1 | ||||||||||||||||||
CURRENT LIABILITIES
|
||||||||||||||||||||||||
Trade and other payables
|
220.3 | 197.1 | 212.6 | 172.2 | 177.7 | 171.0 | ||||||||||||||||||
Borrowings
|
5.4 | 4.8 | 5.0 | 4.0 | 2.6 | 2.5 | ||||||||||||||||||
Financial derivative liabilities
|
9.8 | 8.8 | 6.8 | 5.5 | 6.1 | 5.9 | ||||||||||||||||||
Income tax payable
|
0.2 | 0.2 | 1.1 | 0.9 | 21.5 | 20.7 | ||||||||||||||||||
Provisions
|
90.3 | 80.8 | 93.9 | 76.1 | 43.3 | 41.7 | ||||||||||||||||||
Other
|
0.5 | 0.5 | 1.1 | 0.9 | 0.0 | 0.0 | ||||||||||||||||||
TOTAL CURRENT LIABILITIES
|
326.5 | 292.2 | 320.5 | 259.6 | 251.2 | 241.8 | ||||||||||||||||||
NON-CURRENT LIABILITIES
|
||||||||||||||||||||||||
Borrowings
|
403.1 | 360.5 | 445.5 | 360.8 | 366.0 | 352.1 | ||||||||||||||||||
Deferred tax liabilities
|
447.5 | 400.3 | 414.5 | 335.7 | 385.4 | 370.8 | ||||||||||||||||||
Provisions
|
81.6 | 73.0 | 76.6 | 62.0 | 62.5 | 60.1 | ||||||||||||||||||
Other
|
0.5 | 0.5 | 0.5 | 0.4 | 6.9 | 6.6 | ||||||||||||||||||
TOTAL NON-CURRENT
LIABILITIES
|
932.7 | 834.3 | 937.1 | 758.9 | 820.8 | 789.6 | ||||||||||||||||||
TOTAL LIABILITIES
|
1,259.2 | 1,126.5 | 1,257.6 | 1,018.5 | 1,072.0 | 1,031.4 | ||||||||||||||||||
NET ASSETS
|
4,512.5 | 4,036.1 | 4,358.4 | 3,529.9 | 3,251.9 | 3,128.7 | ||||||||||||||||||
EQUITY
|
||||||||||||||||||||||||
Issued capital
|
3,653.9 | 2,880.2 | 3,641.6 | 2,869.5 | 2,857.4 | 2,343.4 | ||||||||||||||||||
Retained earnings
|
1,135.5 | 889.2 | 1,031.8 | 790.0 | 829.0 | 633.1 | ||||||||||||||||||
Reserves
|
(320.1 | ) | 233.7 | (357.4 | ) | (162.0 | ) | (461.2 | ) | 131.6 | ||||||||||||||
Parent entity interest
|
4,469.3 | 4,003.1 | 4,316.0 | 3,497.5 | 3,225.2 | 3,108.1 | ||||||||||||||||||
Non-controlling interests
|
43.2 | 33.0 | 42.4 | 32.4 | 26.7 | 20.6 | ||||||||||||||||||
TOTAL EQUITY
|
4,512.5 | 4,036.1 | 4,358.4 | 3,529.9 | 3,251.9 | 3,128.7 |
Lihir Gold Limited Scheme Booklet | 95 |
FOR HALF YEAR ENDED | FOR THE YEAR ENDED | FOR THE YEAR ENDED | ||||||||||||||||||||||
31 DECEMBER 2009 | 30 JUNE 2009 | 30 JUNE 2008 | ||||||||||||||||||||||
A$M | US$M | A$M | US$M | A$M | US$M | |||||||||||||||||||
REVIEWED | UNAUDITED | AUDITED | UNAUDITED | AUDITED | UNAUDITED | |||||||||||||||||||
Operating sales revenue
|
1,187.5 | 1,047.3 | 2,530.8 | 1,897.7 | 2,363.1 | 2,122.8 | ||||||||||||||||||
Cost of sales
|
(727.3 | ) | (639.6 | ) | (1,638.0 | ) | (1,225.1 | ) | (1,497.3 | ) | (1,345.7 | ) | ||||||||||||
Gross profit
|
460.2 | 407.7 | 892.8 | 672.6 | 865.8 | 777.1 | ||||||||||||||||||
Exploration expenses
|
(17.0 | ) | (14.8 | ) | (57.8 | ) | (40.2 | ) | (46.4 | ) | (42.0 | ) | ||||||||||||
Corporate administration expenses
|
(34.2 | ) | (30.1 | ) | (69.8 | ) | (51.7 | ) | (58.1 | ) | (52.3 | ) | ||||||||||||
Operating profit
|
409.0 | 362.8 | 765.2 | 580.7 | 761.3 | 682.8 | ||||||||||||||||||
Other revenue
|
5.0 | 4.3 | 8.3 | 6.2 | 20.4 | 18.7 | ||||||||||||||||||
Other income/(expenses)
|
4.7 | 5.3 | 6.8 | 8.3 | 9.2 | 8.7 | ||||||||||||||||||
Losses on delivered hedges
|
0.0 | 0.0 | 0.0 | 0.0 | (33.8 | ) | (28.2 | ) | ||||||||||||||||
Finance costs ordinary activities
|
(15.3 | ) | (13.3 | ) | (34.9 | ) | (25.6 | ) | (43.4 | ) | (38.7 | ) | ||||||||||||
Profit before tax, restructure
and close out impacts
|
403.4 | 359.1 | 745.4 | 569.6 | 713.7 | 643.3 | ||||||||||||||||||
Losses on restructured and closed
out hedge contracts
|
(134.0 | ) | (116.3 | ) | (352.0 | ) | (263.3 | ) | (314.1 | ) | (283.6 | ) | ||||||||||||
Other close out related costs
|
(4.5 | ) | (3.7 | ) | (25.1 | ) | (15.9 | ) | (217.7 | ) | (191.8 | ) | ||||||||||||
Finance costs close out and
restructure
|
0.0 | 0.0 | 0.0 | 0.0 | (20.9 | ) | (18.7 | ) | ||||||||||||||||
Foreign exchange gain on US dollar
borrowings
|
9.4 | 8.2 | 41.4 | 32.1 | 39.0 | 35.2 | ||||||||||||||||||
Profit/(loss) before income tax
|
274.3 | 247.3 | 409.7 | 322.5 | 200.0 | 184.4 | ||||||||||||||||||
Income tax (expense)/benefit
|
(81.7 | ) | (73.6 | ) | (127.6 | ) | (100.3 | ) | (36.6 | ) | (34.8 | ) | ||||||||||||
Profit/(loss) after income tax
|
192.6 | 173.7 | 282.1 | 222.2 | 163.4 | 149.6 | ||||||||||||||||||
Attributable to:
|
||||||||||||||||||||||||
Non-controlling interests
|
16.4 | 14.4 | 34.0 | 25.9 | 29.1 | 26.3 | ||||||||||||||||||
Members of the parent entity
|
176.2 | 159.3 | 248.1 | 196.3 | 134.3 | 123.3 | ||||||||||||||||||
Profit/(loss) after income tax
|
192.6 | 173.7 | 282.1 | 222.2 | 163.4 | 149.6 | ||||||||||||||||||
Profit/(loss) after tax
attributable to members of the
parent entity comprises:
|
||||||||||||||||||||||||
Profit/(loss) after tax attributable to
members of the parent entity
|
176.2 | 159.3 | 248.1 | 196.3 | 134.3 | 123.3 | ||||||||||||||||||
Losses on restructured and closed
out hedge contracts (after tax)
|
93.8 | 81.4 | 246.4 | 184.3 | 219.9 | 198.5 | ||||||||||||||||||
Other close out related costs (after
tax)
|
3.2 | 2.6 | 17.6 | 11.1 | 152.4 | 134.3 | ||||||||||||||||||
Finance costs close out and
restructure (after tax)
|
0.0 | 0.0 | 0.0 | 0.0 | 14.6 | 13.1 | ||||||||||||||||||
Foreign exchange gain on US$
borrowings (after tax)
|
(6.6 | ) | (5.8 | ) | (29.0 | ) | (22.5 | ) | (27.3 | ) | (24.6 | ) | ||||||||||||
Profit after tax before hedge
restructure and close out
impacts attributable to
members of the parent entity
(Underlying Profit)
|
266.6 | 237.5 | 483.1 | 369.2 | 493.9 | 444.6 |
8 Profile of Newcrest continued | 96 |
FOR HALF YEAR ENDED | FOR THE YEAR ENDED | FOR THE YEAR ENDED | ||||||||||||||||||||||
31 DECEMBER 2009 | 30 JUNE 2009 | 30 JUNE 2008 | ||||||||||||||||||||||
A$M | US$M | A$M | US$M | A$M | US$M | |||||||||||||||||||
REVIEWED | UNAUDITED | AUDITED | UNAUDITED | AUDITED | UNAUDITED | |||||||||||||||||||
CASH FLOWS FROM OPERATING
ACTIVITIES
|
||||||||||||||||||||||||
Receipts from customers
|
1,158.1 | 1,007.5 | 2,517.0 | 1,899.6 | 2,456.8 | 2,203.6 | ||||||||||||||||||
Payments to suppliers and employees
|
(627.1 | ) | (549.3 | ) | (1,368.2 | ) | (1,044.5 | ) | (1,295.6 | ) | (1,162.0 | ) | ||||||||||||
Losses on delivered hedges
|
0.0 | 0.0 | 0.0 | 0.0 | (52.5 | ) | (47.1 | ) | ||||||||||||||||
Interest received/(paid)
|
(12.8 | ) | (12.0 | ) | (22.2 | ) | (15.1 | ) | (31.9 | ) | (28.6 | ) | ||||||||||||
Income taxes paid
|
(38.5 | ) | (33.3 | ) | (102.5 | ) | (77.4 | ) | (58.7 | ) | (52.6 | ) | ||||||||||||
Net cash provided by operating
activities
|
479.7 | 412.9 | 1,024.1 | 762.6 | 1,018.1 | 913.3 | ||||||||||||||||||
CASH FLOWS FROM INVESTING
ACTIVITIES
|
||||||||||||||||||||||||
Payment for property, plant and equipment
|
(42.4 | ) | (36.7 | ) | (114.3 | ) | (87.9 | ) | (111.2 | ) | (99.7 | ) | ||||||||||||
Mine under construction, development and
feasibility expenditure
|
(369.6 | ) | (321.3 | ) | (657.1 | ) | (474.7 | ) | (224.5 | ) | (201.4 | ) | ||||||||||||
Exploration and development expenditure
|
(50.5 | ) | (44.3 | ) | (109.3 | ) | (79.8 | ) | (76.8 | ) | (68.9 | ) | ||||||||||||
Software expenditure
|
(28.0 | ) | (24.6 | ) | (28.3 | ) | (21.6 | ) | 0.0 | 0.0 | ||||||||||||||
Acquisition of interest in joint venture
|
0.0 | 0.0 | (470.6 | ) | (386.2 | ) | 0.0 | 0.0 | ||||||||||||||||
Interest capitalised to development projects
|
0.0 | 0.0 | (4.6 | ) | (3.7 | ) | (2.2 | ) | (2.0 | ) | ||||||||||||||
Proceeds from sale of non-current assets
|
0.1 | 0.1 | 2.6 | 1.8 | 0.3 | 0.3 | ||||||||||||||||||
Purchase of gold put options
|
0.0 | 0.0 | 0.0 | 0.0 | (79.5 | ) | (71.3 | ) | ||||||||||||||||
Net cash (used in) investing activities
|
(490.4 | ) | (426.8 | ) | (1,381.6 | ) | (1,052.1 | ) | (493.9 | ) | (443.0 | ) | ||||||||||||
CASH FLOWS FROM FINANCING
ACTIVITIES
|
||||||||||||||||||||||||
Proceeds from borrowings
|
0.0 | 0.0 | 570.1 | 447.0 | 70.1 | 60.0 | ||||||||||||||||||
Repayment of borrowings
|
0.0 | 0.0 | (647.0 | ) | (447.0 | ) | (976.0 | ) | (851.1 | ) | ||||||||||||||
Loans from/(to) controlled entities
|
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||||||||
Repayment of finance lease principal
|
(1.7 | ) | (1.5 | ) | (2.8 | ) | (2.1 | ) | (1.1 | ) | (1.0 | ) | ||||||||||||
Proceeds from equity issue net of costs
|
0.0 | 0.0 | 792.7 | 532.9 | 2,014.4 | 1,699.9 | ||||||||||||||||||
Proceeds from other share issues
|
0.0 | 0.0 | 6.3 | 4.8 | 4.9 | 4.4 | ||||||||||||||||||
Share buy-back
|
0.0 | 0.0 | (25.1 | ) | (19.1 | ) | (6.6 | ) | (5.9 | ) | ||||||||||||||
Dividends paid to members of the parent
entity
|
(60.2 | ) | (55.4 | ) | (40.1 | ) | (27.5 | ) | (14.9 | ) | (13.0 | ) | ||||||||||||
Dividends paid to minority interests
|
(11.5 | ) | (10.0 | ) | (19.9 | ) | (15.3 | ) | (21.8 | ) | (19.7 | ) | ||||||||||||
Purchase of gold to close out gold forward
contracts
|
0.0 | 0.0 | 0.0 | 0.0 | (1,549.3 | ) | (1,307.4 | ) | ||||||||||||||||
Net cash (used in)/provided by
financing activities
|
(73.4 | ) | (66.9 | ) | 634.2 | 473.7 | (480.3 | ) | (433.8 | ) | ||||||||||||||
Net increase/(decrease) in cash and
cash equivalents
|
(84.1 | ) | (80.8 | ) | 276.7 | 184.2 | 43.9 | 36.5 | ||||||||||||||||
Cash and cash equivalents at the beginning
of the period
|
366.4 | 296.7 | 77.5 | 74.6 | 34.3 | 29.0 | ||||||||||||||||||
Effects of exchange rate changes on cash
held
|
(10.7 | ) | 26.9 | 12.2 | 38.0 | (0.7 | ) | 9.2 | ||||||||||||||||
Cash and cash equivalents at the end
of the period
|
271.6 | 242.8 | 366.4 | 296.8 | 77.5 | 74.7 |
Lihir Gold Limited Scheme Booklet | 97 |
8 Profile of Newcrest continued | 98 |
| a written transfer in the usual or common form or in any form the Newcrest Board may prescribe or in a particular case accept, duly stamped (if necessary), being delivered to Newcrest; | |
| a proper ASTC transfer, which is to be in the form required or permitted by the Australian Corporations Act or the ASTC Settlement Rules; or | |
| any other electronic system established or recognised by the Listing Rules of ASX in which Newcrest participates in accordance with the rules of that system. |
| if the registration will infringe any applicable laws or the Listing Rules; | |
| if the transfer concerns shares over which Newcrest has a lien or on which a call has been made and is due and unpaid; | |
| if to do so will result in more than three persons being registered as joint holders of the Newcrest Shares (except in the case of personal representatives of a deceased shareholder); or | |
| if otherwise permitted to do so under the Newcrest Constitution or the Listing Rules of ASX. |
Lihir Gold Limited Scheme Booklet | 99 |
(a) | In 2008, the New South Wales Supreme Court found in favour of Newcrest as plaintiff with respect to the obligation to pay mineral royalties on copper produced by the Cadia Valley operations on Newcrest owned land with no express reservation by the Crown of rights to copper royalties. The Supreme Court ordered the State of New South Wales to refund Newcrest A$10.9 million in royalty and interest payments relating to the 2008 financial year and prior financial years. The decision was appealed by the State of New South Wales and the matter went to the New South Wales Court of Appeal in 2009. The New South Wales Court of Appeal upheld the State of New South Wales appeal. Newcrest was granted leave to appeal this matter in the High Court of Australia. The matter was heard in the High Court on 9 March 2010. The High Court is yet to hand down its decision. | |
(b) | Following a tax audit of PTNHM, an 82.5% owned Indonesian subsidiary, the Indonesian Tax Office denied the tax deductibility of a number of items relating to the financial years 1997-2002, in particular in relation to the deductibility of pre-Contract of Work expenditure. PTNHM defended the claim from the Tax Office, and was successful in October 2007 at the Indonesian Tax Court. Taxes and interest on underpaid tax of US$12.5 million plus interest income on overpaid tax of US$4.8 million were refunded/paid by the Tax Office to PTNHM during the year ending 30 June 2008 and 30 June 2009. The Tax Office has appealed this decision to the Indonesian Supreme Court (which is the final court of appeal), and a decision by the Indonesian Supreme Court may possibly occur in the next 12 months. Newcrest understands that PTNHM believes that it will be successful in defending this claim. | |
(c) | PTNHM has been named as a defendant in proceedings in a local Indonesian court regarding customary ownership of land situated within the Gosowong Contract of Work. The proceedings were initiated by five local residents seeking compensation and have been defended by PTNHM. The proceedings were dismissed by the local court, as the court found that the plaintiffs had been unable to prove the existence of communal land. It should be noted that the plaintiffs cannot file a new proceeding with the same merits. The plaintiffs appealed to the High Court of Indonesia, which also dismissed their claims. The plaintiffs have now appealed to the Supreme Court (the final court of appeal), which can only consider questions of law, not fact. Newcrest understands that PTNHM believes that it will be successful in defending this claim. The Supreme Court appeal process could take several years. | |
(d) | In addition to the above matters, companies in the Newcrest Group are recipients of or defendants in certain claims, suits and complaints made, filed or pending. In the opinion of the Newcrest Directors, all matters are of such a kind, or involve such amounts, that they will not have a material effect on the financial position of the Newcrest Group if disposed of unfavourably, or are at a stage which does not permit a reasonable evaluation of the likely outcome of the matter. |
8 Profile of Newcrest continued | 100 |
(a) | verification of incorporation; and | |
(b) | the financier being satisfied that no event of default or potential event of default has occurred or is continuing. |
CURRENT | ||||||||
COMMITTED FACILITY | ||||||||
BANK | US$ MILLION | MATURITY | ||||||
Australia and New Zealand Banking Group Limited
|
137.5 | January 2013 | ||||||
Bank of America N.A., Sydney Branch
|
137.5 | January 2013 | ||||||
Barclays Bank PLC, Australian Branch
|
137.5 | December 2012 | ||||||
The Bank of Tokyo-Mitsubishi UFJ Ltd (Melbourne Branch)
|
137.5 | December 2012 | ||||||
Credit Suisse AG, Sydney Branch
|
137.5 | February 2013 | ||||||
HSBC Bank Australia Limited
|
137.5 | January 2013 | ||||||
National Australia Bank Limited
|
137.5 | January 2013 | ||||||
Westpac Banking Corporation
|
137.5 | January 2013 |
Lihir Gold Limited Scheme Booklet | 101 |
8 Profile of Newcrest continued | 102 |
Lihir Gold Limited Scheme Booklet | 103 |
8 Profile of Newcrest continued | 104 |
| sets Newcrests strategic goals and objectives; and | |
| oversees the management and performance of Newcrests business. |
Lihir Gold Limited Scheme Booklet | 105 |
| Audit and Risk Committee; | |
| Human Resources and Remuneration Committee; | |
| Safety, Health and Environment Committee; and | |
| Newcrest Board Executive Committee. |
8 Profile of Newcrest continued | 106 |
Lihir Gold Limited Scheme Booklet | 107 |
| ongoing identification, review and development of safety and health management systems and the establishment of robust hazard controls around safety and health risks; | |
| leadership development programs to enable all managers, superintendents and supervisors to create the desired organisational safety culture; and | |
| development of an interdependent safety culture where all employees are required to look out for each other while at work. |
8 Profile of Newcrest continued | 108 |
20 July 2010
|
Appendix 3B | |
8 June 2010
|
Update on proposed merger between Newcrest and Lihir | |
11 May 2010
|
Presentation Merrill Lynch Global Metals Mining Conference | |
10 May 2010
|
Letter to Shareholders | |
5 May 2010
|
Appointment of Additional Company Secretary | |
4 May 2010
|
Presentation in relation to the Newcrest and Lihir Merger | |
4 May 2010
|
LGL: Newcrest and Lihir Merger Presentation | |
4 May 2010
|
Newcrest and Lihir enter into Merger Implementation Agreement | |
4 May 2010
|
Newcrest and LGL enter into Merger Implementation Agreement | |
22 April 2010
|
Presentation March Quarterly Report | |
22 April 2010
|
March Quarterly Report | |
20 April 2010
|
Appendix 3B | |
20 April 2010
|
Letter to Chairman of Lihir Gold Limited |
Lihir Gold Limited Scheme Booklet | 109 |
12 April 2010
|
Letter to Shareholders | |
9 April 2010
|
Newcrest Board approves Cadia East Development | |
1 April 2010
|
Presentation Newcrest Proposed Combination with Lihir | |
1 April 2010
|
Newcrest Proposed Combination with Lihir | |
1 April 2010
|
Newcrest Confirms a Proposed Combination with Lihir | |
1 April 2010
|
LGL rejects acquisition proposal from Newcrest Mining Ltd | |
26 March 2010
|
Dividend Reinvestment Plan | |
24 March 2010
|
Presentation Credit Suisse Asian Investment Conference | |
1 March 2010
|
Presentation BMO Global Metals and Mining Conference | |
26 February 2010
|
Appendix 3B | |
26 February 2010
|
Change of Directors Interest Notice | |
12 February 2010
|
OCallaghans Mineral Resource Competent Persons Statement | |
12 February 2010
|
Newcrests Half Year Results Presentation | |
12 February 2010
|
Financial Results Release | |
12 February 2010
|
Newcrests Half Year Results Announcement | |
28 January 2010
|
Presentation December Quarterly Report | |
28 January 2010
|
December Quarterly Report | |
21 January 2010
|
Appendix 3B | |
18 January 2010
|
ASIC Form 484 Cancellation of Shares | |
8 January 2010
|
Planning approval received for Newcrests Cadia East project | |
6 January 2010
|
Daily share buy-back notice -Appendix 3E | |
5 January 2010
|
Appendix 3E Daily share buy-back notice | |
23 December 2009
|
Telfer Gold Mine operations resume | |
22 December 2009
|
Severe Tropical Cyclone Laurence Telfer Gold Mine | |
15 December 2009
|
Change in substantial holding | |
10 December 2009
|
Change of Company Secretary | |
4 December 2009
|
New senior appointment at Newcrest to support growth | |
29 October 2009
|
AGM Results | |
29 October 2009
|
AGM 2009 | |
22 October 2009
|
Presentation September Quarterly Report | |
22 October 2009
|
September Quarterly Report | |
21 October 2009
|
Appendix 3B | |
8 October 2009
|
New Senior Appointment |
8 Profile of Newcrest continued | 110 |
(a) | all statements in the Newcrest Scheme Information in this Scheme Booklet, other than a statement purporting to be made by, or based upon a statement of, an expert or public official or authority are true and not misleading; and | |
(b) | all statements in the Newcrest Scheme Information in this Scheme Booklet purporting to be made by, or based upon a statement of, an expert or public official or authority fairly represents the statement of that person or authority; and | |
(c) | all extracts from, or copies of, any report, official public document, statement, valuation or other document included in, attached to or forming part of the Newcrest Scheme Information fairly represents and is a true and correct extract or copy of the original. |
PROFILE OF THE MERGED GROUP |
The Lihir Island process plant. |
9 Profile of the Merged Group continued | 112 |
| Cadia Valley Operations located in central western New South Wales comprising the Cadia Hill open pit mine and the Ridgeway Deeps underground mine and the Cadia East development project (see sections 8.4(a) and 8.4(b)); |
| Lihir Island in PNG (see sections 7.2(a) and 7.2(b)); |
| Telfer open pit and underground gold-copper mines located in the Great Sandy Desert in the Paterson Province of Western Australia (see section 8.4(a)); |
| two recently commissioned medium-scale operations at Bonikro (Côte dIvoire) and Hidden Valley (PNG) with brownfields growth potential (see sections 7.2(a), 7.2(c) and 8.4(a)); |
| two smaller-scale mines at Mount Rawdon and Cracow, both located in central Queensland (see sections 7.2(a) and 8.4(a)); |
| one of the worlds highest-grade gold mines at Gosowong in Indonesia (see section 8.4(a)); and |
| two large undeveloped resources at Wafi-Golpu in PNG and Namosi in Fiji with the potential to develop into major gold/copper operations (see section 8.4(c)). |
In addition, the Merged Group will have significant greenfield growth potential in Côte dIvoire and PNG. |
| Newcrest has forecast that its gold production is expected to increase by 40% to 2.30 M ounces and copper production by 30% to approximately 100 K tonnes over the next five years from existing brownfield expansion projects at Ridgeway Deeps, Cadia East, Hidden Valley, Telfer and Gosowong. |
| LGL is aiming to produce 1.45 M ounces of gold per annum on average for the five years from 2012 to 2016. 1 |
Note | ||
1 | Refer to LGLs market release dated 1 March 2010. |
Lihir Gold Limited Scheme Booklet | 113 |
GOLD | COPPER | SILVER | ||||||||||
(MOZ) | (MT) | (MOZ) | ||||||||||
Reserves
|
73.2 | 4.7 | 26.7 | |||||||||
Resources
|
132.2 | 14.4 | 48.8 |
Notes | ||
1 | This number may be increased to take account of the issue of any new LGL Shares under the LGL Executive Share Plan or the LGL Share Ownership Plan. | |
2 | Based on the closing price of Newcrest Shares on ASX of A$32.06 on 3 May 2010, the last ASX Trading Day prior to the Announcement Date. |
9 Profile of the Merged Group continued | 114 |
Lihir Gold Limited Scheme Booklet | 115 |
| to continue the business of LGL; |
| not to make any major changes to the business of LGL; and |
| not to redeploy any of the major fixed assets of LGL. |
| The unaudited pro forma consolidated balance sheet has been prepared by the management of Newcrest, in accordance with IFRS, for illustrative purposes only to show the effect of the acquisition of LGL by Newcrest. |
| The unaudited pro forma consolidated balance sheet assumes that Newcrest will acquire all Scheme Shares. |
| The unaudited pro forma consolidated balance sheet is not intended to be indicative of the financial position that would actually have occurred, or the financial position expected in future periods, had the events reflected herein occurred on the dates indicated. Newcrest is required to account for the acquisition based on values at the time it takes control of LGL, therefore actual amounts recorded by Newcrest upon completion of the transaction will differ from those recorded in the unaudited pro forma consolidated balance sheet. |
| The unaudited pro forma consolidated balance sheet should be read in conjunction with the historical consolidated financial information of Newcrest and LGL as shown in section 8.10 and section 7.9 respectively. |
PRO FORMA | ||||||||||||||||||||||||
RECLASS- | ADJUST- | MERGED | ||||||||||||||||||||||
NEWCREST | LGL | IFICATIONS | MENTS | GROUP | ||||||||||||||||||||
NOTES | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
CURRENT ASSETS
|
||||||||||||||||||||||||
Cash and cash equivalents
|
i | 243.0 | 473.5 | | (243.0 | ) | 473.5 | |||||||||||||||||
Trade and other receivables
|
244.7 | 15.1 | | | 259.8 | |||||||||||||||||||
Inventories
|
317.9 | 162.5 | | | 480.4 | |||||||||||||||||||
Financial derivative assets
|
18.2 | 9.3 | | | 27.5 | |||||||||||||||||||
Other
|
154.3 | 19.7 | | | 174.0 | |||||||||||||||||||
Assets classified as held for sale
|
| 8.5 | | | 8.5 | |||||||||||||||||||
TOTAL CURRENT ASSETS
|
978.1 | 688.6 | | (243.0 | ) | 1,423.7 |
9 Profile of the Merged Group continued | 116 |
PRO FORMA | ||||||||||||||||||||||||
RECLASS- | ADJUST- | MERGED | ||||||||||||||||||||||
NEWCREST | LGL | IFICATIONS | MENTS | GROUP | ||||||||||||||||||||
NOTES | US$M | US$M | US$M | US$M | US$M | |||||||||||||||||||
NON-CURRENT ASSETS
|
||||||||||||||||||||||||
Other receivables
|
8.1 | 0.1 | | | 8.2 | |||||||||||||||||||
Inventories
|
| 333.3 | | | 333.3 | |||||||||||||||||||
Property, plant and equipment
|
x | 1,589.5 | 1,888.8 | (703.2 | ) | | 2,775.1 | |||||||||||||||||
Exploration, evaluation and
development
|
viii,x | 2,064.5 | | 868.5 | 3,242.2 | 6,175.2 | ||||||||||||||||||
Intangible assets
|
ii, iii,viii | 55.4 | 352.0 | (165.3 | ) | 4,053.2 | 4,295.3 | |||||||||||||||||
Deferred tax assets
|
318.6 | 58.9 | | | 377.5 | |||||||||||||||||||
Financial derivative assets
|
9.3 | 1.6 | | | 10.9 | |||||||||||||||||||
Other
|
viii | 139.1 | 299.5 | | (299.5 | ) | 139.1 | |||||||||||||||||
Available for sale financial assets
|
| 4.2 | | | 4.2 | |||||||||||||||||||
TOTAL NON-CURRENT
ASSETS
|
4,184.5 | 2,938.4 | | 6,995.9 | 14,118.8 | |||||||||||||||||||
TOTAL ASSETS
|
5,162.6 | 3,627.0 | | 6,752.9 | 15,542.5 | |||||||||||||||||||
CURRENT LIABILITIES
|
||||||||||||||||||||||||
Trade and other payables
|
197.1 | 111.4 | | | 308.5 | |||||||||||||||||||
Borrowings and finance facilities
|
x | 4.8 | 0.7 | 50.0 | | 55.5 | ||||||||||||||||||
Financial derivative liabilities
|
8.8 | | | | 8.8 | |||||||||||||||||||
Income tax payable
|
0.2 | | | | 0.2 | |||||||||||||||||||
Provisions
|
80.8 | 26.9 | | | 107.7 | |||||||||||||||||||
Other
|
0.5 | | | | 0.5 | |||||||||||||||||||
Liabilities classified as held for sale
|
| 7.0 | | | 7.0 | |||||||||||||||||||
TOTAL CURRENT LIABILITIES
|
292.2 | 146.0 | 50.0 | | 488.2 | |||||||||||||||||||
NON-CURRENT LIABILITIES
|
||||||||||||||||||||||||
Borrowings and finance facilities
|
i,x | 360.5 | 50.2 | (50.0 | ) | 655.0 | 1,015.7 | |||||||||||||||||
Deferred tax liabilities
|
iv | 400.3 | 145.6 | | 887.9 | 1,433.8 | ||||||||||||||||||
Provisions
|
73.0 | 46.5 | | | 119.5 | |||||||||||||||||||
Other
|
0.5 | | | | 0.5 | |||||||||||||||||||
TOTAL NON-CURRENT
LIABILITIES
|
834.3 | 242.3 | (50.0 | ) | 1,542.9 | 2,569.5 | ||||||||||||||||||
TOTAL LIABILITIES
|
1,126.5 | 388.3 | | 1,542.9 | 3,057.7 | |||||||||||||||||||
NET ASSETS
|
4,036.1 | 3,238.7 | | 5,210.0 | 12,484.8 | |||||||||||||||||||
EQUITY
|
||||||||||||||||||||||||
Issued capital
|
v, vi | 2,880.2 | 3,420.9 | | 5,001.9 | 11,303.0 | ||||||||||||||||||
Retained earnings
|
v, vii | 889.2 | (139.7 | ) | | 116.7 | 866.2 | |||||||||||||||||
Reserves
|
v | 233.7 | (74.2 | ) | | 74.2 | 233.7 | |||||||||||||||||
Parent entity interest
|
4,003.1 | 3,207.0 | | 5,192.8 | 12,402.9 | |||||||||||||||||||
Non-controlling interests
|
ix | 33.0 | 31.7 | | 17.2 | 81.9 | ||||||||||||||||||
TOTAL EQUITY
|
4,036.1 | 3,238.7 | | 5,210.0 | 12,484.8 |
Lihir Gold Limited Scheme Booklet | 117 |
US$M | ||||
Value of 268.0 million Newcrest Shares at A$35.92 per share
1
|
8,422.8 | |||
Cash (assuming maximum cash amount of A$1.0 billion)
1
|
875.0 | |||
Total purchase consideration
|
9,297.8 |
Note | ||
1 | Translated to US dollars at an exchange rate of A$0.875. |
9 Profile of the Merged Group continued | 118 |
US$M | ||||
Net book value of LGL assets and liabilities
|
3,238.7 | |||
Less goodwill recognised on previous acquisitions (adj (ii))
|
(168.1 | ) | ||
Net book value of identifiable assets acquired
|
3,070.6 | |||
Fair value adjustment to assets (adj (viii))
|
2,942.7 | |||
Deferred tax liability on fair value adjustment (adj (iv))
|
(887.9 | ) | ||
Fair value net assets
|
5,125.4 | |||
Non-controlling interest (adj (ix))
|
(48.9 | ) | ||
Goodwill (adj (iii))
|
4,221.3 | |||
Total consideration
|
9,297.8 |
(i) | A decrease in cash and cash equivalents by US$243.0 million and an increase in non-current borrowings of US$655.0 million to reflect the aggregate Cash Consideration (total A$1,000 million) and the transaction costs of US$23.0 million. | |
(ii) | A reduction in goodwill by US$168.1 million to de-recognise goodwill recorded by LGL in previous acquisitions. | |
(iii) | An adjustment of US$4,221.3 million to reflect the goodwill as a result of the implementation of the Scheme. | |
(iv) | An increase of US$887.9 million to the deferred tax liability to reflect the difference between the assigned fair values and the tax bases of assets acquired and liabilities assumed as part of the implementation of the Scheme. | |
(v) | Elimination of LGLs pre-acquisition issued capital of US$3,420.9 million, retained earnings of US$139.7 million and reserves of US$74.2 million. | |
(vi) | An increase in issued capital of US$8,422.8 million to record the assumed value of New Newcrest Shares issued in respect of the assumed Share Consideration under the offer. | |
(vii) | An adjustment of US$23.0 million against retained earnings to reflect the expensing of Newcrests transaction costs associated with the implementation of the Scheme. | |
(viii) | The transfer of deferred mining costs of US$299.5 million and US$165.3 million of intangibles to exploration, evaluation and development costs and an increase in mine properties of US$2,942.7 million to reflect preliminary fair value. | |
(ix) | An increase in the non-controlling interests of US$17.2 million to reflect fair value. | |
(x) | Reclassifications made to the financial presentation of the LGL balance sheet: |
(A) | Assets classified as property, plant and equipment in LGL are transferred to exploration, evaluation and development in the Merged Group balance sheet to align with Newcrests accounting policies. | ||
(B) | Reclassification of loan balance from non-current to current liabilities, as the bank has the right to review the facility on a change of control. The loan is classified as current as there is no unconditional right to defer settlement at the acquisition date. |
Lihir Gold Limited Scheme Booklet | 119 |
| sales and/or leasing of gold by governments and central banks; |
| sales by producers in forward transactions and other hedging transactions; |
| a strong US dollar; |
| global and regional recessions or reduced economic activity and/or inflationary expectations; |
| decreased demand for industrial uses, use in jewellery or investment; |
| high supply from production, disinvestment or scrap; and |
| speculative trading. |
9 Profile of the Merged Group continued | 120 |
Lihir Gold Limited Scheme Booklet | 121 |
9 Profile of the Merged Group continued | 122 |
Lihir Gold Limited Scheme Booklet | 123 |
9 Profile of the Merged Group continued | 124 |
| where it is for a public purpose under due process of law; | |
| the measures are non-discriminatory; and | |
| there is prompt, adequate and effective compensation. |
Lihir Gold Limited Scheme Booklet | 125 |
AUSTRALIAN, PNG, US AND UK TAXATION IMPLICATIONS 126 |
Surveyor in the Bonikro mine, Côte dlvoire. |
Lihir Gold Limited Scheme Booklet | 127 |
| are resident of Australia for Australian tax purposes; |
| hold their LGL Shares on capital account (or are taken, under Australian tax law, to hold their LGL Shares on capital account), and not as revenue assets or trading stock for Australian tax purposes; |
| are not employees of LGL for Australian tax purposes; |
| are not life insurance companies; |
| are not temporary residents for Australian tax purposes; and |
| are not significant stakeholders or common stakeholders. |
| the value of the capital proceeds received for the transfer (for each Scheme Share, the cash consideration received plus the part of the total market value of the New Newcrest Shares as is reasonably attributable to the transfer); and |
| the cost base of the Scheme Shares (which would generally include the amount paid to acquire the Scheme Shares and the market value of any property given to acquire the Scheme Shares, plus any incidental costs of acquisition, e.g. brokerage fees and stamp duty). |
10 Australian, PNG, US and UK taxation implications continued | 128 |
(A) | the Scheme Shares are exchanged for replacement shares in Newcrest pursuant to the Scheme and, having regard to the other transactions contemplated in the Merger Implementation Agreement, that exchange is considered to be in consequence of a single arrangement; |
(B) | the Scheme Participant would otherwise make a capital gain on the transfer of its Scheme Shares to Newcrest; |
(C) | the scheme of arrangement is one in which at least all the owners of voting shares in LGL could participate and one in which participation was available on substantially the same terms for all of the owners of interests of a particular type in LGL (participation will be on substantially the same terms if, for example, the matters referred to in subsections 619(2) and (3) of the Australian Corporations Act affect the consideration received under the Scheme); |
(D) | Newcrest and members of Newcrests wholly owned group obtain a holding of at least 80% of the voting shares in LGL as a result of the Scheme; and |
(E) | the Scheme Participant chooses to obtain the roll-over. |
Lihir Gold Limited Scheme Booklet | 129 |
= Cost base of Scheme Shares at time of event
|
X | Market value of New Newcrest Shares received |
Market value of New Newcrest Shares plus cash | ||
|
consideration |
= Cost base of Scheme Shares at time of event
|
X | Cash consideration |
Market value of New Newcrest Shares plus | ||
|
cash consideration |
(A) | if the holder is an individual or trustee, any capital gain made in relation to its Scheme Shares is reduced by 50%; or | |
(B) | if the holder is a trustee of a complying superannuation entity, any capital gain made in relation to its Scheme Shares is reduced by 33 1/3%. |
10 Australian, PNG, US and UK taxation implications continued | 130 |
= Market value of Scheme Shares transferred
|
X | Market value of New Newcrest Shares |
Market value of New Newcrest Shares plus cash | ||
consideration |
Lihir Gold Limited Scheme Booklet | 131 |
10 Australian, PNG, US and UK taxation implications continued | 132 |
NDEPENDENT EXPERTS REPORT Process plant at Lihir island, pepua New Guinea. |
11 Independent experts report continued | 134 |
|
GRANT SAMUEL | |||
|
||||
|
n n n | GRANT SAMUEL & ASSOCIATES | ||
|
||||
|
LEVEL 6 | |||
15 July 2010
|
1 COLLINS STREET MELBOURNE VIC 3000 | |||
|
T: +61 3 9949 8800 / F: +61 3 99949 8838 | |||
The Directors
|
www.grantsamuel.com.au | |||
Lihir Gold Limited
|
||||
Level 7, Pacific Place
|
||||
Champion, Parade and Musgrave Streets
|
||||
Port Moresby
|
||||
Papua New Guinea
|
1 | Introduction | |
Lihir Gold Limited (LGL) is a major pure gold company, incorporated in Papua New Guinea but with its principal listing on the Australian Securities Exchange (ASX). LGL is Papua New Guineas largest gold producer through its flagship Lihir Island open cut mine. In addition, LGL operates the Mount Rawdon open cut mine in Queensland, Australia and the Bonikro open cut mine in Côte dlvoire, West Africa. LGL had a market capitalisation at 13 July 2010 of approximately A$10.2 billion. | ||
On 4 May 2010, LGL and Newcrest Mining Limited (Newcrest) announced that they had entered into a Merger Implementation Agreement whereby Newcrest would acquire all the outstanding shares in LGL (Proposal). The Proposal is to be implemented through a scheme of arrangement (Scheme) under the Papua New Guinea Companies Act. LGL shareholders will receive one Newcrest share for every 8.43 LGL shares held plus A$0.225 cash per LGL share, less any interim dividend declared or paid for the half year ended 30 June 2010 (Consideration). This followed the announcement by LGL on 1 April 2010 that it had rejected an earlier proposal from Newcrest to offer LGL shareholders one Newcrest share for every nine LGL shares held plus A$0.225 cash per LGL share, less any interim dividend declared for the half year ended 30 June 2010 (Initial Proposal). | ||
LGL shareholders will have the opportunity to utilise a mix and match facility in relation to the Proposal. LGL shareholders wishing to increase either the cash or share component of their consideration can elect to do so. However, the maximum share consideration will be 280,988,130 Newcrest shares 1 and the maximum cash consideration will be A$1.0 billion. Where the aggregate elections for either the cash or share consideration exceed the maximum levels, LGL shareholders who have elected a changed consideration will be subject to scale back on a pro-rata basis. Newcrest intends to fund the cash component of the consideration from internal finance sources. | ||
Newcrest is Australias largest gold producer and one of the worlds top ten gold mining companies by production, reserves and market capitalisation. Newcrests operating assets are: the Cadia Valley operation comprising Cadia Hill and Ridgeway in New South Wales; the Telfer open pit and underground operation in Western Australia; an 82.5% interest in the high grade Gosowong gold operation in Indonesia; a 70% interest in the relatively smaller Cracow gold mine in Queensland and a 50% interest in the Hidden Valley operation in Papua New Guinea. Newcrest also has a pipeline of substantial growth/development projects at Cadia East, Ridgeway Deeps, Gosowong and Wafi-Golpu in Papua New Guinea. Newcrest has an active exploration program and, including its joint ventures, is exploring for gold and gold-copper deposits in Australia, Indonesia, Fiji and Papua New Guinea. Newcrest is listed on the ASX and had a market capitalisation at 13 July 2010 of approximately A$16.8 billion. | ||
The directors of LGL have engaged Grant Samuel & Associates Pty Limited (Grant Samuel) to prepare an independent experts report setting out whether, in its opinion, the Proposal is in the best interests of LGL shareholders. |
1 | Excludes any shares issued as a result of vesting of LGL executive share rights. |
Lihir Gold Limited Scheme Booklet | 135 |
This letter contains a summary of Grant Samuels opinion and main conclusions and is extracted from Grant Samuels full report. A copy of this letter and the full report will accompany the Scheme Booklet to be sent to LGL shareholders. | ||
2 | Summary of Opinion | |
In Grant Samuels opinion the Proposal is in the best interests of LGL shareholders, in the absence of a superior proposal. | ||
Given the relative size of Newcrest and LGL, the Proposal can be analysed either as a merger of the companies or as a takeover of LGL by Newcrest. A group of major institutional shareholders that holds around 26% of LGL also holds approximately 35% of Newcrest, and for these shareholders in particular it may be appropriate to assess the Scheme on the basis of merger analysis rather than as a takeover. | ||
The combination of Newcrest and LGL (the merged Newcrest) will create one of the worlds largest gold companies, with very long life assets, competitive cash costs and the potential for substantial growth in gold reserves. Having regard to relative contributions of reserves, resources, production and share market values, LGL shareholders will hold a share in the merged Newcrest that is broadly consistent with (and in some cases exceeds) their contribution to the merged Newcrest. In this sense, the Proposal is fair to LGL shareholders. While movements in gold price and exchange rates make it difficult to quantify precisely the premium implied by the terms of the Proposal, in Grant Samuels view, LGL shareholders will receive a meaningful premium. | ||
Moreover, merging the companies will realise some synergies (Newcrest has estimated these at A$85 million per annum). There are also arguments that the significant increase in the size of the merged Newcrest and the likely increase in its trading liquidity will attract additional investor interest, lower the cost of capital and ultimately result in a re-rating. While such benefits are difficult to quantify, in Grant Samuels view the benefits are nevertheless likely to be real. Overall, on the basis of merger analysis the Proposal is in the best interests of LGL shareholders. | ||
Evaluation of the Proposal in terms of takeover analysis requires a comparison of the underlying value of LGL shares with the value of the Consideration offered by Newcrest. Judgements regarding the value of LGL and of the Consideration offered by Newcrest are subject to uncertainty. This uncertainty reflects factors including recent gold price and exchange rate volatility, and the complexity and unique characteristics of LGLs flagship Lihir Island operation. | ||
The Consideration to be received by LGL shareholders will principally consist of shares in the merged Newcrest. On the basis of Newcrest share prices in the range A$33.50-34.50, Grant Samuel has attributed a value of A$4.20-4.32 per LGL share to the Consideration. | ||
The apparent premium provided by the Consideration at the time the Proposal was announced (in the range 36-40%, depending on the time frame for measurement) was attractive. Between 1 April 2010 and 13 July 2010, Newcrest shares underperformed global gold equities (in US$ terms) by around 10%, potentially reflecting amongst other factors the fall in the copper price over that period. Accordingly, it is likely that the actual premium provided by the Consideration has declined. The current level of the premium (i.e. relative to the price at which LGL shares would be trading absent the Scheme proposal, recognising that LGL has no exposure to copper) cannot be accurately determined, given the movement in gold prices and exchange rates over the period. However, in Grant Samuels view, it is likely that the terms of the Proposal continue to represent a significant (although reduced) premium for LGL shareholders. | ||
Grant Samuel has valued LGL in the range A$4.28-4.83 per share. This valuation range reflects recent gold prices in the range US$1,200-1,240 per ounce and an exchange rate of around A$1.00 = US$0.86. The valuation range would change for different gold prices and exchange rates. The key judgement in the valuation of LGL relates to the value of the Lihir Island mine. The valuation takes into account Lihir Islands status as one of the worlds largest gold deposits, with gold reserves of 28.8 million ounces. It reflects the expected improvements in Lihir Islands operating performance following the completion of the Million Ounce Processing Upgrade (MOPU) project, including increased annual gold production |
2
11 Independent experts report continued | 136 |
and reduced cash operating costs, and the potential for a material expansion of the Lihir Island reserve base. The valuation also takes into account various risks associated with Lihir Island, including geotechnical and other technical risks, and sovereign risks associated with the mines location in Papua New Guinea. | ||
On the basis of a comparison of the estimated value of the Consideration (A$4.20-4.32) with the estimated underlying value of LGL (A$4.28-4.83), the Consideration is fair (albeit marginally). There are uncertainties associated with judgements regarding the value of LGL and Newcrest shares. The valuation of gold assets is intrinsically uncertain. Theoretical models for valuing gold assets appear to have lost predictive power, following a de-linking of gold equities and physical gold through the global financial crisis in 2008 and the more recent European sovereign debt crisis. Lihir Island is a unique gold operation and there is uncertainty as to how its very long operating life should be captured in a valuation assessment. Accordingly, conclusions as to fairness based on theoretical valuation analysis should be treated with caution (particularly since the estimated value of the Consideration only just falls within the bottom end of the valuation range for LGL). | ||
However, far more reliable evidence as to value is available. Since LGLs announcement on 1 April 2010 that it had received and rejected an acquisition proposal from Newcrest, LGL and its advisers have conducted an extensive process to solicit alternative offers for the company. The Merger Implementation Agreement between Newcrest and LGL contained a specific carve out that allowed LGL to engage with potential acquirers (including through the provision of detailed information regarding LGL) up to 8 June 2010. Given LGLs size, there are only a limited number of credible potential acquirers of LGL. It is reasonable to conclude that all these potential acquirers have been aware of LGLs process to seek a superior proposal and, if potentially interested, have conducted sufficient due diligence on LGL to allow them to frame alternative proposals. By the time LGL shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. | ||
If no superior proposal is forthcoming, there will be good reason for LGL shareholders to vote in favour of the Scheme. On one view, the competitive sale process undertaken by LGL will provide the best possible evidence as to the current underlying value of LGL. On this view, the absence of a superior proposal would confirm that the Consideration reflects full underlying value. This argument has additional weight given the uncertainties inherent in the valuation analysis for LGL and for Newcrest shares. In the context of these uncertainties, market based evidence as to value (as revealed through LGLs sale process) would generally be preferred and the Consideration would be deemed fair. | ||
Because all market participants (including investors and potential acquirers of LGL) face uncertainty in their valuation judgements regarding LGL, the sale process conducted by LGL and its advisers will not provide incontrovertible evidence as to the underlying value of LGL. In particular, it is likely that any competing proposal will be developed and framed by reference to the LGL share price. There is some risk that the pre-announcement LGL share price did not properly reflect the value of LGL. Accordingly, there is a risk that even a proposal at an apparently attractive premium to the LGL share price might not reflect full underlying value. The logical consequence of this argument would be that LGL shareholders would be better off continuing to hold their LGL shares for the medium term, in expectation of a market re-rating of LGL. However, the argument effectively relies on two instances of market failure a failure of the public equity markets to properly value LGL shares, and a subsequent failure of the market for corporate control to attribute an appropriate control value to LGL. On balance, Grant Samuel believes that it is reasonable to conclude that the sale process conducted by LGL and its advisers is likely to deliver a value outcome that approaches underlying value and that the Consideration is therefore fair. | ||
The merger of Newcrest and LGL will have a number of other advantages and disadvantages for LGL shareholders. It will provide project diversification (given LGLs current focus on Lihir Island), although this diversification could also be achieved at an investor level through portfolio allocation. It will provide exposure to Newcrests growth projects, particularly at Cadia East and Wafi-Golpu in Papua New Guinea. On the other hand, it will dilute LGLs status as a pure gold developer, given Newcrests significant copper exposure. It will expose LGL shareholders to Newcrest project development risk. In particular, LGL shareholders will be exposed to the risks associated with development of Newcrests Cadia East underground mine, which will have capital costs of around A$2 billion and will mine a very |
3
Lihir Gold Limited Scheme Booklet | 137 |
large, very low grade gold/copper ore body using the block caving mining method. All of these advantages, disadvantages and risks should already be reflected in the Newcrest share price and do not significantly affect the assessment of the Proposal. |
The recent LGL share price has closely tracked the Newcrest share price and appears to reflect an expectation that the Proposal will proceed. Shareholders should understand that if the Proposal does not proceed then (absent some alternative proposal) the LGL share price is likely to fall, potentially significantly. |
Overall, Grant Samuel has concluded on the basis of merger analysis that the Proposal is fair and in the best interests of LGL shareholders. Evaluation of the Proposal on the basis of takeover analysis requires consideration of both subjective valuation judgements regarding the value of LGL and objective market based evidence (as revealed by LGLs process to find alternative proposals for the acquisition of LGL). Grant Samuel has concluded having regard to theoretical valuation analysis that the Consideration is fair (although this conclusion is marginal). More importantly, if LGLs process to seek an alternative offer for the company does not result in a superior proposal, there are strong market based grounds to conclude that the Consideration is the highest value available to LGL shareholders. On this basis, the Consideration represents full underlying value and the Proposal is therefore by definition fair and reasonable. |
In Grant Samuels view, in the absence of a superior proposal, the Proposal is in the best interests of LGL shareholders. |
LGL shareholders should understand that the valuation of LGL, the value of the Consideration and the overall assessment as to whether the Proposal is in their best interests could change, potentially significantly, as a result of changes in the gold price, exchange rates, market conditions, the operational prospects for the assets of Newcrest and LGL or for other reasons. More information in relation to these issues is set out below in this letter and also in the detailed report of which this letter is a summary. |
3 | Key Conclusions |
§ | The Proposal has been assessed on the basis of both merger and takeover analysis. | ||
Grant Samuel has evaluated the Proposal on the basis of both merger and takeover analysis. The combination of Newcrest and LGL through the Proposal has many of the characteristics of a merger: |
§ | the proportions of value in the merged Newcrest that will be attributable to Newcrest and LGL shareholders are reasonably even. LGL shareholders will hold approximately 37% of the aggregate value of the merged Newcrest, and will share in approximately 38% of the total value available if the cash component of the Consideration is taken into account; | ||
§ | a group of three institutional shareholders holds around 26% of the shares in LGL and 35% of the shares in Newcrest. There are likely to be further shareholders that hold shares in both companies. Merger analysis is likely to be particularly appropriate for these common shareholders; and | ||
§ | the merged Newcrest will have an open register, with no controlling shareholder or shareholders. Arguably, control will not pass at a shareholder level. |
On the other hand, there are factors that suggest that the transaction should be evaluated as a takeover: |
§ | control of LGL will clearly pass in the sense of Board and management control; | ||
§ | both Newcrest and LGL have effectively treated the transaction as a takeover, with Newcrest offering a premium and LGL conducting a process to seek a superior proposal; and | ||
§ | while the share register of the merged Newcrest will be open and in that respect there will be no impediment to a takeover offer for the merged Newcrest, as a practical matter, the size of |
4
11 Independent experts report continued | 138 |
the merged Newcrest relative to the other gold majors will significantly reduce the potential for a subsequent takeover offer for the merged Newcrest. The prospects for LGL shareholders of realising a takeover premium through a subsequent transaction are consequently limited. Accordingly it is a relevant consideration for LGL shareholders as to whether they will realise full underlying value (including a full premium for control) through the Proposal. |
§ | The combination of Newcrest and LGL will create one of the largest gold companies in the world. | |
The combination of Newcrest and LGL will be transformational for both companies. The merged Newcrest will be one of the worlds largest gold companies. It will be: |
§ | the worlds fourth largest gold company by market capitalisation. It will be marginally smaller than Newmont, with only Barrick and Goldcorp significantly larger; and | ||
§ | the worlds fifth largest gold company in terms of gold reserves and annual gold production. |
The merged Newcrest will be one of a group of four clear market leaders in the gold sector. With an expected market capitalisation of around US$24 billion 2 , the merged Newcrest will be significantly larger than the gold companies ranking immediately behind it. AngloGold is the next largest gold company with a market capitalisation of approximately US$15 billion. | ||
The following chart illustrates the market capitalisation, reserve base and production levels of the merged Newcrest by comparison with the worlds major gold companies: |
Source: Grant Samuel analysis | ||
Note: Production corresponds to the mid-point of each companys guidance for the 2010 financial year. The size of the bubbles represents market capitalisations as at 13 July 2010 expressed in US$. |
The merged Newcrest will have attractive investment characteristics. It will have cash costs of production comparable to those of Barrick, Goldcorp andNewmont (although Goldcorps cash costs are expected to fall significantly in the short to medium term as it brings low cost operations into production). It will have a number of long life mines, with reserves sufficient to support expected 2010 production for around 26 years. It will have an attractive production growth profile and the |
2 | Based on share prices and exchange rates at 13 July 2010. |
5
Lihir Gold Limited Scheme Booklet | 139 |
potential to significantly grow reserves in the short to medium term. Its operations will centre on three of the worlds largest gold mining operations: Lihir Island, Cadia Valley and Telfer: |
Source: LGL | ||
Notes: | ||
1. | Barrick owns 50%. | |
2. | Barrick owns 60% and Goldcorp owns 40%. | |
3. | Barrick owns 75% and Kinross owns 25%. |
The Lihir Island and Cadia Valley operations, in particular, have very long expected lives and could potentially continue to operate for more than 30 years. They should provide the backbone for an enduring, world class gold company. | ||
On the other hand, the merged Newcrest would also be exposed to a range of risks. The Lihir Island operation faces geotechnical, environmental and other operating risks, while Newcrests Cadia East and Telfer mines face project development and ongoing operational risks. From an international investor perspective, the merged Newcrest will be exposed to sovereign risk issues, given that almost all its assets will be located in Papua New Guinea, Australia and Indonesia. | ||
§ | Merger analysis suggests that the terms of the Proposal are fair to LGL shareholders. | |
Merger analysis is based on comparing the relative contributions of LGL and Newcrest shareholders with the shares of the merged Newcrest that they will hold if the Scheme is implemented. The following table shows the proportions of reserves, resources and production that the two groups of shareholders will contribute: |
6
11 Independent experts report continued | 140 |
Variable | LGL | Newcrest | LGL Contribution | |||||||||
Gold reserves
3
(Moz)
|
30.3 | 42.8 | 41 | % | ||||||||
Gold equivalent reserves
4
(Moz)
|
30.3 | 68.6 | 31 | % | ||||||||
Gold resources
3
(Moz)
|
52.1 | 80.0 | 39 | % | ||||||||
Gold equivalent resources
4
(Moz)
|
52.2 | 158.7 | 25 | % | ||||||||
Gold production
|
||||||||||||
- twelve months to 30 June 2009 (000s oz)
|
1,166 | 1,631 | 42 | % | ||||||||
- nine months to 31 March 2010 (000s oz)
|
732 | 1,236 | 37 | % | ||||||||
Share market values
|
||||||||||||
- pre-announcement (A$ billion)
|
7.2 | 15.9 | 31 | % | ||||||||
- pro-forma current (A$ billion)
|
8.4 | 16.8 | 33 | % | ||||||||
LGL shareholder interest in merged Newcrest (shareholding) | 37 | % | ||||||||||
LGL shareholder interest in aggregate value (including cash consideration) | 38 | % |
The analysis shows that the share of the merged company held by LGL shareholders will be broadly consistent with their contribution of reserves, resources, production and share market values. Based on gold reserves and resources, LGL shareholders are contributing marginally more than their share of the merged company. Based on gold equivalent reserves and resources (which includes the value of Newcrests reported copper and silver reserves and resources), LGL shareholders contribution is significantly less than their share of the merged company. On this measure the terms of the Proposal appear favourable to LGL shareholders. | ||
Based on share market values immediately before the announcement of the Initial Proposal on 1 April 2010, LGL shareholders are contributing significantly less than their share of the merged company, suggesting that the terms of the Proposal are favourable to LGL shareholders. This is consistent with the significant premium implied by the Consideration based on share prices at the time of the announcement of the Initial Proposal. | ||
Analysis based on contributions of share market value is potentially misleading. Between the announcement of the Initial Proposal and 13 July 2010, Newcrest shares underperformed global gold equities (in US$ terms) by around 10%. LGL shares have traded in line with Newcrest shares (at approximately the ratio implied by the Proposal terms). In the absence of the Proposal, LGL shares would almost certainly have risen, reflecting the rise in the gold price and the fall in the Australian dollar over the period. The pro-forma share market value for Newcrest set out in the table above is based on its share price as at 13 July 2010. The pro-forma share market value for LGL assumes that the LGL share price would have risen in line with global gold equities (by around 12% in US$ terms between 1 April 2010 and 13 July 2010), but for the announcements of the Initial Proposal and Proposal. It is not possible to predict with any accuracy the price at which LGL and Newcrest shares would be trading in the current market place, absent the Proposal. Accordingly, the analysis based on pro-forma current share market values needs to be assessed with caution. However, it suggests that the terms of the Proposal are fair to LGL shareholders. | ||
The analysis does not take into account the net debt position of Newcrest as at 31 December 2009 of A$137 million and LGLs adjusted net cash of US$394 million. Relative contributions of reserves, resources and production do not take into account any asset quality differentials in terms of production costs, production growth potential or other factors. Nevertheless, in Grant Samuels view, the merger analysis suggests that the terms of the Proposal are fair having regard to the interests of LGL shareholders. |
3 | All gold reserve and resource data are based on the reserves and resources most recently reported by LGL and Newcrest | |
4 | Gold equivalent reserve and resource data are based on converting copper and silver reserves and resources at a gold price of US$1,220 per ounce, a copper price of US$3.00 per pound and a silver price of US$18.75 per ounce. |
7
Lihir Gold Limited Scheme Booklet | 141 |
LGL shareholders would also share in any value created through the combination of Newcrest and LGL. Newcrest has estimated that annual synergies of around A$85 million should ultimately be available to the merged company. The value of these synergies would be significant, although not material in the context of the size of the merged Newcrest. In addition, the creation through the Proposal of a gold company much larger than either Newcrest or LGL has the potential to lead to a re-rating of the merged company. The size and asset quality of the merged company and the likely liquidity in the market for its shares should make it attractive for international investors in gold equities. It is reasonable to expect some benefits in terms of a reduced cost of capital for the merged Newcrest, although these benefits are difficult to quantify. |
§ | The proposed Resources Super Profits Tax no longer applies to Newcrest. |
On 2 May 2010, the Australian Government announced that it intended to levy a new tax, the RSPT, on companies operating in the Australian resources and energy sectors. The effect of the RSPT (broadly put) was that tax at 40% would be levied on project profits to the extent that they exceeded a risk free return on the project investment. Company income tax would be payable in addition to this at the current tax rate of 30% (decreasing to 29% in the 2014 financial year and 28% thereafter), although any RSPT payable would be a deductible expense for income tax purposes. State based mining royalties would be credited against the RSPT. |
Following vigorous debate regarding the merits of the RSPT and the replacement of Mr Kevin Rudd as Australian Prime Minister by Ms Julia Gillard, the Australian government announced on 2 July 2010 that it does not intend to proceed with implementation of the RSPT. Instead, it proposes to introduce a Minerals Resources Rent Tax (MRRT). The MRRT, which is structurally very different to the proposed RSPT, will only apply to iron ore and coal projects. Accordingly, there will be no impost on Newcrest or Lihir (although Lihir had only a very small exposure to the original RSPT, through its Mount Rawdon operation). |
Between the Governments announcement on 2 July 2010 that it will not proceed with the RSPT and 13 July 2010, Newcrests shares have outperformed global gold equities, although this outperformance may in part have reflected a strengthening in the copper price. |
§ | Grant Samuel has valued the Consideration in the range A$4.20-4.32 per LGL Share. |
Grant Samuel has estimated the value of the Consideration at A$4.20-4.32 per LGL share based on a market value of Newcrest shares of A$33.50-34.50 per share. This range compares to a closing Newcrest share price on 13 July 2010 of A$34.83. |
Grant Samuel believes that it is reasonable to adopt this range for the following reasons: |
§ | the range of A$33.50-34.50 per Newcrest share reflects recent share market trading in Newcrest shares. It represents the markets current assessment of the trading value of Newcrest shares and appears to incorporate an expectation that the Proposal will proceed. In other words, the recent Newcrest share price appears to represent a market estimate of the share price for the merged Newcrest. LGL shares have essentially been tracking the Newcrest share price (having regard to the terms of the Proposal) in recent weeks: |
8
11 Independent experts report continued | 140 |
Source: Bloomberg and Grant Samuel analysis |
§ | there is a deep and active market for Newcrest shares. Newcrest is followed by many analysts, both in Australia and internationally. It is reasonable to conclude that the Newcrest share price represents the objective consensus view of many market participants on the value of Newcrest shares; | ||
§ | Newcrests recent share price represents multiples of reserves, resources and production that are broadly in line with those for the major global gold companies, both for Newcrest on a standalone basis and for Newcrest and LGL on a combined basis; | ||
§ | many brokers have target prices for Newcrest shares well above current levels. However, in many cases these target prices appear not to adjust for the recent fall in copper prices, or the broader underperformance of gold stocks relative to physical gold; | ||
§ | there has been a reasonable volume of trading in Newcrest shares since the announcement of the Proposal; and | ||
§ | analysis of the merged Newcrest is relatively straightforward and there is no reason to believe that market participants are materially mis-pricing the effect of the combination of Newcrest and LGL. |
The value of the Consideration will vary with movements in the Newcrest share price. The actual value received by LGL shareholders could therefore ultimately be greater or less than A$4.20-4.32 per LGL share. | ||
§ | While it is likely that the underperformance of Newcrest shares relative to other gold companies has reduced the effective premium provided by the Consideration, the premium remains significant. | |
Based on the volume weighted average price (VWAP) for Newcrest and LGL shares for various periods prior to the announcement on 1 April 2010 that Newcrest had made an acquisition proposal, the Consideration represented the following premium to the LGL pre announcement share price: |
9
Lihir Gold Limited Scheme Booklet | 143 |
LGL | Newcrest | |||||||||||||||||||
VWAP | VWAP | VWAP | Consideration Range Premium | |||||||||||||||||
Date/Period | (A$) | (A$) | Premium | A$4.20 | A$4.32 | |||||||||||||||
1 day
|
3.05 | 32.93 | 36 | % | 38 | % | 42 | % | ||||||||||||
5 days
|
3.06 | 33.37 | 37 | % | 37 | % | 41 | % | ||||||||||||
1 month
|
3.03 | 33.55 | 39 | % | 39 | % | 43 | % | ||||||||||||
3 months
|
2.99 | 33.41 | 40 | % | 41 | % | 45 | % |
Source: Bloomberg and Grant Samuel analysis |
The value attributed to the Consideration of A$4.20-4.32 implied a premium to LGLs VWAP before the announcement on 1 April 2010 of Newcrests initial takeover proposal in the range 37%-45%, depending on the time frame for measurement of the premium. On this basis, the apparent premium provided by the Consideration is attractive. |
However, movements in the gold market since the announcement of Newcrests initial takeover proposal mean that premium estimates based on historical share prices are misleading. Between 31 March 2010 and 13 July 2010, the S&P TSX Global Gold Index increased by 12%. By contrast, the Newcrest share price (in US$ terms) increased by only around 2%. This underperformance of approximately 10% means that it is likely that the effective premium has fallen. |
Since the announcement of the Initial Proposal, the LGL share price has broadly tracked the Newcrest share price. If LGL shares had instead performed in US$ terms in line with the S&P TSX Global Gold Index in the period ended 13 July 2010, LGL shares would have been trading at around A$3.54. On the basis of Newcrests closing share price on 13 July 2010 of A$34.83 the implied value of the Consideration would have been approximately A$4.36, which would represent a premium of around 23%. Some caution must be applied to this analysis, given the assumptions that it involves in relation to LGLs share price performance in the absence of the Proposal. Having regard to the negative sentiment that appears to have affected Australian stocks generally, it may well be that LGL would not have performed in line with the S&P TSX Global Gold Index. Accordingly, it is not possible to estimate the premium with any precision. In any event, while it is likely that the premium has fallen, in Grant Samuels view the premium remains significant. |
§ | Grant Samuel has valued LGL in the range A$4.28-4.83 per share. |
Grant Samuel has valued LGL in the range US$8.7-9.8 billion, which corresponds to a value of A$4.28-4.83 per share at an exchange rate of A$1.00 = US$0.86. The valuation represents the estimated full underlying value of LGL assuming 100% of the company was available to be acquired and includes a premium for control. The value exceeds the price at which, based on current market conditions, Grant Samuel would expect LGL shares to trade on the ASX in the absence of a takeover offer. The valuation is appropriate only for gold prices in the range US$1,200-1,240 per ounce and would change for different gold prices. |
10
11 Independent experts report continued | 140 |
The valuation is summarised below: |
Value Range | ||||||||||||||||
US$ Million | A$ Million | |||||||||||||||
Low | High | Low | High | |||||||||||||
Lihir Island
|
7,500 | 8,500 | 8,721 | 9,884 | ||||||||||||
Bonikro and exploration (90% interest)
|
595 | 645 | 692 | 750 | ||||||||||||
Mount Rawdon
|
340 | 390 | 395 | 453 | ||||||||||||
Head office costs (net of savings)
|
(100 | ) | (80 | ) | (116 | ) | (93 | ) | ||||||||
Enterprise Value
|
8,335 | 9,455 | 9,692 | 10,994 | ||||||||||||
LGLs adjusted net cash
|
393 | 393 | 457 | 457 | ||||||||||||
Value of equity
|
8,728 | 9,848 | 10,149 | 11,451 | ||||||||||||
Shares on issue (millions)
|
2,369 | 2,369 | ||||||||||||||
Value per share (AS)
|
4.28 | 4.83 |
The valuation reflects evidence as to value from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector. |
Grant Samuel appointed AMC as technical specialist to review LGLs gold assets. AMCs role included a review of reserves and resources, development plans, production schedules, operating costs, capital costs and exploration potential. AMC prepared valuations of LGLs exploration interests. AMCs report is attached to Grant Samuels report. |
Grant Samuels financial analysis was based on valuation scenarios prepared in conjunction with AMC, reflecting AMCs judgements regarding the range of assumptions as to ultimate mining inventory, mine life, capital costs and operating costs that could reasonably be adopted for valuation purposes. The valuation adopted a gold price assumption of US$1,200-1,240 per ounce and an exchange rate of A$1.00 = US$0.86. The financial models for LGLs mining operations projected US$ cash flows from 1 January 2010 onwards. Present values were estimated using a range of discount rates. |
The valuation is based on a number of important assumptions, including assumptions regarding gold prices, exchange rates and future operating performance. Gold prices, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value. |
§ | Assessment of the value of the Lihir Island gold mine is key to the valuation of LGL. |
The Lihir Island gold mine accounts for more than 90% of LGLs reserves and resources and around 80% of LGLs expected production for 2010. Accordingly, judgements regarding the value of Lihir Island are key to the overall valuation of LGL. |
The Lihir Island gold mine is one of the largest in the world. It has been operating since 1997 and has an expected life of more than 30 years. As at 30 June 2009, it had 28.8 million ounces of gold in reserves, making it the worlds fourth largest gold deposit by reserves. LGL expects that the Lihir Island gold mine will produce approximately 835,000 ounces in 2010. LGL is well advanced with the US$838 million MOPU project. In addition, it plans to spend additional capital on new mine fleet and other capital expenditure over the next two years. The completion of the MOPU project, together with Lihir Islands other capital expenditure, is expected to result in an increase in annual production to 1.0-1.2 million ounces and a reduction in cash operating costs to around US$400 per |
5 | Numbers might not add due to rounding. |
11
Lihir Gold Limited Scheme Booklet | 145 |
ounce by 2012. AMCs review of Lihir Island suggests that, based on current measured and indicated resources not yet in reserves and other currently identified mineralisation, there are likely to be substantial further increases in the Lihir Island gold reserves. The reserve expansion may be of the order of 5-10 million ounces. |
Grant Samuels valuation of Lihir Island takes into account the results of financial analysis for a variety of mine development scenarios and a range of gold prices. The mine development scenarios range from a case that assumes only the production of current reserves to an upside case based on the delineation and exploitation of an additional 10 million ounces of reserves. The valuation also considers the valuation parameters in terms of reserve, resource and production multiples implied by the share market capitalisations of the worlds major gold companies. In addition, Grant Samuel has judgementally considered such factors as: |
§ | the geotechnical, environmental and other risks associated with the Lihir Island mine. These are not captured in the cash flows projected for the various mine development scenarios modelled in Grant Samuels financial analysis; | ||
§ | the extent to which gold investors (and acquirers of gold companies) are prepared to attribute value to potential production many years in the future (in the case of Lihir Island, it is likely that a significant portion of any expanded reserve base would only be produced 20 to 40 years into the future); | ||
§ | the optionality inherent in very long life mining operations; and | ||
§ | the sovereign risk associated with the mines location in Papua New Guinea. While the Lihir Island mining operation is well established and sovereign risk may not be immediately apparent, from the perspective of an international investor in gold companies the mines location is likely to make the mine less attractive than if it was located (for example) in North America. |
Grant Samuels valuation of the Lihir Island gold mine in the range US$7.5-8.5 billion implies the following multiples of reserves, resources and production: |
Variable | Implied Multiple | |||||||||||
Multiples of | (Moz) | Low | High | |||||||||
Gold resources
|
48.5 | 155 | 175 | |||||||||
Gold reserves
|
28.8 | 260 | 295 | |||||||||
Gold production 2009
|
0.85 | 8,788 | 9,960 |
The multiples of reserves and resources implied by the valuation of Lihir Island are modest by comparison with the reserve and resource multiples implied by the share prices of major gold companies (particularly given that the valuation of Lihir Island represents a full underlying value, including a premium for control). On the other hand, the production multiples implied by the valuation are relatively high by comparison with the production multiples for comparable gold companies. This reflects, in part, Lihir Islands very long expected mine life. Overall, Grant Samuel believes that the multiples implied by its valuation of Lihir Island are reasonable, having regard to the characteristics of the mine and the factors set out above. |
§ | The valuation of LGL also reflects an apparent de-rating of gold equities relative to physical gold. |
Grant Samuels experience in valuing gold companies over many years has indicated a consistent relationship between share market and transaction values for gold companies and the value of physical gold. Market values have consistently reflected the value of mining inventories at spot gold prices, less the present value of all extraction costs (including taxes). However, since the onset of the global financial crisis in 2008, there appears to have been a dislocation between physical gold |
12
11 Independent experts report continued | 146 |
and gold equities. Given that gold equities effectively represent a geared exposure to physical gold, gold equities should outperform physical gold in times of increasing gold prices. From 1 January 2008 to 13 July 2010, the gold price increased by 45%, from US$834 per ounce to US$1,212 per ounce. Over the same time, however, the S&P TSX Global Gold Index increased by only 12%, as depicted below: |
Source: Bloomberg and Grant Samuel analysis |
While cash margins for the gold majors have improved in recent years, market valuation benchmarks such as market values per ounce of reserves, resources and production have not adjusted on a similar basis. Effectively, there appears to have been a downwards re-rating of major gold stocks relative to physical gold. | ||
Arguably, this would be consistent with the role of gold in the financial system as an investment asset of last resort. In periods of heightened global financial stress (as witnessed during the global financial crisis in 2008 and more recently during the European sovereign debt crisis), extremely risk averse investors may have reassessed the extent to which gold equities provide a proxy for physical gold and may have concluded that indirect gold (through equities) is a riskier investment than direct physical gold. The result would have been, in effect, an increase in the cost of capital for gold companies and a fall in their market value relative to gold. Alternatively, the underperformance of gold stocks may reflect an equity market assessment that recent increases in the US$ gold price are not sustainable, such that equities are valued on a lower assumed long term gold price than the current spot price. | ||
The consequence is that theoretical models developed to explain and predict the value of gold companies now appear to have poorer explanatory power (particularly for long life projects) than previously. Traditional DCF analysis has long failed to explain trading and transaction values for gold companies. In these circumstances, judgements regarding value are subject to great uncertainty. | ||
Grant Samuels valuation analysis has considered the impact on calculated values of assuming longer term gold prices lower than the current spot price. In addition, Grant Samuel has assessed the impact on value of making more conservative assumptions for Lihir Island regarding ultimate mining inventory. These approaches attempt to mirror the apparent risk aversion reflected in the underperformance of gold equities relative to physical gold. Given the shortcomings of theoretical valuation models, Grant Samuel has had particular regard to relative valuation measures (for example, benchmarks based on values per ounce of gold reserves, resources and production). While somewhat crude, these benchmarks provide extremely useful evidence as to value. |
13
Lihir Gold Limited Scheme Booklet | 147 |
§ | The valuation of LGL in the range A$4.28-4.83 per share is only appropriate for gold prices in the range US$1,200-1,240 per ounce and an exchange rate of around A$1.00 = US$0.86. |
The valuation of LGL and the value estimated for the Consideration are point in time estimates of value. Values in the gold sector are not absolutes: rather, they represent relativities to physical gold, currencies and other gold stocks. Grant Samuels value estimates are only appropriate for the gold prices and exchange rates applicable at the time of the analysis (gold prices in the range US$1,200-1,240 per ounce and an exchange rate of A$1.00 = US$0.86). Estimated values would change, perhaps significantly, for different assumptions. Although there is not necessarily a direct relationship between exchange rates and the valuation range, Grant Samuels analysis suggests (assuming all other assumptions remain constant) that a one cent movement in the exchange rate will affect the valuation of LGL by approximately A$0.05 per LGL share. |
§ | LGL has conducted an extensive process to seek alternative proposals. Arguably, the outcome of this process provides better evidence as to the value of LGL than any theoretical valuation. |
Since LGLs announcement on 1 April 2010 that it had received and rejected an acquisition proposal from Newcrest, LGL has conducted a formal process to solicit alternative offers for the company. LGL established a data room with extensive technical and other information and made contact with a number of parties that could potentially have interest in putting forward a competing proposal. The Merger Implementation Agreement between Newcrest and LGL contained a specific carve out that allowed LGL to engage with potential acquirers up to 8 June 2010. Given LGLs size, there are only a limited number of credible potential acquirers. It is reasonable to conclude that all these potential acquirers have been aware of LGLs process to seek a superior proposal and, if potentially interested, have conducted sufficient due diligence on LGL to allow the framing of alternative proposals. By the time LGL shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. (Although a break fee of US$60 million would be payable in the event that LGL preferred an alternative proposal, this amount is not significant in the context of the overall transaction size). |
If no superior proposal is forthcoming, there will be good reason for LGL shareholders to vote in favour of the Scheme. On one view, the competitive sale process undertaken by LGL will provide the best possible evidence as to the underlying value of LGL. On this view, the absence of a superior proposal would confirm that the Consideration reflects full underlying value. This argument has considerable weight, given the uncertainties inherent in the valuation analysis for LGL and for Newcrest shares. In the context of these uncertainties, market based evidence as to value (as revealed through LGLs sale process) would generally be preferred. At a minimum, the absence of any superior proposal would suggest that the Proposal provides consideration close to underlying value. |
§ | Absent a superior proposal from a third party, the alternative for LGL shareholders is to continue holding LGL shares in the expectation of a medium term re-rating of the company. |
Given that all market participants (including investors and potential acquirers of LGL) face uncertainty in their valuation judgements regarding LGL, the sale process conducted by LGL and its advisers will not provide incontrovertible evidence as to the underlying value of LGL. In particular, it is likely that any competing proposal will be developed and framed by reference to the LGL share price. There is some risk that the pre-announcement LGL share price did not properly reflect the value of LGL. Accordingly, there is a risk that even if LGL received a proposal at an apparently attractive premium to the LGL share price, that proposal might not reflect full underlying value. The logical consequence of this argument would be that LGL shareholders would be better off continuing to hold their LGL shares for the medium term, in expectation of a market re-rating of LGL. However, the argument effectively relies on two instances of market failure a failure of the public equity markets to properly value LGL shares, and a subsequent failure of the market for corporate control to attribute an appropriate control value to LGL. On balance, Grant Samuel believes that it is reasonable to conclude that the process conducted by LGL and its advisers is likely to deliver a value outcome that at least approaches underlying value. |
14
11 Independent experts report continued | 148 |
§ | It is likely that the LGL share price would fall in the absence of the Proposal. |
Since the announcement of the Proposal, the LGL share price has generally tracked the Newcrest share price on a basis consistent with the terms of the Proposal. In Grant Samuels view, it is likely that the LGL share price would fall, potentially significantly, if the Proposal does not proceed (absent some comparable other proposal for the acquisition of LGL). |
§ | The key risks for LGL shareholders relate to development and operational risks at Newcrests major assets (Cadia East and Telfer). |
If the Proposal is implemented, LGL shareholders will be exposed to the development and general operational risks associated with, in particular, the Cadia East development and the Telfer mine. |
Overall, these issues and risks should be well understood by analysts and investors and should be incorporated in the Newcrest share price. However, LGL shareholders should understand that any extreme manifestation of these risks (such as a failure of the bulk underground mining method proposed for Cadia East) could have a material adverse effect on the Newcrest share price. The extent of this effect could be exacerbated by a market re-assessment of the premium rating that Newcrest shares currently enjoy. |
§ | Other benefits and disadvantages of the Proposal are not material. |
Other factors that LGL shareholders should consider are: | |||
§ | in the absence of the Proposal or some similar proposal for a change of control of LGL, it is likely that the LGL share price would fall, potentially significantly. Shareholders would be unlikely in the short term to realise the value delivered by the Proposal (assuming the continuation of current market conditions) through selling their LGL shares in the ordinary course of share market trading; | ||
§ | the Proposal provides increased diversification for LGL shareholders in terms of both assets and geographic exposure. On the other hand, LGL shareholders could achieve this diversification through portfolio allocation (buying and selling shares in Newcrest and LGL); | ||
§ | LGL shareholders current pure gold exposure will be diluted. Newcrest has a significant exposure to copper, with approximately 23% of its revenue for the year to 30 June 2009 and approximately 38% of gold equivalent reserves attributable to copper; and | ||
§ | with an approximate 37% interest in the merged Newcrest, LGL shareholders will retain some exposure to any potential upside in LGLs assets. |
§ | Overall, Grant Samuel has concluded that the Proposal is in the best interests of LGL shareholders, in the absence of a superior offer. |
On the basis of merger analysis, in Grant Samuels view, the Proposal is fair to LGL shareholders and in their best interests. |
Assessment of the Proposal on the basis of takeover analysis requires consideration of both theoretical valuation analysis and market-based evidence as to value. |
While judgements regarding the value of the Consideration are complicated by recent volatility in the gold price and exchange rates, Grant Samuel believes that recent Newcrest share prices are the best basis for estimating the value of the Consideration. Having regard to a comparison of the estimated value of the Consideration of A$4.20-4.32 with the estimated underlying value of LGL of A$4.28-4.83, Grant Samuel has concluded that the Consideration is fair (albeit marginally). This conclusion should be treated with caution as there are uncertainties associated with judgements regarding the value of LGL and of Newcrest shares. |
15
Lihir Gold Limited Scheme Booklet | 149 |
However, there is objective market-based evidence on which to base a conclusion as to the fairness of the Consideration. Since LGLs announcement on 1 April 2010 of the Initial Proposal, LGL and its advisers have conducted an extensive process to solicit alternative offers for the company. By the time LGL shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. In the absence of a superior proposal, there are strong grounds to conclude that the Consideration is the highest value available to LGL shareholders. On this basis, the Consideration represents full underlying value and the Proposal is fair and reasonable. | |||
In Grant Samuels view, the Proposal is in the best interests of LGL shareholders, in the absence of a higher offer. |
4 | Other Matters | |
This report is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of individual shareholders in LGL. Because of that, before acting in relation to their investment, shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs. Shareholders should read the Scheme Booklet issued by LGL in relation to the Scheme. | ||
Voting for or against the Scheme is a matter for individual shareholders, based on their own views as to value and future market conditions and their particular circumstances including risk profile. Shareholders who are in doubt as to the action they should take should consult their own professional adviser. | ||
Similarly, it is a matter for individual shareholders as to whether to continue to hold Newcrest shares received under the Scheme. This is an investment decision independent of a decision on whether to vote in favour of the Scheme, and Grant Samuel offers no advice to LGL shareholders in relation to their decision as to whether to continue holding Newcrest shares received under the Scheme. | ||
The Scheme will be effected pursuant to Part XVI of the Papua New Guinea Companies Act. Although there is no requirement for an independent experts report pursuant to the Papua New Guinea Companies Act, the Australian Corporations Act 2001 (Corporations Act) or the Australian Securities Exchange (ASX) Listing Rules, the directors of LGL have engaged Grant Samuel to prepare an independent experts report as if it were required under Section 411 of the Corporations Act. Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act, 2001. The Financial Services Guide is included at the beginning of this summary. | ||
The opinion is made as at the date of this letter and reflects circumstances and conditions as at that date. |
16
11 Independent experts report continued | 150 |
Lihir Gold Limited Scheme Booklet | 151 |
|
GRANT SAMUEL & ASSOCIATES | |
|
||
|
LEVEL 6 | |
|
1 COLLINS STREET MELBOURNE VIC 3000 | |
|
T: +61 3 9949 8800 / F: + 61 3 99949 8838 | |
|
www.grantsamuel.com.au |
Grant Samuel and its related entities do not have at the date of this report, and have not had within the previous two years, any shareholding in or other relationship with LGL or Newcrest that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal. Grant Samuel advises that it was engaged separately by each of LGL and Newcrest to undertake preparatory work that would form the basis of an independent experts report if such a report was required: |
§ | Newcrest August 2005 and December 2009; and | ||
§ | LGL October 2008. |
These engagements did not result in the commissioning of an independent experts report and Grant Samuel did not provide either party with views on valuation. The engagements did not affect Grant Samuels independence or its ability to prepare an independent experts report in relation to the Proposal. The work did not involve Grant Samuel participating in the setting the terms of, or any negotiations leading to, the Proposal. | ||
In addition, Grant Samuel group executives hold parcels of less than 46,000 shares in LGL and 600 shares in Newcrest. | ||
Grant Samuel had no part in the formulation of the Proposal. Its only role has been the preparation of this report. | ||
Grant Samuel will receive a fixed fee of A$1,900,000 for the preparation of this report. This fee is not contingent on the outcome of the Proposal. Grant Samuels out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Samuel will receive no other benefit for the preparation of this report. | ||
Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 October 2007. |
11 Independent experts report continued | 152 |
1 Terms of the Proposal
|
1 | |||
|
||||
2 Scope of the Report
|
3 | |||
2.1 Purpose of the Report
|
3 | |||
2.2 Basis of Evaluation
|
3 | |||
2.3 Sources of the Information
|
5 | |||
2.4 Limitations and Reliance on Information
|
6 | |||
|
||||
3 Profile of LGL
|
9 | |||
3.1 Overview
|
9 | |||
3.2 Financial Performance
|
13 | |||
3.3 Financial Position
|
15 | |||
3.4 Cash Flow
|
16 | |||
3.5 Group Hedging
|
17 | |||
3.6 Taxation Position
|
17 | |||
3.7 Capital Structure and Ownership
|
18 | |||
3.8 Share Price Performance
|
19 | |||
|
||||
4 Profile of Newcrest
|
21 | |||
4.1 Background
|
21 | |||
4.2 Financial Performance
|
26 | |||
4.3 Financial Position
|
28 | |||
4.4 Cash Flow
|
29 | |||
4.5 Group Hedging
|
30 | |||
4.6 Taxation Position
|
30 | |||
4.7 Capital Structure and Ownership
|
30 | |||
4.8 Share Price Performance
|
32 | |||
|
||||
5 Profile of the Merged Newcrest
|
34 | |||
5.1 Overview
|
34 | |||
5.2 Capital Structure and Ownership
|
37 | |||
5.3 Resources, Reserves and Production
|
38 | |||
5.4 Synergies
|
39 | |||
5.5 Pro Forma Financial Position
|
39 | |||
|
||||
6 Valuation of the Consideration
|
41 | |||
6.1 Summary
|
41 | |||
6.2 Approach
|
42 | |||
6.3 Newcrest and LGL Trading Relativities
|
43 | |||
6.4 Proposed Resources Super Profits Tax
|
44 | |||
6.5 Newcrests Share Price Performance
|
44 | |||
6.6 Broker Forecasts
|
46 | |||
6.7 Trading Multiples
|
48 | |||
6.8 Share Trading Volumes
|
50 | |||
6.9 Impact of the Proposal
|
50 | |||
|
||||
7 Valuation of LGL
|
51 | |||
7.1 Summary
|
51 | |||
7.2 Valuation Approach
|
52 | |||
7.3 Lihir Island
|
60 | |||
7.4 Bonikro
|
67 | |||
7.5 Mount Rawdon
|
70 | |||
7.6 Corporate Costs
|
72 | |||
7.7 Net cash
|
72 | |||
|
||||
8 Evaluation of the Proposal
|
73 |
Lihir Gold Limited Scheme Booklet | 153 |
8.1 Summary and Conclusion
|
73 | |||
8.2 Approach
|
75 | |||
8.3 Merger Analysis
|
76 | |||
8.4 Premium for Control
|
77 | |||
8.5 Takeover Analysis
|
79 | |||
8.6 Other Advantages, Disadvantages and Risks
|
80 | |||
8.7 Ineligible Foreign Shareholders
|
81 | |||
8.8 Taxation Issues
|
81 | |||
8.9 Shareholder Decision
|
81 | |||
|
||||
9 Qualifications, Declarations and Consents
|
83 | |||
9.1 Qualifications
|
83 | |||
9.2 Disclaimers
|
83 | |||
9.3 Independence
|
83 | |||
9.4 Declarations
|
84 | |||
9.5 Consents
|
85 | |||
9.6 Other
|
85 |
Appendices
|
||||
|
||||
1 Profile of LGL Assets
|
||||
2 Profile of Newcrest Assets
|
||||
3 Valuation Evidence from Comparable Listed Companies
|
||||
4 Valuation Concepts for Gold Projects
|
||||
5 Report by AMC Consultants Pty Ltd
|
11 Independent experts report continued | 154 |
Lihir Gold Limited Scheme Booklet | 155 |
1 | Terms of the Proposal | |
On 1 April 2010, Lihir Gold Limited (LGL) announced that it had rejected a proposal by Newcrest Mining Limited (Newcrest) to acquire all the outstanding shares in LGL through a scheme of arrangement. Under the proposed terms, LGL shareholders would receive one Newcrest share for every nine LGL shares held plus A$0.225 cash per LGL share, less any interim dividend declared for the half year ended 30 June 2010 (Initial Proposal). | ||
On 4 May 2010, LGL and Newcrest announced that they had entered into a Merger Implementation Agreement whereby Newcrest would acquire all the outstanding shares in LGL (Proposal). The Proposal is to be implemented through a scheme of arrangement (Scheme) in Papua New Guinea. Under the Proposal, LGL shareholders will receive one Newcrest share for every 8.43 LGL shares held plus A$0.225 cash per LGL share, less any interim dividend declared or paid for the half year ended 30 June 2010 (Consideration). | ||
LGL shareholders will have the opportunity to utilise a mix and match facility in relation to the Proposal. LGL shareholders wishing to increase either the cash or ordinary share component of their consideration can elect to do so. However, the maximum share consideration will be 280,988,130 Newcrest shares 1 and the maximum cash consideration will be A$1.0 billion. Where the aggregate elections for either the cash or share consideration exceed the maximum levels, LGL shareholders who have elected a changed consideration will be subject to scale back on a pro-rata basis. Newcrest intends to fund the cash component of the consideration via internal finance sources. | ||
LGL is a pure gold company, incorporated in Papua New Guinea, with its principal listing on the Australian Securities Exchange (ASX). LGL is Papua New Guineas largest gold producer, through its flagship Lihir Island open cut mine. In addition, LGL operates the Mount Rawdon open cut mine in Queensland, Australia and the Bonikro open cut mine in Côte dIvoire, West Africa. The company also holds a suite of exploration tenements, including extensive exploration interests in Côte dIvoire. LGL has a 100% stake in all its operations except the Bonikro assets (90%) and the exploration permits in Côte dIvoire (98%). | ||
Newcrest is Australias largest gold producer and one of the worlds top ten gold mining companies by production, reserves and market capitalisation. Newcrests operating assets are: the Cadia Valley operation comprising Cadia Hill and Ridgeway in New South Wales; the Telfer open pit and underground operation in Western Australia; an 82.5% interest in the high grade Gosowong gold operation in Indonesia; a 70% interest in the relatively smaller Cracow gold mine in Queensland and a 50% interest in the Hidden Valley operation in Papua New Guinea. Newcrest also has a pipeline of substantial growth/development projects at Cadia East, Ridgeway Deeps, Gosowong and Wafi-Golpu (50%) in Papua New Guinea. Newcrest has an active exploration program and, including through its joint ventures, is exploring for gold and gold-copper deposits in Australia, Indonesia, Fiji and Papua New Guinea. | ||
The Proposal is conditional on certain conditions precedent being satisfied or waived including: |
§ | approval by the requisite majority as determined by the PNG court, but which is likely to be 75% of LGL shareholders, in accordance with Section 250 of the Companies Act 1997 (Papua New Guinea) (PNG Companies Act); | ||
§ | the approval of the Scheme in accordance with Section 250 of the PNG Companies Act (subject to any conditions ordered by the Court and approved in writing by the parties); | ||
§ | no order or legislative restraint, whether permanent or temporary, being issued by a Governmental Agency that restricts the implementation of the Proposal; and | ||
§ | no regulated event or material adverse change affecting either party. |
1 | Excludes any shares issued as a result of vesting of LGL executive sharerights. |
1
11 Independent experts report continued | 156 |
LGL and Newcrest have entered into agreements in connection with the Proposal under which LGL has agreed not to solicit competing proposals. However, prior to the exclusivity period (commencing on 8 June 2010), LGL had the right to continue existing discussions with third parties or enter discussions with new third parties (which were not solicited, invited or initiated by LGL) regarding any possible control transaction. LGL has agreed to pay Newcrest a break fee equal to US$60 million plus any applicable GST under certain circumstances, including if there is a competing proposal for LGL, which causes the LGL Board to change, qualify or withdraw its recommendation. |
2
Lihir Gold Limited Scheme Booklet | 157 |
2 | Scope of the Report |
2.1 | Purpose of the Report | ||
The Scheme will be effected pursuant to Part XVI of the PNG Companies Act. Under Section 250 of the PNG Companies Act, the Scheme must be approved by the requisite majority as determined by the National Court of PNG (PNG Court) but which is likely to be 75% of LGL shareholders. The Scheme will also require PNG Court approval. The PNG Companies Act does not specifically require the preparation of an independent experts report in relation to a scheme effected under the PNG Companies Act, and Grant Samuel understands that there is no other statutory or listing rule requirement for such a report. However, under Section 250 of the PNG Companies Act, the Court may make an order requiring that a report on the scheme be prepared for the Court by a person specified by the Court and provided to shareholders. Past experience indicates that the Court will require an independent experts report. | |||
Accordingly, the directors of LGL have engaged Grant Samuel & Associates Pty Limited (Grant Samuel) to prepare an independent experts report. Given there are no guidelines for preparing such a report under the PNG Companies Act, the directors have requested that the report be prepared as if the Scheme were being effected as a scheme under Section 411 of the Corporations Act 2001 (Australia). Part 3 of Schedule 8 prescribes the information to be sent to shareholders in relation to schemes of arrangement pursuant to Section 411 of the Corporations Act. It requires that the expert state in the report whether, in its opinion, the Proposal is in the best interests of LGL shareholders and to state reasons for that opinion. In forming its opinion, Grant Samuel was specifically requested to consider the possible effect on Newcrest of the proposed Resources Super Profits Tax (RSPT) announced on 2 May 2010. On 2 July 2010 the Australian Government announced that it no longer intended to implement the RSPT, but would instead introduce a Minerals Resources Rent Tax (MRRT). However, this will only apply to iron ore and coal projects and will therefore have no impact on Newcrest. A copy of the report will accompany the Notice of Meeting and Explanatory Memorandum (the Scheme Booklet) to be sent to shareholders by LGL. | |||
This report is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of individual shareholders. Accordingly, before acting in relation to their investment, shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs. Shareholders should read the Scheme Booklet issued by LGL in relation to the Proposal. | |||
Voting for or against the Proposal is a matter for individual shareholders based on their views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Shareholders who are in doubt as to the action they should take in relation to the Proposal should consult their own professional adviser. | |||
Similarly, it is a matter for individual shareholders as to whether to buy, hold or sell shares in LGL, Newcrest or the merged entity. These are investment decisions upon which Grant Samuel does not offer an opinion and are independent of a decision to vote for or against the Proposal. Shareholders should consult their own professional adviser(s) in this regard. |
2.2 | Basis of Evaluation | ||
Schemes of arrangement pursuant to Section 411 of the Australian Corporations Act 2001 can encompass a wide range of transactions. Accordingly, in the best interests must be capable of a broad interpretation to meet the particular circumstances of each transaction. However, there is no legal definition of the expression in the best interests. | |||
The Australian Securities & Investments Commission (ASIC) has issued Regulatory Guide 111, which establishes guidelines in respect of independent experts reports. ASIC Regulatory Guide 111 differentiates between the analysis required for control transactions and other transactions. In |
3
11 Independent experts report continued | 158 |
the context of control transactions (whether by takeover bid, by scheme of arrangement, by the issue of securities or by selective capital reduction or buyback), it comments on the meaning of fair and reasonable and continues earlier regulatory guidelines that created a distinction between fair and reasonable. A proposal that, under takeover analysis, was fair and reasonable or not fair but reasonable would be in the best interests of shareholders. For most other transactions the expert is to weigh up the advantages and disadvantages of the proposal for shareholders. This involves a judgement on the part of the expert as to the overall commercial effect of the transaction, the circumstances that have led to the proposal and the alternatives available. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view as to whether the shareholders are likely to be better off if the proposal is implemented than if it is not. | |||
The term fair and reasonable has no legal definition although over time a commonly accepted interpretation has evolved. In the context of a takeover, an offer is considered fair and reasonable if the price fully reflects the value of a companys underlying businesses and assets. ASIC Regulatory Guide 111 distinguishes between fair and reasonable. Fairness is said to involve a comparison of the offer price with the value that may be attributed to the securities that are the subject of the offer based on the value of the underlying businesses and assets. In determining fairness any existing entitlement to shares by the offeror is to be ignored. Reasonableness is said to involve an analysis of other factors that shareholders might consider prior to accepting a takeover offer such as: |
§ | the offerors existing shareholding; | ||
§ | other significant shareholdings; | ||
§ | the probability of an alternative offer; and | ||
§ | the liquidity of the market for the target companys shares. |
A takeover offer could be considered reasonable if there were valid reasons to accept the offer notwithstanding that it was not fair. | |||
Fairness is a more demanding criteria. A fair offer will always be reasonable but a reasonable offer will not necessarily be fair. A fair offer is one that reflects the full market value of a companys businesses and assets. A takeover offer that is in excess of the pre-bid market prices but less than full value will not be fair but may be reasonable if shareholders are otherwise unlikely in the foreseeable future to realise an amount for their shares in excess of the bid price. This is commonly the case in takeover offers where the bidder already controls the target company. In that situation the minority shareholders have little prospect of receiving full value from a third party offeror unless the controlling shareholder is prepared to sell its controlling shareholding. | |||
The Proposal is economically the same as a takeover offer. Accordingly, Grant Samuel has evaluated the Proposal as a control transaction and considered whether the Proposal is fair and reasonable. | |||
Grant Samuel has determined whether the Proposal is fair by comparing the estimated underlying value range of LGL with the Consideration. The Proposal will be fair if the Consideration falls within the estimated underlying value range. In considering whether the Proposal is fair, the factors that have been considered include: |
§ | the estimated underlying value of LGL, based on theoretical valuation analysis; | ||
§ | evidence as to the underlying value of LGL based on the process undertaken by LGL and its advisers to seek a superior takeover proposal for LGL; and | ||
§ | the estimated value of the Consideration, based on the price at which Newcrest shares have traded since the announcement of the Proposal. |
4
Lihir Gold Limited Scheme Booklet | 159 |
A proposal that, under takeover analysis, was fair and reasonable or not fair but reasonable would be in the best interests of shareholders. | |||
While the Proposal has the same economic effect as a takeover offer, there are elements of the Proposal that suggest that it can also be viewed as a merger. In particular: |
§ | the proportions of value in the merged Newcrest that will be attributable to Newcrest and LGL shareholders are reasonably even. LGL shareholders will hold approximately 37% of the aggregate value of the merged Newcrest, and will share in approximately 38% of the total value available if the cash component of the Consideration is taken into account; | ||
§ | a group of three institutional shareholders holds around 26% of the shares in LGL and 35% of the shares in Newcrest. There are likely to be further shareholders that hold shares in both companies. Merger analysis is likely to be particularly appropriate for these common shareholders; and | ||
§ | the merged Newcrest will have an open register, with no controlling shareholder or shareholders. Arguably, control will not pass at a shareholder level. |
Accordingly, Grant Samuel has also assessed the Proposal on the basis of merger analysis. This analysis compares the values contributed to the merged company by LGL and Newcrest shareholders with the relative interests they will hold in the merged Newcrest. For this purpose, the terms of the Proposal are fair if the share of the merged Newcrest to be held by LGL shareholders is consistent with or exceeds the share of value contributed by LGL shareholders. The relative value contributions have been assessed on the basis of share market values, reserves, resources and production. For the purposes of the merger analysis the Proposal will be in the best interests of LGL shareholders if its terms are fair and if the other benefits of the Proposal outweigh the disadvantages. | |||
In addition, in assessing whether the Proposal is in the best interests of LGL shareholders, Grant Samuel has considered such factors as: |
§ | the extent of the premium offered to LGL shareholders under the Proposal; | ||
§ | the likely impact on the market price of LGL shares if the Proposal did not proceed; and | ||
§ | other advantages and disadvantages for LGL shareholders of approving the Proposal. |
2.3 | Sources of the Information | ||
The following information was utilised and relied upon, without independent verification, in preparing this report: | |||
Publicly Available Information |
§ | the Scheme Booklet (including earlier drafts); | ||
§ | annual reports of LGL for the four years ended 31 December 2009 and annual reports of Newcrest for the four years ended 30 June 2009; | ||
§ | the half year announcement of Newcrest for the six months ended 31 December 2009; | ||
§ | quarterly reports for LGL and Newcrest for the two years to 31 March 2010; | ||
§ | press releases, public announcements, media and analyst presentation material and other public filings by LGL and Newcrest including information available on their websites; | ||
§ | broker reports and recent press articles on LGL and Newcrest and the gold industry; and | ||
§ | sharemarket data and related information on Australian and international listed companies engaged in the gold industry and on acquisitions of companies and businesses in this industry. |
5
11 Independent experts report continued | 160 |
Non Public Information provided by LGL |
§ | life of mine plans for Lihir Island, Mount Rawdon and Bonikro; | ||
§ | corporate models for LGL; | ||
§ | studies and technical information relating to LGLs assets; | ||
§ | management reports and strategy documents; and | ||
§ | other confidential documents, presentations and working papers. |
In preparing this report, representatives of Grant Samuel held discussions with, and obtained information from, senior management of LGL and its advisers and senior management of Newcrest. Grant Samuel representatives had previously visited Lihir Island, Mount Rawdon and the Bonikro operations. |
2.4 | Limitations and Reliance on Information | ||
Grant Samuel believes that its opinion must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the opinion. The preparation of an opinion is a complex process and is not necessarily susceptible to partial analysis or summary. | |||
Grant Samuels opinion is based on economic, sharemarket, business trading, financial and other conditions and expectations prevailing at the date of this report. These conditions can change significantly over relatively short periods of time. If they did change materially, subsequent to the date of this report, the opinion could be different in these changed circumstances. | |||
This report is also based upon financial and other information provided by LGL and Newcrest and their respective advisers. Grant Samuel has considered and relied upon this information. LGL and Newcrest have represented in writing to Grant Samuel that to their knowledge the information provided by them was complete and not incorrect or misleading in any material aspect. Grant Samuel has no reason to believe that any material facts have been withheld. | |||
The information provided to Grant Samuel has been evaluated through analysis, inquiry and review to the extent that it considers necessary or appropriate for the purposes of forming an opinion as to whether the Proposal is in the best interests of LGL shareholders. However, Grant Samuel does not warrant that its inquiries have identified or verified all of the matters that an audit, extensive examination or due diligence investigation might disclose. While Grant Samuel has made what it considers to be appropriate inquiries for the purposes of forming its opinion, due diligence of the type undertaken by companies and their advisers in relation to, for example, prospectuses or profit forecasts, is beyond the scope of an independent expert. Grant Samuel is not in a position nor is it practicable to undertake its own due diligence investigation of the type undertaken by accountants, lawyers or other advisers. | |||
Accordingly, this report and the opinions expressed in it should be considered more in the nature of an overall review of the anticipated commercial and financial implications rather than a comprehensive audit or investigation of detailed matters. | |||
An important part of the information used in forming an opinion of the kind expressed in this report is comprised of the opinions and judgement of management. This type of information was also evaluated through analysis, inquiry and review to the extent practical. However, such information is often not capable of external verification or validation. | |||
Preparation of this report does not imply that Grant Samuel has audited in any way the management accounts or other records of LGL. It is understood that the accounting information that was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the method of accounting in previous years (except where noted). |
6
Lihir Gold Limited Scheme Booklet | 161 |
AMC Consultants Pty Ltd (AMC) was appointed as technical specialist to review the operations and exploration assets of LGL for Grant Samuel. AMCs review included a review of the reserves, development plans, production schedules, operating costs, capital costs, potential reserve extensions and exploration activities. AMC also prepared valuations of LGLs exploration interests. The report prepared by AMC is attached to and forms part of this report. | |||
The information provided to Grant Samuel and AMC included mine development plans, forecasts and feasibility studies for LGLs key assets. LGL (as appropriate) is responsible for the information contained in the mine development plans, forecasts and feasibility studies (the forward looking information). Grant Samuel and AMC have considered and, to the extent deemed appropriate, relied on this information for the purpose of their analysis. | |||
On the basis of the information provided to Grant Samuel and AMC, and the review conducted by Grant Samuel and AMC of such information, Grant Samuel and AMC have concluded that the forward looking information was prepared appropriately and accurately based on the information available to management at the time and within the practical constraints and limitations of such forward looking information. Grant Samuel and AMC have concluded that the forward looking information does not reflect any material bias, either positive or negative. Grant Samuel has no reason to believe otherwise. However, the achievability of the forward looking information is not warranted or guaranteed by Grant Samuel. Future profits and cash flows are inherently uncertain. They are predictions by management of future events that cannot be assured and are necessarily based on assumptions, many of which are beyond the control of the company or its management. Actual results may be significantly more or less favourable. Moreover, the forward looking information provided by LGL was not originally generated for, and may not be appropriate in the context of, a valuation of the gold assets of LGL. | |||
Accordingly, AMC conducted a detailed review of the significant assumptions and technical factors underlying the forward looking information provided by LGL to AMC and Grant Samuel. This review included a review of the basis on which resources and reserves have been estimated, a review of likely future operating and capital costs, a review of likely future gold recovery rates, a review of the potential for the conversion of resources to reserves and the potential to mine mineralisation not currently in reserves, a review of environmental factors and such other reviews as AMC deemed appropriate. Having regard to these reviews, AMC made independent judgements regarding the technical assumptions that can reasonably be adopted for the purposes of the valuation of the gold assets of LGL (technical valuation assumptions). | |||
As part of its analysis, Grant Samuel has developed cash flow models on the basis of the technical valuation assumptions deemed appropriate by AMC. Grant Samuel has reviewed the sensitivity of cash flow models to changes in key variables. The sensitivity analysis isolates a limited number of assumptions that are inputs to the cash flow model and shows the impact of the expressed variations occurring. Actual variations may be greater or less than those modelled. In addition to not representing best and worst case outcomes, the sensitivity analysis does not, and does not purport to, show all the possible variations to the business model. The actual performance of the business may be negatively or positively impacted by a range of factors including, but not limited to: |
§ | variations to the assumptions other than those considered in the sensitivity analysis; | ||
§ | greater or lesser variations to the assumptions considered in the sensitivity analysis than those modelled; and | ||
§ | combinations of different variations to a number of different assumptions that may produce outcomes different to the combinations modelled. |
In forming its opinion, Grant Samuel has also assumed that: |
§ | matters such as title, compliance with laws and regulations and contracts in place are in good standing and will remain so and that there are no material legal proceedings, other than as publicly disclosed; |
7
11 Independent experts report continued | 162 |
§ | the information set out in the Scheme Booklet sent by LGL to its shareholders is complete, accurate and fairly presented in all material respects; | ||
§ | the publicly available information relied on by Grant Samuel in its analysis was accurate and not misleading; | ||
§ | the Proposal will be implemented in accordance with its terms; and | ||
§ | the legal mechanisms to implement the Proposal are correct and will be effective. |
To the extent that there are legal issues relating to assets, properties, or business interests or issues relating to compliance with applicable laws, regulations, and policies, Grant Samuel assumes no responsibility and offers no legal opinion or interpretation on any issue. |
8
Lihir Gold Limited Scheme Booklet | 163 |
3 | Profile of LGL |
3.1 | Overview | ||
LGL is a pure gold company, incorporated in Papua New Guinea but with its principal listing on the ASX. The companys producing assets are its flagship Lihir Island open cut mine in Papua New Guinea, the Mount Rawdon open cut mine in Queensland, Australia, and the Bonikro open cut mine in Côte dIvoire, West Africa. The company also holds a suite of exploration tenements, including extensive exploration interests in Côte dIvoire. LGL has a 100% stake in all its operations except the Bonikro assets (90%) and the exploration permits in Côte dIvoire (98%). | |||
The following map shows the location of LGLs operations: |
Source: LGL | |||
LGL was incorporated in 1995 to acquire the Lihir Island project from a joint venture between Kennecott Explorations Australia Limited, a subsidiary of Rio Tinto plc (Rio Tinto), and Niugini Mining Limited (Niugini). The acquisition, which was completed in October 1995, and the development of the project were funded through a US$450 million Global Initial Public Offering of ordinary shares and US$327 million of debt finance. Production of gold at Lihir Island commenced in May 1997. The project was managed by a subsidiary of Rio Tinto until the management agreement was terminated in October 2005. The project has been managed by LGL since then. | |||
LGL acquired the Bonikro and Mount Rawdon mines and the Kirkalocka operation (now sold) through the June 2008 acquisition of Equigold NL (Equigold). | |||
Shares in LGL were listed on the ASX on 9 October 1995. LGL shares commenced trading on the Port Moresby Stock Exchange on 12 July 1999 and on the Toronto Stock Exchange (TSX) on 18 September 2007. American Depositary Shares (ADS), each representing 10 ordinary shares in LGL, have been traded on the NASDAQ Stock Market (NASDAQ) since March 1996 (ADR Program). |
9
11 Independent experts report continued | 164 |
Date | Event | |||||
1997
|
§ | LGL completed the construction of the processing facilities at Lihir Island ahead of schedule and commenced gold production from oxide ore in May and from sulphide ore in September. | ||||
|
||||||
2000
|
§ | LGL merged with Niugini. About 221 million LGL shares representing approximately 19.3% of the merged company were issued to Niugini shareholders. | ||||
|
||||||
2005
|
§ | In September, LGL undertook a financial restructure and raised approximately US$216 million through a 480,000 ounce gold loan. | ||||
|
||||||
|
§ | In September, Rio Tinto relinquished its management agreement with LGL. In December, Rio Tinto sold its 14.6% stake in LGL. | ||||
|
||||||
2007
|
§ | On 26 February, LGL completed the acquisition of Ballarat Goldfields NL (Ballarat Goldfields) by way of a scheme of arrangement. Under the terms of the proposal, Ballarat Goldfields shareholders received five LGL shares for every 54 Ballarat Goldfields shares. The transaction valued Ballarat Goldfields at approximately US$353 million and a total of 112 million ordinary shares were issued to Ballarat Goldfields shareholders. | ||||
|
||||||
|
§ | In April and May, LGL completed an Institutional Entitlement Offer and a Retail Entitlement Offer. The A$2.80 per share placement to institutional investors and the one for three Retail Entitlement rights issue at A$2.30 per share raised approximately A$1.2 billion in new funds. These funds were used to close out all hedging and repay the gold loan and other secured debt. | ||||
|
||||||
|
§ | A three million tonnes per annum flotation circuit was successfully commissioned at Lihir Island, increasing the plant throughput to 6.5 million tonnes per year. | ||||
|
||||||
2008
|
§ | In February, LGL announced it would proceed with the Million Ounce Plant Upgrade (MOPU) project, which is expected to lift gold production capacity at Lihir Island to one million ounces per annum. Construction is expected to be completed in late 2011. | ||||
|
||||||
|
§ | LGL completed the acquisition of Equigold by way of a scheme of arrangement on 26 June. Under the terms of the proposal, each Equigold shareholder was issued 33 ordinary shares in LGL for every 25 Equigold shares. The transaction valued Equigold at approximately US$762 million and resulted in the issue of 280.4 million ordinary shares in LGL. | ||||
|
||||||
|
§ | LGL was included in the S&P/ASX 50 Index in September. | ||||
|
||||||
|
§ | LGLs Bonikro operation in Côte dIvoire poured its first gold in October. | ||||
|
||||||
2009
|
§ | The Ballarat operation moved into commercial production in January. | ||||
|
||||||
|
§ | LGL completed a US$325 million institutional share placement priced at A$3.00 per share in March and a share purchase plan priced at A$2.82 per share to raise approximately A$25 million in April. The proceeds were used to fund the MOPU project at Lihir Island and other growth opportunities. | ||||
|
||||||
|
§ | On 16 June, LGL announced a reduced production forecast for the Ballarat operation and an after tax impairment charge in the range of US$250-$300 million against the book value of the Ballarat assets. On 21 July, LGL confirmed that it had initiated a process to sell the Ballarat operation. | ||||
|
||||||
|
§ | On 8 July, LGL announced that it had closed out the gold hedge book acquired through the acquisition of Equigold. | ||||
|
||||||
|
§ | On 26 August, LGL announced a significant increase in resources, including a 34% increase in resources to 48.5 million ounces at Lihir Island. | ||||
|
||||||
|
§ | On 29 October, LGL announced its reserves at Lihir Island increased by 7.5 million ounces (or 36%) taking total reserves to 28.8 million ounces at 30 June 2009. | ||||
|
||||||
2010
|
§ | On 5 March, LGL announced that it had entered into an agreement to sell the Ballarat operation to Castlemaine Goldfields Limited for A$4.5 million in cash plus a 2.5% royalty interest. The sale was concluded on 7 May 2010. |
10
Lihir Gold Limited Scheme Booklet | 165 |
LGLs portfolio of operations and development projects is summarised as follows: |
Production | ||||||||||||||||||||
Year ended | ||||||||||||||||||||
LGL | Resources | Reserves | 31 Dec 2009 | |||||||||||||||||
Asset/Project | Interest | Location | (Moz) | (Moz) | (000s oz) | |||||||||||||||
Operating Assets
|
||||||||||||||||||||
Lihir Island
|
100 | % | Papua New Guinea | 48.5 | 28.8 | 853 | ||||||||||||||
Mount Rawdon
|
100 | % | Australia | 1.3 | 0.8 | 108 | ||||||||||||||
Bonikro
|
90 | % | Côte dIvoire | 1.1 | 0.7 | 135 | ||||||||||||||
Total Operating Assets
|
51.0 | 30.3 | 1,096 | 3 | ||||||||||||||||
Exploration
|
||||||||||||||||||||
Hiré Permit
|
98 | % | Côte dIvoire | 0.9 | | | ||||||||||||||
Bonikro Exploitation Permit
Extension application |
90 | % | Côte dIvoire | 0.2 | | | ||||||||||||||
Total Exploration
|
1.1 | | | |||||||||||||||||
Total Assets
|
52.1 | 30.3 | 1,096 |
LGL has grown its gold resources and reserves in recent years, notwithstanding depletion from production. The following charts show the key contributors to the increase in resources and reserves between 31 December 2004 and the latest resources and reserves information available. The addition of 7.8 million ounces at the Link Zone on Lihir Island following successful drilling and changes in modelling assumptions accounts for approximately half of the increase in resources and resulted in a substantial increase in reserves: |
2 | Reserves, resources and production estimates represent LGLs share. Numbers might not add due to rounding. Resources and reserves are as at 30 June 2009 for Lihir Island, 1 January 2010 for Mount Rawdon and 31 March 2010 for Bonikro. Resources are as reported in August 2009 for the exploration tenements in Côte dIvoire. | |
3 | Production does not include the 12,565 ounces contribution from Ballarat during calendar year 2009. |
11
11 Independent experts report continued | 166 |
12
Lihir Gold Limited Scheme Booklet | 167 |
3.2 | Financial Performance | ||
The operating and financial performance of LGL for the four years to 31 December 2009 is summarised below: |
Year ended 31 December | ||||||||||||||||
2006 | 2007 | 2008 5 | 2009 6 | |||||||||||||
Gold sold (000s oz)
|
643 | 708 | 861 | 1,115 | ||||||||||||
Average realised price (US$/oz)
7
|
510 | 666 | 850 | 956 | ||||||||||||
Gold produced (000soz)
|
651 | 701 | 871 | 1,111 | ||||||||||||
Total cash costs (US$/oz)
8
|
297 | 301 | 400 | 397 | ||||||||||||
Gold and silver revenue
9
|
384.4 | 493.1 | 744.1 | 1,086.2 | ||||||||||||
EBITDA
10
|
185.3 | 231.9 | 346.7 | 578.5 | ||||||||||||
Depreciation and amortisation (excluding goodwill)
|
(37.3 | ) | (50.4 | ) | (98.2 | ) | (184.4 | ) | ||||||||
Other
non-cash items (deferred mining costs and change in inventories)
|
8.0 | 14.4 | 17.9 | 18.8 | ||||||||||||
EBIT
11
|
156.2 | 195.9 | 266.4 | 412.9 | ||||||||||||
Net interest and foreign exchange income / (expense)
|
(2.0 | ) | (2.8 | ) | 6.8 | 3.7 | ||||||||||
Net cash hedging gains / (losses)
|
(61.2 | ) | (21.4 | ) | (9.9 | ) | (7.7 | ) | ||||||||
Net non-cash hedging gains / (losses)
|
(17.1 | ) | (75.8 | ) | (65.6 | ) | (111.0 | ) | ||||||||
Loss on settlement of gold loan
|
| (117.9 | ) | | | |||||||||||
Other non-recurring items
|
| (13.8 | ) | (31.0 | ) | (14.6 | ) | |||||||||
Profit before tax
|
75.9 | (35.8 | ) | 166.7 | 283.3 | |||||||||||
Income tax benefit / (expense)
|
(21.0 | ) | 11.7 | (56.6 | ) | (104.6 | ) | |||||||||
Net profit after tax from continuing operations
|
54.9 | (24.1 | ) | 110.1 | 178.7 | |||||||||||
(Loss) / profit from discontinued operations (net of tax)
|
| | 0.7 | (412.9 | ) | |||||||||||
Net profit for the period
|
54.9 | (24.1 | ) | 110.8 | (234.2 | ) | ||||||||||
Minority interest
|
| | (0.2 | ) | (0.2 | ) | ||||||||||
Net profit after tax attributable to LGL shareholders
|
54.9 | (24.1 | ) | 111.0 | (234.0 | ) | ||||||||||
Statistics
|
||||||||||||||||
Basic earnings per share
|
4.2 | (1.4 | ) | 5.6 | 7.5 | 12 | ||||||||||
Diluted earnings per share
|
4.2 | (1.4 | ) | 5.6 | 7.4 | 12 | ||||||||||
Dividends per share (cents per share)
|
| | | 1.5 | ||||||||||||
Total sales revenue growth (%)
|
n.a. | 28 | 51 | 46 | ||||||||||||
EBITDA growth (%)
|
n.a. | 25 | 50 | 67 | ||||||||||||
EBIT growth (%)
|
n.a. | 25 | 36 | 55 | ||||||||||||
EBITDA margin (%)
|
48 | 47 | 47 | 53 | ||||||||||||
EBIT margin (%)
|
41 | 40 | 36 | 38 |
4 | The financial statements were prepared in accordance with the Australian equivalent to International Financial Reporting Standards (AIFRS). Numbers may not add due to rounding. | |
5 | Restated to reflect the reclassification of the Ballarat operation from continuing operations to discontinued operations and the finalisation of accounting adjustments related to the Equigold business combination. | |
6 | Production and financial performance from continuing operations do not include the contribution from the Ballarat operation. The financial performance related to the Ballarat operation has been separately reported under profit/ (loss) from discontinued operations. | |
7 | Includes deliveries into hedges. | |
8 | Refers to cash costs after deferral of excess stripping and stockpile costs. | |
9 | Sales revenue excludes the impact of any hedging adjustments. | |
10 | EBITDA is earnings before net interest, tax, depreciation and amortisation, investment income, and significant and non-recurring items. | |
11 | EBIT is earnings before net interest, tax, investment income, and significant and non-recurring items. | |
12 | Represents earnings from continuing operations. |
13
11 Independent experts report continued | 168 |
§ | a process to sell the Ballarat operations commenced in July 2009. The reported sales, EBITDA and EBIT for 2008 and 2009 exclude the contribution from the Ballarat operations. For these periods, the contribution from the Ballarat operation is classified as (Loss) / profit after tax from discontinued operations. However, the contribution of the Ballarat operation to the 2007 sales and financial performance is reported as part of the continuing operations; | |
§ | the year ended 31 December 2006 was the first full year in which the Lihir Island operations were internally managed by LGL. Gold production, solely from the Lihir Island operations, increased by 9% year on year to approximately 651,000 ounces. The strengthening of the gold price, partially offset by higher hedging losses, resulted in a realised gold price of US$510 per ounce; | |
§ | LGL acquired the Ballarat operations in February 2007. Record gold production, further strengthening in the gold price and flat unit cash costs at Lihir Island resulted in a 28% increase in revenue and a 25% increase in EBITDA for the year to 31 December 2007. However, hedging losses and losses related to the settlement of a gold loan crystallised a pre-tax loss of US$211 million. As a result, LGL reported a net loss for the year; | |
§ | LGL acquired Equigold in June 2008. The reported sales and financial performance of LGL includes approximately six months contribution from Equigolds Mount Rawdon and Bonikro operations and very limited production from Kirkalocka. Gold production increased by about 26% to 882,000 ounces as a result of increases at Lihir Island and the Ballarat operation and the contribution of the Equigold assets. The average realised gold price increased substantially to US$850 per ounce as a result of the strengthening gold price and the reduction in hedging losses. Although the total unit cash costs increased due to cost pressures, EBITDA was approximately 48% higher than for the year ended 31 December 2007. Hedging losses relate to the LGL hedge book closed out in 2007 (there was no cash effect in 2008) and the net effect, after fair value adjustments, of delivering into the acquired Equigold hedge book; and | |
§ | for the year ended 31 December 2009, LGL reported record gold production and sales with full year contributions from Bonikro and Mount Rawdon and record production at Lihir Island. The average realised gold price increased by 12% to US$956 per ounce. The combination of increased gold sales, higher realised prices and slightly lower unit cash costs resulted in a 67% increase in EBITDA relative to the previous year. The loss from discontinued operations relates to LGLs decision to divest the Ballarat operation and an associated A$409 million after tax impairment charge. As a result of the write-down, LGL reported a net loss for the year. |
14
Lihir Gold Limited Scheme Booklet | 169 |
3.3 | Financial Position | ||
The financial position of LGL as at 31 December 2008 and 31 December 2009 is summarised below: |
As at 31 December | ||||||||
2008 | 2009 | |||||||
Receivables
|
21.4 | 15.2 | ||||||
Inventories
|
394.0 | 495.8 | ||||||
Payables
|
(102.1 | ) | (111.4 | ) | ||||
Net working capital
|
313.3 | 399.6 | ||||||
Property, plant and equipment
|
2,104.0 | 1,888.8 | ||||||
Deferred mining costs
|
257.0 | 299.5 | ||||||
Intangible assets
|
419.3 | 352.0 | ||||||
Other net assets / (liabilities)
|
(222.0 | ) | (123.8 | ) | ||||
Total funds employed
|
2,871.6 | 2,816.1 | ||||||
Cash and cash equivalents
|
64.7 | 473.5 | ||||||
Total debt
|
(0.5 | ) | (50.9 | ) | ||||
Net cash / (borrowings)
|
64.2 | 422.6 | ||||||
Minority interests
|
(31.9 | ) | (31.7 | ) | ||||
Net assets attributable to LGL shareholders
|
2,903.9 | 3,207.0 | ||||||
Statistics
|
||||||||
Shares on issue at period end (million)
|
2,787 | 2,368 | ||||||
Net assets per share (US$)
|
1.33 | 1.35 | ||||||
NTA
14
per share (US$)
|
1,14 | 1,21 |
The reduction in property, plant and equipment and intangible assets as at 31 December 2009 relates primarily to the impairment of the Ballarat assets. However, the equity issue of US$340.9 million (net of transaction costs) completed in 2009 resulted in an increase in net assets. |
13 | Numbers may not add due to rounding. | |
14 | NTA is net tangible assets, which is calculated as net assets less intangible assets. |
15
11 Independent experts report continued | 170 |
3.4 | Cash Flow | ||
LGLs cash flows for the four years ended 31 December 2009 are summarised below: |
Year ended 31 December | ||||||||||||||||
US$ million | 2006 | 2007 | 2008 | 2009 | ||||||||||||
EBITDA
|
185.3 | 231.9 | 346.7 | 578.5 | ||||||||||||
Changes in working capital and other
adjustments
|
(124.7 | ) | (125.4 | ) | (138.7 | ) | (127.6 | ) | ||||||||
Capital expenditure (net)
|
(170.7 | ) | (206.7 | ) | (277.8 | ) | (368.8 | ) | ||||||||
Operating cash flow
|
(110.1 | ) | (100.2 | ) | (69.8 | ) | 82.1 | |||||||||
Tax received / (paid)
|
| | 4.6 | | ||||||||||||
Net interest received / (paid)
|
(1.9 | ) | 1.7 | 0.4 | (0.6 | ) | ||||||||||
Hedge book proceeds / (payments)
|
| (701.9 | ) | | (37.9 | ) | ||||||||||
Investments (net of cash)
|
(34.0 | ) | 18.4 | (43.4 | ) | (6.5 | ) | |||||||||
Net proceeds from share issues / (buyback)
|
(0.4 | ) | 976.1 | (0.9 | ) | 340.9 | ||||||||||
Net proceeds / (repayments) of borrowings
|
65.6 | (65.8 | ) | (0.4 | ) | 49.9 | ||||||||||
Dividends received / (paid)
|
| | | (35.5 | ) | |||||||||||
Other
|
| | | 4.5 | ||||||||||||
Net cash generated (used)
|
(80.8 | ) | 128.3 | (109.5 | ) | 396.9 | ||||||||||
Net cash / (borrowings) opening
|
127.8 | 47.0 | 174.2 | 64.7 | ||||||||||||
Effects of exchange rate on cash held
|
| (1.1 | ) | | 11.9 | |||||||||||
Net cash / (borrowings) closing
|
47.0 | 174.2 | 64.7 | 473.5 |
For the 2006 to 2008 years, cash earnings were more than offset by capital expenditure. Major items of capital expenditure included: |
§ | during the 12 months ended 31 December 2007, capital expenditure included approximately US$157 million spent at Lihir Island, primarily on the geothermal power station and flotation circuit; | ||
§ | during the year ended 31 December 2008, capital expenditure included approximately US$141 million spent on sustaining capital and MOPU project at Lihir Island and US$27 million at Bonikro. LGL also spent US$108 million on operating infrastructure and development at the Ballarat operations; and | ||
§ | during the 12 months ended 31 December 2009, approximately US$279 million was spent on the Lihir Island operations, including US$151 million on the MOPU project and the interim power station. About US$49 million was spent on the Bonikro operations and US$35 million on Ballarat infrastructure and development. |
In April 2007, the company undertook a US$1.0 billion capital raising to close out LGLs gold hedge book, repay the gold loan and retire all of LGLs secured debt. LGL raised a further US$341 million (net of transaction costs) in March 2009, by way of an institutional share placement and share purchase plan. LGL also established a US$50 million debt facility that was fully drawn down during the year. | |||
LGL recommenced paying dividends in 2009. An interim dividend of US$1.5 cents per share (totalling approximately US$35.5 million) was paid during 2009. On 18 February 2010, LGL announced a final dividend of US$1.5 cents per share paid on 31 March 2010. |
15 | Numbers may not add due to rounding. |
16
Lihir Gold Limited Scheme Booklet | 171 |
3.5 | Group Hedging | ||
LGL completed the close out of its gold hedge book in June 2009. However, hedge accounting requires that the profit and losses on those hedge contracts are brought to account at the original designated dates. Accordingly, LGL will report the non-cash impact of these closed hedge contracts in future periods. A schedule of the non-cash hedging losses to be booked by LGL in future periods is summarised below: |
Gross Pre-Tax | Net Post-Tax | |||||||||||
Non-Cash Hedging | Non-Cash Hedging | |||||||||||
Year ending 31 December | Loss | Tax Effect | Loss | |||||||||
2010
|
88.8 | (26.2 | ) | 62.6 | ||||||||
2011
|
44.2 | (13.2 | ) | 31.0 | ||||||||
2012
|
5.8 | (1.7 | ) | 4.1 | ||||||||
2013
|
6.0 | (1.8 | ) | 4.2 | ||||||||
Total
|
144.8 | (42.9 | ) | 101.9 |
LGL hedges against some of its exposure to movements in the price of diesel fuel and heavy fuel oil. The mark to market value of these hedges as at 28 May 2010 was negative US$0.4 million. LGL also hedges against some of its currency risk. The mark to market value of the foreign exchange hedge book was negative US$2.7 million as at 28 May 2010. | |||
LGL has a number of Carbon Emission Reduction certificates applications that are pending approval. The value of these certificates under application as at 28 May 2010 was estimated by LGL at US$6.6 million. |
3.6 | Taxation Position | ||
The wholly-owned Australian entities of LGL have elected to be taxed as a single entity. The Papua New Guinea entities and the Côte dIvoire entities are taxed separately. | |||
As at 31 December 2009, LGL had carried forward income tax losses of US$187.0 million in Papua New Guinea. LGL expects that these losses will be fully utilised during the 2010 calendar year. | |||
As at 31 December 2009, LGL had carried forward income tax losses of A$227.8 million and carried forward capital losses of A$29.8 million in Australia. In addition, LGL expects to crystallise income tax losses of A$279.5 million and capital tax losses of A$310.1 million following the sale of the Ballarat assets. LGL estimates that approximately A$390 million of the revenue losses could be used to offset profit from the Mount Rawdon operations. | |||
In Côte dIvoire, LGL has been granted a five year tax holiday in relation to its Bonikro operations. The tax holiday expires on 31 December 2013. LGL assumes that the tax holiday will also apply to any activities conducted at Hiré, although this is yet to be confirmed by the Government of Côte dIvoire. LGL had no tax losses in Côte dlvoire as at 31 December 2009. | |||
At 31 December 2009, LGL had accumulated Australian franking credits of A$22.8 million. These franking credits cannot be passed on to frank dividends to LGL shareholders but may be used to reduce Australian dividend withholding tax to nil on dividends paid by the Australian controlled entities to the PNG parent entity. |
17
11 Independent experts report continued | 172 |
3.7 | Capital Structure and Ownership |
3.7.1 | Capital Structure | ||
As at 10 June 2010, LGL had 2,368,729,935 ordinary shares on issue. These include 256,350,210 shares held through LGLs ADR Program on NASDAQ and 342,044 fully paid ordinary shares classified as restricted executive shares. The restricted executive shares are not transferrable and require defined service periods to be met. The restricted executive shares however carry voting rights and are entitled to dividends. | |||
In early 2010, LGL redeemed all 161,527,405 class B shares held by Niugini, a wholly-owned subsidiary of the LGL. The unlisted class B shares were redeemed for a payment of approximately US$6,150. | |||
As at the date of this report, there were approximately 7.1 million share rights on issue to executives participating in the Lihir Executive Share Plan (LESP) and to employees participating in the Lihir Employee Share Ownership Plan (LESOP). Each share right represents a right to acquire an ordinary share in LGL for no consideration on satisfaction of various performance conditions over a three year performance period. | |||
3.7.2 | Ownership | ||
At 24 May 2010 there were 49,786 registered ordinary shareholders, including 92 registered ADR holders, in LGL. Approximately 50% of LGL shares are held by foreign institutions and another 20% by Australian institutions. Shareholders based in North America, Australia and the United Kingdom account for respectively one third, 30% and 20% of shares on issue. | |||
LGL has received notices from the following substantial shareholders: |
Shareholder | Date of Notice | Number of Shares | Percentage | |||||||||
BlackRock Investment Management
|
27 May 2010 | 262,344,786 | 11.07 | |||||||||
FMR LLC and FIL
|
25 May 2010 | 213,276,728 | 9.00 | |||||||||
Commonwealth Bank of Australia
|
28 May 2010 | 147,918,171 | 6.24 |
The Papua New Guinea Government acquired a 30% interest in the Lihir Island project in March 1995. At the time of the Global Offering in October 1995, the Papua New Guinea Government swapped its direct interest in the project for approximately 154 million shares in LGL, equating to 17% of the company. It transferred half of these shares to Mineral Resources Lihir Limited, now MRL Capital Limited (MRL), which was established as a trustee for the people of Lihir, and subsequently sold its remaining interest on the open market. Since then, MRLs interest in LGL has reduced through a series of equity sales and dilution due to capital raisings. As at 26 May 2010, MRL held a 0.2% equity interest in LGL. |
18
Lihir Gold Limited Scheme Booklet | 173 |
3.8 | Share Price Performance | ||
A summary of the share price and trading history of LGL since 1 January 2005 is set out below: |
Average | ||||||||||||||||||||
Weekly | Average | |||||||||||||||||||
Share Price (A$) | Volume | Weekly | ||||||||||||||||||
High | Low | Close | (000s) | Transactions | ||||||||||||||||
Year ended 31
December
|
||||||||||||||||||||
2005
|
2.19 | 0.91 | 2.01 | 72,110 | 2,584 | |||||||||||||||
2006
|
3.35 | 1.82 | 2.87 | 72,261 | 5,369 | |||||||||||||||
2007
|
4.45 | 2.57 | 3.61 | 71,423 | 6,783 | |||||||||||||||
2008
|
4.39 | 1.52 | 3.01 | 86,831 | 12,061 | |||||||||||||||
2009
|
3.77 | 2.41 | 3.28 | 100,791 | 14,115 | |||||||||||||||
Quarter ended
|
||||||||||||||||||||
31 March 2010
|
3.50 | 2.57 | 3.03 | 119,260 | 14,069 | |||||||||||||||
30 June 2010
|
4.48 | 3.65 | 4.31 | 208,730 | 16,393 | |||||||||||||||
Week ended
|
||||||||||||||||||||
4 June 2010
|
4.04 | 3.92 | 4.02 | 91,514 | 11,283 | |||||||||||||||
11 June 2010
|
4.22 | 3.98 | 4.22 | 88,678 | 11,861 | |||||||||||||||
18 June 2010
|
4.38 | 4.15 | 4.35 | 53,886 | 11,605 | |||||||||||||||
25 June 2010
|
4.47 | 4.28 | 4.44 | 99,382 | 16,544 | |||||||||||||||
2 July 2010
|
4.48 | 4.17 | 4.20 | 60,616 | 13,040 | |||||||||||||||
9 July 2010
|
4.25 | 4.11 | 4.23 | 37,679 | 9,593 |
The following graph shows the weekly closing share price and trading volumes for LGL since 1 January 2005: |
19
11 Independent experts report continued | 174 |
Since January 2005, LGL ordinary shares have traded in a broad range, reaching a low of A$0.91 on 18 April 2005 and a high of A$4.45 on 29 October 2007. After trending upwards until mid 2007, the LGL share price has been volatile. | |||
The trading in LGLs ordinary shares has been reasonably liquid with the average weekly volume over the twelve months prior to the announcement of the initial approach by Newcrest representing approximately 5% of the outstanding shares. | |||
LGL is a constituent of a number of indices. LGL was added to the S&P/ASX 50 Index on 19 September 2008 and had a weight of approximately 1.2% as at 13 July 2010. LGL is also a member of the S&P/ASX All Ordinaries Gold Index and had a weight of approximately 25.4% on 13 July 2010. | |||
The following graph illustrates the performance of LGL shares since 1 January 2005 relative to the S&P/ASX All Ordinaries Gold Index and the spot gold price expressed in Australian dollars: |
The chart shows that the LGL share price has broadly mirrored movements in the spot gold price, although the LGL share price has been more volatile. LGL shares have outperformed the S&P/All Ordinaries Gold Index over the period, reflecting the improvement in LGLs underlying performance. |
20
Lihir Gold Limited Scheme Booklet | 175 |
4 | Profile of Newcrest |
4.1 | Background | ||
Newcrest is Australias largest gold producer and one of the worlds top ten gold mining companies by production, reserves and market capitalisation. Newcrest is listed on the ASX and its shares are also traded in the form of American Depositary Receipts in the United States. As at 13 July 2010, Newcrest had a market capitalisation of approximately A$16.8 billion. | |||
Newcrests core assets are the wholly-owned gold-copper Cadia Valley operations in New South Wales, the wholly-owned gold-copper Telfer operations in Western Australia and an 82.5% interest in the Gosowong gold operation in Indonesia, held through the PT Nusa Halmahera Minerals Joint Venture. Newcrest also holds 100% of the OCallaghans tungsten deposit in the Telfer province, a 70% interest in the Cracow gold mine in Queensland, a 50% interest in the Morobe Joint Venture in Papua New Guinea and a 69.94% interest in the Namosi Joint Venture in Fiji. Cadia Valley, Telfer and Gosowong together contributed in excess of 95% of the companys gold production in the year ended 30 June 2009, with Cracow and Hidden Valley (owned by the Morobe joint venture) accounting for the balance. | |||
The location of Newcrests operations is set out on the map below: |
Newcrest was formed in 1990 through the merger of Newmont Australia Limited and BHP Gold Limited. At the time of the merger, the asset portfolio included a 100% interest in Telfer, a 20% interest in Boddington and stakes in a number of other mines and projects that were subsequently sold or abandoned. The company discovered the first mineable deposit at Cadia Valley in 1992, the Gosowong deposit in 1995 and the Cracow deposit in 1999. Newcrest later secured its interest in the Morobe and Namosi assets by entering into joint venture agreements. |
21
11 Independent experts report continued | 176 |
Date | Event | |
Aug 1998
|
Commencement of operations at Cadia Hill in Cadia Valley | |
|
||
Jul 2000
|
Telfer mine put on care and maintenance pending a re-evaluation of the operation | |
|
||
Aug 2001
|
Completion of a share placement raising A$138 million at A$4.10 per share | |
|
||
Nov 2001
|
Boddington mine put on care and maintenance | |
|
||
Apr 2002
|
Commencement of operations at Ridgeway in Cadia Valley | |
|
||
Sep 2002
|
Completion of a share placement raising A$216 million at A$6.80 per share | |
|
||
Jun 2003
|
Recommencement of the open pit operations at Telfer | |
|
||
Mar 2004
|
Inclusion in the S&P/ASX 50 Index | |
|
||
Nov 2004
|
Commencement of operations at Cracow | |
|
||
Feb 2005
|
Commencement of operations at Gosowong | |
|
||
May 2005
|
Private placement of long term senior unsecured notes to raise US$350 million in North America | |
|
||
Mar 2006
|
Commencement of the underground operations at Telfer | |
|
||
Mar 2006
|
Completion of the sale of Newcrests 22.2% interest in the Boddington Joint Venture to Newmont Mining Corporation (Newmont) for A$225 million | |
|
||
Nov 2006
|
Announcement of the partial restructure of Newcrests gold hedge book by deferring 1.6 million ounces of existing gold hedges to later years | |
|
||
Jun 2007
|
Board approval of the development of the Ridgeway Deeps project in Cadia Valley | |
|
||
Sep 2007
|
A$2.0 billion equity raising via a 7 for 20 accelerated renounceable entitlement offer to Newcrest shareholders at a price of A$17.40 per share. Funds used to close out the gold hedge book, repay a gold loan and the USD bilateral loan facilities and purchase gold put options | |
|
||
Dec 2007
|
Execution of a joint venture agreement with Nittetsu Mining Co. Ltd and Mitsubishi Materials Corporation to explore for copper-gold in the Namosi region of Fiji. Newcrest secured a 69.94% interest in the joint venture for total consideration of A$21.5 million | |
|
||
May 2008
|
Execution of a joint venture agreement with Harmony Gold Mining Company Ltd (Harmony) to earn a 50% interest in Harmonys Morobe gold assets in Papua New Guinea. The joint venture was established in August 2008 and the total consideration paid by Newcrest was US$532 million | |
|
||
Sep 2008
|
Inclusion in the S&P/ASX 20 Index | |
|
||
Feb 2009
|
Institutional share placement and share purchase plan to raise approximately A$800 million at A$27.00 per share. Funds used to reduce Newcrests gearing levels and accelerate capital projects | |
|
||
Jun 2009
|
First gold pour at Hidden Valley in PNG | |
|
||
Jan 2010
|
Planning approval received for the Cadia East project in Cadia Valley | |
|
||
Apr 2010
|
Board approval for the development of the Cadia East project in Cadia Valley |
22
Lihir Gold Limited Scheme Booklet | 177 |
Newcrests portfolio of gold and copper-gold assets is summarised as follows: |
Year ended | ||||||||||||||||||||||||||||||||
As at 30 June 2009 | 30 June 2009 | |||||||||||||||||||||||||||||||
Mineral Resources | Ore Reserves | Production | ||||||||||||||||||||||||||||||
Gold | Copper | Silver | Gold | Copper | Silver | Gold | Copper | |||||||||||||||||||||||||
Asset | (Moz) | (Mt) | (Moz) | (Moz) | (Mt) | (Moz) | (000s oz) | (000s t) | ||||||||||||||||||||||||
Cadia Province
(100%)
|
44.0 | 8.0 | | 17 | 24.0 | 3.7 | | 17 | 532 | 57.0 | ||||||||||||||||||||||
Telfer Province
(100%)
|
19.6 | 0.9 | | 17 | 14.1 | 0.5 | | 17 | 629 | 32.9 | ||||||||||||||||||||||
Gosowong (82.5%)
|
2.8 | | 2.2 | 2.4 | | 1.6 | 400 | | ||||||||||||||||||||||||
Cracow (70%)
|
0.6 | | 0.4 | 0.2 | | 0.1 | 69 | | ||||||||||||||||||||||||
Morobe JV (50%)
|
7.8 | 0.9 | 42.0 | 2.1 | 0.4 | 22.6 | 0 | | ||||||||||||||||||||||||
Namosi JV (69.94%)
|
4.0 | 3.8 | | | | | | | ||||||||||||||||||||||||
Marsden (100%)
|
1.2 | 0.7 | | | | | | | ||||||||||||||||||||||||
Total
|
80.0 | 14.4 | 44.6 | 42.8 | 4.7 | 24.3 | 1,631 | 89.9 |
Newcrests main development projects are Cadia East Underground and Ridgeway Deeps in Cadia Valley and the Gosowong expansion. In addition, Newcrest believes that the Wafi-Golpu project in Papua New Guinea has the potential to make a major contribution to its gold and copper production, although the project is not yet approved for development. Further growth is expected from near mine exploration at the existing operations and from various development and exploration projects owned by the Morobe and Namosi Joint Ventures. As at 30 June 2009, more than half of Newcrests gold resources were defined at the companys development projects and advanced exploration opportunities. | |||
Newcrest has successfully grown its gold endowment in recent years, notwithstanding depletion from production. The following charts show the key contributors to the increase in resources and reserves between 30 June 2005 and 30 June 2009. It should be noted that changes in assumptions on metal prices, cut-off grades and mine design also contributed to the overall increase in Newcrests Mineral Resources and Ore Reserves: |
16 | Equity share except for Gosowong (100%). | |
17 | Silver is recovered as a by-product at the Cadia Valley and Telfer operations. Newcrest has not reported silver in the Annual Ore Reserves and Mineral Resources statement for Cadia and Telfer. |
23
11 Independent experts report continued | 178 |
Newcrest grew its production by approximately 40% in the four years to 30 June 2009, mainly as a result of the commencement of operations at Telfer and Gosowong. A fall in production at Cadia Valley due to lower than expected grade and recoveries was the main contributor to the groups production decline in 2009. Newcrest has revised its production guidance to 1.76-1.83 million ounces of gold for the year ending 30 June 2010, but expects that production will be at the lower end of the range. Operating costs are expected to be lower than in 2009. Telfer, Gosowong and the ramp up of production at Hidden Valley should contribute most of the increase forecast for the 2010 financial year: |
24
Lihir Gold Limited Scheme Booklet | 179 |
25
11 Independent experts report continued | 180 |
4.2 | Financial Performance | ||
The financial performance of Newcrest for the three years ended 30 June 2009 and the six months ended 31 December 2009 is summarised below: |
Half year | ||||||||||||||||
Year ended 30 June | ended | |||||||||||||||
2007 | 2008 | 2009 | 31 Dec 2009 | |||||||||||||
Gold sold (000 s ounces)
|
1,627 | 1,765 | 1,637 | 767 | ||||||||||||
Gold Average spot price (A$/oz)
|
812 | 917 | 1,169 | 1,170 | ||||||||||||
Copper sold (tonnes)
|
88,437 | 83,843 | 93,077 | 42,258 | ||||||||||||
Copper Average spot price (A$/lb)
|
4.03 | 3.90 | 2.89 | 3.16 | ||||||||||||
Cash costs (A$/oz Gold)
19
|
280 | 261 | 468 | 369 | ||||||||||||
Sales revenue at spot prices
|
2,126.5 | 2,363.1 | 2,530.8 | 1,187.5 | ||||||||||||
EBITDA
|
920.8 | 1,046.4 | 1,098.9 | 512.8 | ||||||||||||
Depreciation and amortisation
|
(224.4 | ) | (278.6 | ) | (266.8 | ) | (136.1 | ) | ||||||||
Other non-cash items (Deferred mining costs and Change in
inventories)
|
93.7 | 4.2 | (59.5 | ) | 37.3 | |||||||||||
EBIT
|
790.1 | 772.0 | 772.6 | 414.0 | ||||||||||||
Net interest expense
|
(79.9 | ) | (24.5 | ) | (27.2 | ) | (10.6 | ) | ||||||||
Gain / (loss) on delivered hedges
|
(436.5 | ) | (33.8 | ) | | | ||||||||||
Underlying profit before tax
|
273.7 | 713.7 | 745.4 | 403.4 | ||||||||||||
Income tax expense on underlying profit
|
(61.5 | ) | (190.7 | ) | (228.3 | ) | (120.4 | ) | ||||||||
Underlying profit after tax
|
212.2 | 523.0 | 517.1 | 283.0 | ||||||||||||
Gain / (loss) on restructure and close out of hedges and
gold loans net of tax
|
(122.4 | ) | (386.9 | ) | (264.0 | ) | (97.0 | ) | ||||||||
Foreign exchange gain / (loss) on US$ borrowings -net of tax
|
3.2 | 27.3 | 29.0 | 6.6 | ||||||||||||
Profit after tax
|
93.0 | 163.4 | 282.1 | 192.6 | ||||||||||||
Outside equity interests
|
21.0 | 29.1 | 34.0 | 16.4 | ||||||||||||
Profit after tax attributable to Newcrest shareholders
|
72.0 | 134.3 | 248.1 | 176.2 | ||||||||||||
Financial statistics
|
||||||||||||||||
Basic earnings (underlying profit) per share
|
51.6 | 113.2 | 103.2 | 55.1 | ||||||||||||
Diluted earnings (underlying profit) per share
|
51.4 | 112.9 | 103.0 | 55.0 | ||||||||||||
Dividends per share
|
5.0 | 10.0 | 15.0 | 5.0 | ||||||||||||
Total sales revenue growth (%)
|
n.a. | 11.1 | 7.1 | n.m. | ||||||||||||
EBITDA growth (%)
|
n.a. | 13.6 | 5.0 | n.m. | ||||||||||||
EBIT growth (%)
|
n.a. | (2.3 | ) | 0.1 | n.m. | |||||||||||
EBITDA margin (%)
|
43.3 | 44.3 | 43.4 | 43.2 | ||||||||||||
EBIT margin (%)
|
37.2 | 32.7 | 30.5 | 34.9 |
In analysing Newcrests recent financial performance, the following should be noted: |
§ | of the entities it does not own outright, the PT Nusa Halmahera Minerals joint venture is the only controlled entity that Newcrest consolidates in its accounts. The minority interest |
18 | Newcrests financial accounts have been prepared in accordance with AIFRS. | |
19 | After stripping and ore inventory adjustments and by-product credits. |
26
Lihir Gold Limited Scheme Booklet | 181 |
reported in the statements of financial performance and financial position therefore relates solely to the 17.5% Newcrest does not own in the joint venture; |
§ | gold production increased in the 2007 financial year as falls in production at Cadia and Telfer were more than compensated by the ramp-up of production at Gosowong. The average gold spot price was higher than in the previous year. Copper production was down because of the lower performance at both Telfer and Cadia, but average copper spot prices were higher than in the previous corresponding period. The ramp up of production at Telfer and the increase in unit input costs resulted in higher costs. Net profit also reflected losses on the delivery of production into gold and copper hedges and the restructuring costs of the gold hedges, which were mainly non-cash adjustments; | ||
§ | the increase in revenue in the 12 months to 30 June 2008 was largely due to higher gold production and higher average gold spot price. The approximately A$240 million rise in revenue was partly offset by sharp cost increases in key inputs such as fuel, labour and maintenance. Following the expiry of the last copper hedges in June 2007 and the closing out of the gold hedge book in September 2007, losses on delivered hedges were significantly reduced from the previous year as less than 10% of the gold and none of the copper sales were delivered into hedge contracts compared to 55% and 40% of gold and copper sales respectively the previous year. However, substantial losses were recorded on the close out of the gold hedge book; and | ||
§ | in the financial year ended 30 June 2009, sales revenue rose 7% relative to the previous year. This resulted from a 27% increase in the average gold spot price in Australian dollar terms and an 11% increase in copper sales volumes, partially offset by a 26% decline in the average copper spot price in Australian dollar terms and a 7% decrease in gold sales volumes. The fall in gold sales volumes mostly resulted from a 183,000 ounce fall in production at Cadia Valley due to anticipated lower grade and recoveries. Unit costs were higher than in 2008 as a consequence of higher labour and maintenance rates and other key input costs, but decreased in the second half of the year. The significant depreciation of the A$ against the US$ further inflated costs as approximately 25% of the cost base of the Australian operations and almost all the cost base at Gosowong are US$ denominated. Overall, EBITDA and EBIT were slightly higher than in 2008. Net profit increased mainly as a result of lower losses on delivery into and restructure and close out of hedges. |
27
11 Independent experts report continued | 182 |
4.3 | Financial Position | ||
The financial position of Newcrest as at 31 December 2009 is summarised below: |
As at 31 December 2009 | ||||
Receivables and prepayments
|
312.8 | |||
Inventories
|
355.4 | |||
Payables and provisions
|
(310.6 | ) | ||
Other current assets / (liabilities)
|
(0.5 | ) | ||
Net working capital
|
357.1 | |||
Property, plant and equipment
|
1,777.1 | |||
Exploration, evaluation and development
|
2,308.1 | |||
Deferred mining expenditure
|
281.7 | |||
Deferred tax assets / (liabilities)
|
(91.3 | ) | ||
Other assets / (liabilities)
|
16.7 | |||
Total funds employed
|
4,649.4 | |||
Cash and cash equivalents
|
271.6 | |||
Borrowings
|
(408.5 | ) | ||
Net cash / (borrowings)
|
(136.9 | ) | ||
Net assets
|
4,512.5 | |||
Outside equity interests
|
43.2 | |||
Equity attributable to Newcrest shareholders
|
4,469.3 | |||
Statistics
|
||||
Shares on issue at period end (million)
|
483.8 | |||
Net assets per share
|
9.3 | |||
Gearing
21
|
2.9 | % |
Property, plant and equipment comprises the cost of property, plant and equipment and the capitalised development costs of assets in production. Exploration, evaluation and development includes acquisition, exploration, evaluation, feasibility, construction and development costs capitalised because they are expected to be recouped through the successful development of the related asset. Deferred mining expenditure relates to mining costs that are deferred because mining costs incurred during a period are higher than the life of mine average. Deferred mining expenditure is charged against revenue in the years when mining costs are lower than the life of mine average. | |||
Newcrest undertook equity raisings in the 2008 and the 2009 financial years and used the proceeds to close out its gold hedge book and gold forward sales contracts, repay a gold loan and US$ denominated bilateral loan facilities and purchase 2.25 million ounces of gold put options. As a consequence, Newcrest now holds limited amounts of financial derivatives (included in other assets / liabilities above) and its gearing as at 31 December 2009 was only 3%. The majority of borrowings relate to the US$ denominated long-term senior unsecured notes Newcrest issued in the North American market during the 2005 financial year: |
20 | Newcrests financial accounts have been prepared in accordance with AIFRS. | |
21 | Gearing is net borrowings divided by net assets plus net borrowings. |
28
Lihir Gold Limited Scheme Booklet | 183 |
As at 31 December 2009 | ||||||||||
Expiry Date | Rate | US$ million | ||||||||
Fixed 7 years
|
11 May 2012 | 5.41 | % | 95.0 | ||||||
Fixed 10 years
|
11 May 2015 | 5.66 | % | 105.0 | ||||||
Fixed 12 years
|
11 May 2017 | 5.71 | % | 100.0 | ||||||
Fixed 15 years
|
11 May 2020 | 5.92 | % | 25.0 | ||||||
Floating 7 years
|
11 May 2012 | LIBOR + 0.78% | 25.0 | |||||||
Total
|
350.0 |
On 4 December 2009, Newcrest announced that it had completed the refinancing of the 2005 Bilateral bank facilities that expire in 2010. Following an increase in these facilities in June 2010, their total amount is US$1,100 million and their term is three years. The existing and new facilities were undrawn as at the date of this report. |
4.4 | Cash Flow | ||
Newcrests cash flows for the three years ended 30 June 2009 and the six months ended 31 December 2009 are summarised below: |
Half year | ||||||||||||||||
Year ended 30 June | ended | |||||||||||||||
2007 | 2008 | 2009 | 31 Dec 2009 | |||||||||||||
EBITDA
|
920.8 | 1,046.4 | 1,098.9 | 512.8 | ||||||||||||
Losses on delivered hedges
|
(403.6 | ) | (52.5 | ) | | | ||||||||||
Changes in working capital and other adjustments
|
(31.1 | ) | 114.8 | 49.9 | 18.2 | |||||||||||
Payments for property, plant and equipment
|
(116.0 | ) | (110.9 | ) | (140.0 | ) | (70.3 | ) | ||||||||
Payments for exploration, evaluation and development
|
(284.0 | ) | (303.5 | ) | (771.0 | ) | (420.1 | ) | ||||||||
Cash flows from operations
|
86.1 | 694.3 | 237.8 | 40.6 | ||||||||||||
Acquisitions (net of cash)
|
| | (470.6 | ) | | |||||||||||
Purchases of gold to close out hedging contracts and
hedging payments and purchases of gold put options
|
| (1,628.8 | ) | | | |||||||||||
Proceeds from share issues (net of costs and buybacks)
|
12.7 | 2,012.7 | 773.9 | | ||||||||||||
Proceeds from / (repayments of) borrowings
|
(93.3 | ) | (907.0 | ) | (79.7 | ) | (1.7 | ) | ||||||||
Tax paid
|
(22.0 | ) | (58.7 | ) | (102.5 | ) | (38.5 | ) | ||||||||
Net interest paid
|
(76.7 | ) | (31.9 | ) | (22.2 | ) | (12.8 | ) | ||||||||
Dividends paid
|
(24.6 | ) | (36.7 | ) | (60.0 | ) | (71.7 | ) | ||||||||
Net cash generated (used)
|
(117.8 | ) | 43.9 | 276.7 | (84.1 | ) | ||||||||||
Cash on hand opening
|
153.0 | 34.3 | 77.5 | 366.4 | ||||||||||||
Exchange rate movements
|
(0.9 | ) | (0.7 | ) | 12.2 | (10.7 | ) | |||||||||
Cash on hand closing
|
34.3 | 77.5 | 366.4 | 271.6 |
Over the three and a half years ended 31 December 2009, Newcrests major applications of cash were on capital and development expenditure (totalling approximately A$2.2 billion), the acquisition of its stake in the Morobe Joint Venture (A$470 million) and the losses on and restructuring of the companys hedge book (A$1.6 billion). In addition, Newcrest repaid approximately A$l.l billion of borrowings. | |||
Operations generated in excess of A$3.6 billion during the period. The balance of the funding required was provided by two equity issues completed in September 2007 and February 2009 that raised a total of A$2.8 billion. |
29
11 Independent experts report continued | 184 |
4.5 | Group Hedging | ||
Following the expiry of its copper contracts in June 2007 and the close out of its gold hedge book in June 2008, Newcrest does not have any future obligations with respect to gold or copper hedge contracts. However, Newcrest manages its exposure to commodity price movements through gold put options, fixing its A$ diesel costs via vanilla swaps at budget and copper swap contracts to manage movements in the copper price between delivery of the concentrate and payment for the contained metals. Newcrest also undertakes hedging of its non-functional currency capital commitment exposures to provide some budget certainty in the functional currency. | |||
Furthermore, accounting rules require that losses on restructured and closed-out hedges be amortised in line with the initially planned delivery into the contracts. The profit and tax impacts of the amortisation of these costs are non-cash items. The release profile of these non-cash losses is summarised in the table below: |
Year ended 30 June | ||||||||||||
2010 | 2011 | 2012 | ||||||||||
Hedge losses
|
(294.9 | ) | (152.8 | ) | (7.2 | ) | ||||||
Tax credit
|
88.5 | 45.8 | 2.2 | |||||||||
After tax hedge
losses
|
(206.4 | ) | (107.0 | ) | (5.0 | ) |
4.6 | Taxation Position | ||
Effective 1 July 2003, under the Australian tax consolidation regime, Newcrest and its wholly-owned Australian resident entities have elected to be taxed as a single entity. | |||
As at 30 June 2009, Newcrests balance sheet recorded an asset for carried forward Australian income tax losses of A$403.5 million. (No deferred tax asset has been recognised in respect of carry forward gross capital losses of A$296 million corresponding to a A$89 million tax value). Newcrest expects the income tax losses to be fully utilised in the next three to four years based on current levels of profitability. | |||
As at 31 December 2009, Newcrest had no accumulated franking credits. |
4.7 | Capital Structure and Ownership |
4.7.1 | Capital Structure | ||
As at 18 June 2010, Newcrest had the following securities on issue: |
§ | 483,498,777 ordinary shares; and | ||
§ | 1,309,498 performance share rights over unissued ordinary shares. |
Each share right is exercisable into one ordinary share and has no dividend entitlement or voting right. Share rights become exercisable on a date set by the directors. Employee and executive director share rights lapse on termination of employment, other than in limited circumstances, or on the expiry date. |
30
Lihir Gold Limited Scheme Booklet | 185 |
Exercise | Issued | |||||||||||
Issue Date | Expiry Date | Date On or After | Share Rights | |||||||||
8-Nov-05
|
8-Nov-10 | 8-Nov-08 | 11,166 | |||||||||
14-Jul-06
|
14-Jul-11 | 14-Jul-09 | 165,000 | |||||||||
3-Nov-06
|
3-Nov-11 | 3-Nov-09 | 140,804 | |||||||||
9-Nov-07
|
9-Nov-12 | 9-Nov-10 | 220,971 | |||||||||
11-Nov-08
|
11-Nov-13 | 11-Nov-10 | 112,844 | |||||||||
11-Nov-08
|
11-Nov-13 | 11-Nov-11 | 33,428 | |||||||||
11-Nov-08
|
11-Nov-13 | 11-Nov-11 | 361,206 | |||||||||
10-Nov-09
|
10-Nov-14 | 10-Nov-12 | 264,079 | |||||||||
Total
|
1,309,498 |
4.7.2 | Ownership | ||
As at 18 June 2010, there were 43,099 registered shareholders in Newcrest with the top ten shareholders accounting for approximately 86.6% of the ordinary shares on issue. International institutions represent approximately 69% of all registered shareholders, domestic institutions 17% and retail and other investors the balance. | |||
Newcrest has received notices from the following substantial shareholders: |
Date of | Number of | |||||||||||
Shareholder | Notice | Shares | Percentage | |||||||||
Blackrock Investment Management
(Australia) Limited
|
2 Dec 2009 | 71,058,580 | 14.7 | % | ||||||||
Commonwealth Bank of Australia
|
27 Aug 2009 | 51,959,058 | 10.7 | % | ||||||||
Fidelity
|
19 May 2010 | 53,940,769 | 11.2 | % | ||||||||
The Bank of New York Mellon Corporation
|
2 Feb 2009 | 23,757,042 | 5.2 | % |
31
11 Independent experts report continued | 186 |
4.8 | Share Price Performance |
4.8.1 | Share Price History | ||
A summary of the price and trading history of Newcrest since 2006 is set out below: |
Average | ||||||||||||||||||||
Weekly | Average | |||||||||||||||||||
Share Price (A$) | Volume | Weekly | ||||||||||||||||||
High | Low | Close | (000s) | Transactions | ||||||||||||||||
Year ended 31 December
|
||||||||||||||||||||
2006
|
25.09 | 15.73 | 24.31 | 10,838 | 6,848 | |||||||||||||||
2007
|
35.85 | 18.64 | 33.10 | 10,569 | 10,324 | |||||||||||||||
2008
|
40.50 | 16.55 | 33.89 | 14,099 | 21,919 | |||||||||||||||
2009
|
39.75 | 27.61 | 35.33 | 13,246 | 33,682 | |||||||||||||||
Quarter ended
|
||||||||||||||||||||
31 March 2010
|
37.43 | 30.51 | 32.82 | 10,866 | 29,939 | |||||||||||||||
30 June 2010
|
36.47 | 29.73 | 35.10 | 19,682 | 40,710 | |||||||||||||||
Week ended
|
||||||||||||||||||||
4 June 2010
|
32.75 | 31.62 | 32.41 | 16,416 | 37,766 | |||||||||||||||
11 June 2010
|
34.35 | 32.05 | 34.35 | 19,298 | 40,639 | |||||||||||||||
18 June 2010
|
35.41 | 33.88 | 35.24 | 11,583 | 31,623 | |||||||||||||||
25 June 2010
|
36.40 | 34.82 | 36.00 | 25,752 | 49,217 | |||||||||||||||
2 July 2010
|
36.47 | 33.95 | 34.24 | 15,868 | 50,048 | |||||||||||||||
9 July 2010
|
34.54 | 33.34 | 34.31 | 12,323 | 35,957 |
The following graph illustrates the weekly closing share price and trading volumes for Newcrest since January 2006: |
Newcrests shares traded between A$15.73 and A$25.10 from 1 January 2006 to 14 September 2007. In October 2007, Newcrest announced it had successfully completed a A$2 billion accelerated renounceable entitlement offer and that the proceeds would be used |
32
Lihir Gold Limited Scheme Booklet | 187 |
to fund the close out of its existing gold hedge book, repay its gold loan and repay the United States bilateral loan facilities. Following the announcement, the share price rose sharply and reached a high of A$40.50 on 6 March 2008. Newcrests share price then began to fall in line with Australian shares generally, hitting a low of A$16.55 on 24 October 2008. The share price recovered strongly in late 2008 and early 2009 reflecting the increase in the A$ gold price during this period. In the three months prior to Newcrests initial proposal for LGL on 1 April 2010, Newcrest shares traded between A$30.51 and A$37.43 at a volume weighted average price (VWAP) of A$33.41. From the announcement of the Initial Proposal for LGL on 1 April 2010 to 13 July 2010, Newcrest shares traded in the range A$29.73 A$36.47 at a VWAP of A$33.18. On 13 July 2010, Newcrest shares closed at A$34.83. | |||
4.8.2 | Relative Performance | ||
Newcrest is a constituent of various indices including S&P/ASX 100, S&P/ASX 100 Resources and the S&P/ASX All Ordinaries Gold. At 13 July 2010 its weighting in these indices was approximately 1.8%, 6.1% and 42.2% respectively. The following graph illustrates the performance of Newcrest shares since January 2006 relative to the S&P/ASX All Ordinaries Gold Index and the spot gold price expressed in Australian dollars: |
Newcrests shares have traded in line with the S&P All Ordinaries Gold Index reflecting its significant weighting in this index. In the 2006 calendar year and the first half of the 2007 calendar year, Newcrest underperformed the spot gold price and the S&P All Ordinaries Index, possibly reflecting grade reconciliation and other operational issues at Telfer. Since August 2008, Newcrests share price and the Gold Index have underperformed the A$ spot gold price. |
33
11 Independent experts report continued | 188 |
5 | Profile of the Merged Newcrest |
5.1 | Overview | ||
The combination of Newcrest and LGL (merged Newcrest) will be transformational for both companies. While both Newcrest and LGL are substantial mid-ranking gold companies in their own right, the merged Newcrest will be one of four clear market leading gold companies: |
The merged Newcrest will have a market capitalisation of around US$24 billion and will be significantly larger that the fifth-ranked AngloGold Ashanti Ltd (AngloGold), with a market capitalisation of around US$15 billion. It will be the worlds fifth largest gold company by gold reserves and production: |
34
Lihir Gold Limited Scheme Booklet | 189 |
The merged Newcrest will have attractive investment characteristics. It will have cash costs of production comparable to those of Barrick Gold Corporation (Barrick), Goldcorp Inc. (Goldcorp) and Newmont (although Goldcorps cash costs are expected to fall significantly in the short to medium term as it brings low cost operations into production). It will have a number of long life mines, with reserves sufficient to support expected 2010 production for around 26 years. It will have an attractive production growth profile and the potential to significantly grow reserves in the short to medium term. Its operations will centre on three of the worlds largest gold mining operations: Lihir Island, Cadia Valley and Telfer: |
35
11 Independent experts report continued | 190 |
1. | Barrick owns 50%. | |
2. | Barrick owns 60% and Goldcorp owns 40%. | |
3. | Barrick owns 75% and Kinross Gold Corporation owns 25%. |
36
Lihir Gold Limited Scheme Booklet | 191 |
5.2 | Capital Structure and Ownership | ||
As at 18 June 2010 Newcrest had 483,498,777 ordinary shares outstanding. If the Proposal proceeds, Newcrest will issue a maximum of 280,988,130 additional shares to acquire 100% of LGL pursuant to the Proposal. | |||
A group of three institutional shareholders hold approximately 26% of the shares in LGL and 35% of the shares in Newcrest. Following the Proposal, these three institutional shareholders could hold up to 32% of the merged Newcrest, depending on LGL shareholder elections in the mix and match facility. |
37
11 Independent experts report continued | 192 |
5.3 | Resources, Reserves and Production | ||
The merged Newcrests pro forma reserves and resources and the merged Newcrests production for the 12 months ended 31 December 20009 are set out below: |
Newcrest | LGL | Merged Newcrest | ||||||||||
Resources
|
||||||||||||
Gold (Moz)
|
80.0 | 52.1 | 132.1 | |||||||||
Copper (Mt)
|
14.4 | | 14.4 | |||||||||
Silver (Moz)
|
44.6 | 4.2 | 48.8 | |||||||||
Reserves
|
||||||||||||
Gold (Moz)
|
42.8 | 30.3 | 73.1 | |||||||||
Copper (Mt)
|
4.7 | | 4.7 | |||||||||
Silver (Moz)
|
24.3 | 2.4 | 26.7 | |||||||||
Production (12 months ending 31 December 2009)
|
||||||||||||
Gold (000s oz)
|
1,582.0 | 1,096.2 | 22 | 2,678.2 | ||||||||
Copper (000s t)
|
92.2 | | 92.2 |
22 | Excludes 12,656 ounces contributed from Ballarat | |
23 | Excludes future production upside from a number of internal opportunities. |
38
Lihir Gold Limited Scheme Booklet | 193 |
5.4 | Synergies | ||
Following the Proposal, the merged Newcrest is expected to extract a number of synergies including supply chain efficiencies, fleet and equipment utilisation, productivity improvements, funding cost reductions and the elimination of duplicated corporate costs. Newcrest has estimated that these synergies will exceed A$85 million per annum pre tax, which represents approximately 4% of the merged Newcrest cost base. | |||
5.5 | Pro Forma Financial Position | ||
The unaudited pro forma financial position of the merged Newcrest as at 31 December 2009 is summarised below: |
Year ended 31 December 2009 | ||||||||||||||||||||
Reclass- | Merged | |||||||||||||||||||
LGL | Newcrest | ification | Adjustments | Newcrest | ||||||||||||||||
Trade and other receivables
|
15.2 | 252.8 | | | 268.0 | |||||||||||||||
Inventories
|
495.8 | 317.9 | | | 813.7 | |||||||||||||||
Trade and other payables
|
(111.4 | ) | (197.1 | ) | | | (308.5 | ) | ||||||||||||
Net working capital
|
399.6 | 373.6 | | | 773.2 | |||||||||||||||
Property, plant and equipment
|
1,888.8 | 1,589.5 | (703.2 | ) | | 2,775.1 | ||||||||||||||
Exploration, evaluation and development
|
| 2,064.5 | 868.5 | 3,242.2 | 6,175.2 | |||||||||||||||
Deferred mining expenditure
|
299.5 | 139.1 | | (299.5 | ) | 139.1 | ||||||||||||||
Intangible assets
|
352.0 | 55.4 | (165.3 | ) | 4,053.2 | 4,295.3 | ||||||||||||||
Deferred tax assets / (liabilities)
|
(86.7 | ) | (81.9 | ) | | (887.9 | ) | (1,056.5 | ) | |||||||||||
Provisions
|
(73.4 | ) | (153.8 | ) | | | (227.2 | ) | ||||||||||||
Derivative financial instruments
|
10.9 | 18.7 | | | 29.6 | |||||||||||||||
Other assets / (liabilities)
|
25.4 | 153.3 | | | 178.7 | |||||||||||||||
Total funds employed
|
2,816.1 | 4,158.4 | | 6,108.0 | 13,082.5 | |||||||||||||||
Cash and cash equivalents
|
473.5 | 243.0 | | (243.0 | ) | 473.5 | ||||||||||||||
Borrowings
|
(50.9 | ) | (365.2 | ) | | (655.0 | ) | (1,071.2 | ) | |||||||||||
Net cash / (borrowings)
|
422.6 | (122.2 | ) | | (898.0 | ) | (597.7 | ) | ||||||||||||
Net assets
|
3,238.7 | 4,036.3 | | 5,210.0 | 12,484.8 | |||||||||||||||
Outside equity interests
|
(31.7 | ) | (33.0 | ) | | (17.2 | ) | (81.9 | ) | |||||||||||
Equity attributable to Shareholders
|
3,207.0 | 4,003.1 | | 5,192.8 | 12,402.9 | |||||||||||||||
Statistics
|
||||||||||||||||||||
Shares on issue at period end (million)
|
2,368.3 | 483.8 | na | na | 764.5 | |||||||||||||||
Net assets per share (US$)
|
1.35 | 8.27 | na | na | 16.2 | |||||||||||||||
Gearing
|
na | 3.0 | % | na | na | 4.6 | % |
§ | it has been assumed that the Scheme occurred on 31 December 2009; | ||
§ | it assumes 2,369 million shares of LGL at 31 December 2009 are acquired for a total consideration of US$9,297.8 million, comprising 268.0 million shares in Newcrest and US$875.0 million in cash. This assumes that the maximum cash consideration applies. The final amount of cash consideration will depend on the exercise of LGL executive share rights, if any, and Consideration elections made by LGL shareholders; and |
39
11 Independent experts report continued | 194 |
§ | the measurement of the purchase consideration in the unaudited pro forma balance sheet is based on a Newcrest share price of A$35.92, representing the closing price of Newcrest shares on ASX on 28 June 2010. |
40
Lihir Gold Limited Scheme Booklet | 195 |
6 | Valuation of the Consideration |
6.1 | Summary | ||
Under the Proposal, LGL shareholders will receive one Newcrest share for every 8.43 LGL shares plus A$0.225 cash per LGL share, less any interim dividend declared or paid for the half year ended 30 June 2010. | |||
LGL shareholders will have the opportunity to utilise a mix and match facility in relation to the Proposal. This will allow LGL shareholders to elect to receive a greater proportion of either Newcrest shares or cash, subject to a maximum share issue of 280,988,130 Newcrest shares 24 and maximum aggregate cash consideration of A$1.0 billion. If the aggregate elections for the cash or share consideration exceed the maximum share and cash levels, LGL shareholders will be subject to scale back on a pro-rata basis. For the purpose of the transfer of interests between LGL shareholders under the mix and match facility, Newcrest shares will be valued at the VWAP over the five consecutive trading days immediately preceding the date of the second Court hearing (Newcrest VWAP). The effect of this will be that the (pre-tax) value of the consideration received will be constant, regardless of the proportions of cash and Newcrest shares elected by LGL shareholders. This will be the case at the date of the second Court hearing. Subsequent movements in the Newcrest share price will affect the value of the consideration to varying degrees, depending upon the proportions of cash and Newcrest shares elected by LGL shareholders. | |||
Accordingly, Grant Samuel has used the standard Consideration of one Newcrest share for every 8.43 LGL shares plus A$0.225 cash per LGL share as the basis for estimating the value of the Consideration. | |||
Grant Samuel has attributed a value to the Consideration of A$4.20-4.32 per LGL share, based on Newcrest share prices in the range A$33.5034.50. The value attributed to the Consideration is summarised as follows: |
Value Range | ||||||||
Low | High | |||||||
Cash
|
0.225 | 0.225 | ||||||
Newcrest ordinary shares (A$33.5034.50) ÷ 8.43
|
3.97 | 4.09 | ||||||
Total Consideration value per LGL share
|
4.20 | 4.32 |
24 | Excludes any shares issued as a result of vesting of LGL executive share rights. |
41
11 Independent experts report continued | 196 |
§ | Newcrest is followed by many analysts, both in Australia and internationally. It is reasonable to conclude that the Newcrest share price represents the objective consensus view of many market participants on the value of Newcrest shares; | ||
§ | Newcrests recent share price represents multiples of reserves, resources and production that are broadly in line with those for the major global gold companies, both for Newcrest on a standalone basis and for Newcrest and LGL on a combined basis; | ||
§ | many brokers have target prices for Newcrest shares well above current levels. However, in many cases these target prices appear not to adjust for the recent fall in copper prices, or the broader underperformance of gold stocks relative to physical gold; | ||
§ | there has been a reasonable volume of trading in Newcrest shares since the announcement of the Proposal; and | ||
§ | analysis of the merged Newcrest is relatively straightforward and there is no reason to believe that market participants are materially mis-pricing the effect of the combination of Newcrest and LGL. |
For some shareholders, the ability to defer taxation through roll-over relief in relation to the scrip component of the Consideration will be attractive. Accordingly, the after tax value of the Consideration may vary for different elections under the mix and match facility, depending upon the personal tax positions of individual shareholders. Grant Samuel makes no recommendation as to whether LGL shareholders should choose the standard Consideration or participate in the mix and match facility. LGL shareholders who are in any doubt should seek their own professional advice. | |||
6.2 | Approach | ||
For the purpose of takeover analysis, the relevant benchmark for LGL shareholders is the expected market value of the shares in the merged Newcrest received as part of the Consideration. This assessment requires an estimate of the trading price of shares in the merged Newcrest after the Proposal is implemented (rather than a pre-bid price for Newcrest on a standalone basis). | |||
It is normal practice to use the current market price as the starting point for estimating the value of an offer, particularly where the bidder is a relatively large company that enjoys high levels of liquidity and is closely followed by a wide range of analysts and other commentators. |
42
Lihir Gold Limited Scheme Booklet | 197 |
§ | analysed recent trading in Newcrests shares; | ||
§ | analysed the trading multiples implied by Newcrests share price (both on a pre- and post-Proposal basis) compared to its international peers; | ||
§ | reviewed broker analyst research on Newcrest; and | ||
§ | analysed the impact of the Proposal on Newcrests key financial metrics. |
6.3 | Newcrest and LGL Trading Relativities | ||
Since the announcement of the Proposal, LGL shares have traded in line with the Newcrest share price (having regard to the terms of the Proposal): |
43
11 Independent experts report continued | 198 |
6.4 | Proposed Resources Super Profits Tax | ||
On 2 May 2010, the Australian Government announced that it intended to levy a new tax, the RSPT, on companies operating in the Australian resources and energy sectors. The effect of the RSPT (broadly put) was that tax at 40% would be levied on project profits to the extent that they exceeded a risk free return on the project investment. Company income tax would be payable in addition to this at the current tax rate of 30%, decreasing to 29% in the 2014 financial year and 28% thereafter, although any RSPT payable would be a deductible expense for income tax purposes. State based mining royalties would be credited against the RSPT. | |||
Following vigorous debate regarding the merits of the RSPT and the replacement of Mr Kevin Rudd as Australian Prime Minister by Ms Julia Gillard, the Australian government announced on 2 July 2010 that it does not intend to proceed with implementation of the RSPT. Instead, it proposes to introduce a Minerals Resources Rent Tax (MRRT). The MRRT, which is structurally very different to the proposed RSPT, will only apply to iron ore and coal projects. Accordingly, there will be no impost on Newcrest or Lihir (although Lihir had only a very small exposure to the proposed RSPT, through its Mount Rawdon operation). | |||
Between the Governments announcement on 2 July 2010 that it will not proceed with the RSPT and 13 July 2010, Newcrests shares have outperformed global gold equities, although this outperformance may in part have reflected a strengthening in the copper price | |||
6.5 | Newcrests Share Price Performance | ||
Newcrests share price performance since 2006 is discussed in Section 4.8. Since the beginning of 2009, Newcrest shares have generally traded in the range A$30.00-$35.00 (although between October 2009 and January 2010 the share price was generally above A$35.00). Since the announcement on 1 April 2010 of the Initial Proposal, Newcrest shares have traded, in general, between A$31.00 and A$35.00. |
44
Lihir Gold Limited Scheme Booklet | 199 |
45
11 Independent experts report continued | 200 |
6.6 | Broker Forecasts | ||
The closing Newcrest share price on 13 July 2010 was A$34.83, well below the broad range of brokers target prices for Newcrest shares: |
Broker | Date of Report | Price (A$) | 12 month Target Price (A$) | |||||||||
Broker 1
|
12-Jul-10 | 34.31 | 44.30 | |||||||||
Broker 2
|
2-Jul-10 | 35.37 | 42.00 | |||||||||
Broker 3
|
1-Jul-10 | 35.10 | 48.50 | |||||||||
Broker 4
|
25-Jun-10 | 35.65 | 47.00 | |||||||||
Broker 5
|
17-Jun-10 | 34.16 | 40.00 | |||||||||
Broker 6
|
8-Jun-10 | 32.41 | 38.76 | |||||||||
Broker 7
|
7-Jun-10 | 32.25 | 45.00 | |||||||||
Broker 8
|
7-Jun-10 | 32.25 | 42.00 | |||||||||
Broker 9
|
4-May-10 | 30.69 | 40.52 | |||||||||
Broker 10
|
4-May-10 | 30.69 | 38.20 | |||||||||
Broker 11
|
4-May-10 | 30.69 | 33.00 | |||||||||
Broker 12
|
4-May-10 | 30.69 | Restricted | |||||||||
Broker 13
|
22-Apr-10 | 33.88 | 36.40 | |||||||||
Broker 14
|
1-Apr-10 | 33.78 | 38.00 | |||||||||
Broker 15
|
15-Feb-10 | 32.18 | 43.50 | |||||||||
Broker 16
|
14-Feb-10 | 32.68 | 44.73 | |||||||||
Low
|
33.00 | |||||||||||
High
|
48.50 | |||||||||||
Median
|
42.00 | |||||||||||
Average
|
41.46 |
46
Lihir Gold Limited Scheme Booklet | 201 |
§ | many of the broker price targets do not take into account the recent fall in copper prices; | ||
§ | global gold equities appear to have underperformed (at least relative to gold) through the recent European sovereign debt crisis; | ||
§ | there appears to have been a general and potentially indiscriminate selling of Australian equities by global investors, reflecting risk aversion in the context of the European sovereign debt crisis and a perspective that Australian investments are in some sense risky. This perception of riskiness may have been exacerbated by the controversy surrounding the RSPT; | ||
§ | there is little or no consensus on an appropriate approach to valuing gold stocks and broker valuations are commonly highly subjective; and | ||
§ | Grant Samuels analysis indicates that there has been a de-coupling of gold stocks from physical gold since early 2008. This de-coupling is likely to have exacerbated the uncertainty inherent in judgements regarding the Newcrest share price. |
47
11 Independent experts report continued | 202 |
6.7 | Trading Multiples | ||
Newcrests trading multiples and multiples for comparable gold companies are summarised below: |
Forecast Cash | ||||||||||||||||
EV/Reserves | EV/Resources | EV/Production | Cost (US$/oz) | |||||||||||||
Newcrest
|
||||||||||||||||
- Standalone (31 March 2010)
|
344 | 184 | 9,037 | 283 | ||||||||||||
- Standalone (4 June 2010)
|
312 | 167 | 8,184 | 283 | ||||||||||||
- Merged Newcrest (4 June 2010)
|
287 | 159 | 7,522 | 25 | 346 | 26 | ||||||||||
Barrick Gold Corporation
|
320 | 193 | 6,084 | 360 | ||||||||||||
Goldcorp Inc.
|
592 | 312 | 13,062 | 350 | ||||||||||||
Newmont Mining Corp.
|
302 | 302 | 5,242 | 340 | ||||||||||||
AngloGold Ashanti Ltd
|
266 | 84 | 4,128 | 603 | ||||||||||||
Kinross Gold Corporation
|
250 | 148 | 5,038 | 435 | ||||||||||||
Minimum
|
250 | 84 | 4,128 | 340 | ||||||||||||
Maximum
|
592 | 312 | 13,062 | 603 | ||||||||||||
Median
|
302 | 193 | 5,242 | 360 | ||||||||||||
Weighted Average
|
370 | 228 | 7,300 | 390 |
25 | Production is for 12 months ending 30 June 2009. | |
26 | Pro forma cash costs for quarter ending 31 March 2010, includes A$85 million of synergies. | |
27 | Share prices and exchange rates as at 4 June 2010, except Newcrest standalone 31 March 2010 whose share price and exchange rates are the day prior to the Initial Proposal. |
48
Lihir Gold Limited Scheme Booklet | 203 |
28 | Share prices based on 4 June 2010, excluding merged Newcrest which is based on 31 March 2010, the day prior to the Initial Proposal. |
49
11 Independent experts report continued | 204 |
6.8 | Share Trading Volumes | ||
The average weekly volume of trading in Newcrest shares is summarised below: |
6.9 | Impact of the Proposal | ||
The acquisition of LGL would have a significant impact on Newcrests operations and financial metrics. | |||
The market has had limited financial information on the merged Newcrest. No detailed financial information on the merged Newcrest was provided at the time of the announcement of the Proposal. The Scheme Booklet only includes an unaudited pro forma historical balance sheet for the merged Newcrest as at 31 December 2009. It does not include detailed pro forma financial performance that could include the potential synergies or costs savings associated with the Proposal. On the other hand, analysis of the Proposal is reasonably straightforward. There is extensive information available on both Newcrest and LGL on a standalone basis. | |||
There was limited information provided on potential synergies at the time of the announcement. Newcrest has projected that the synergies could be in excess of A$85 million per annum (pre-tax). Expected synergies include supply chain efficiencies, fleet and equipment utilisation, productivity improvements, more efficient project and exploration spend, lower funding costs and the removal of duplicated corporate costs. A number of analysts, however, have been able to estimate the merged Newcrests financials. As a result, it is likely that the synergies from the Proposal are already reflected in the share price, at least to some extent. In any event, the projected synergies are only approximately 4% of the merged Newcrest cost base and are unlikely to have a material impact on the markets assessment of the value of the merged Newcrest. |
50
Lihir Gold Limited Scheme Booklet | 205 |
7 | Valuation of LGL |
7.1 | Summary | ||
Grant Samuel has valued LGL in the range US$8.7-9.8 billion, which corresponds to a value of A$4.28-4.83 per share at an exchange rate of A$1.00 = US$0.86. The valuation represents the estimated full underlying value of LGL assuming 100% of the company was available to be acquired and includes a premium for control. The value exceeds the price at which, based on current market conditions, Grant Samuel would expect LGL shares to trade on the ASX in the absence of a takeover offer. | |||
The value for LGL is the aggregate of the estimated market value of LGLs operating business and other assets plus adjusted net cash. The valuation is summarised below: |
Value Range | ||||||||||||||||
US$ Million | A$ Million | |||||||||||||||
Low | High | Low | High | |||||||||||||
Lihir Island
|
7,500 | 8,500 | 8,721 | 9,884 | ||||||||||||
Bonikro and exploration (90% interest)
|
595 | 645 | 692 | 750 | ||||||||||||
Mount Rawdon
|
340 | 390 | 395 | 453 | ||||||||||||
Head office costs (net of savings)
|
(100 | ) | (80 | ) | (116 | ) | (93 | ) | ||||||||
Enterprise Value
|
8,335 | 9,455 | 9,692 | 10,994 | ||||||||||||
LGLs adjusted net cash
|
393 | 393 | 457 | 457 | ||||||||||||
Value of equity
|
8,728 | 9,848 | 10,149 | 11,451 | ||||||||||||
Shares on issue (millions)
|
2,369 | 2,369 | ||||||||||||||
Value per share (A$)
|
4.28 | 4.83 |
29 | Numbers might not add due to rounding. |
51
11 Independent experts report continued | 206 |
Variable | Implied Multiple | |||||||||||
Multiples of 30 | (Moz) | Low | High | |||||||||
Gold resources
|
52.1 | 160 | 181 | |||||||||
Gold reserves
|
30.4 | 274 | 311 | |||||||||
Gold production year ending 31 December 2009
|
1.1 | 7,605 | 8,627 |
The multiples of reserves and resources implied by the valuation of LGL are reasonably modest by comparison with the reserve and resource multiples implied by the share prices of major gold companies (particularly given that the valuation of LGL represents a full underlying value, including a premium for control). On the other hand, the production multiples implied by the valuation are relatively high by comparison with the production multiples for comparable gold companies. This reflects, in part, Lihir Islands very long expected mine life. The multiples for these comparable companies are set out in Appendix 3. | |||
7.2 | Valuation Approach |
7.2.1 | Valuation Methodology | ||
Grant Samuels valuation of LGL has been assessed by aggregating the estimated market values of LGLs gold assets and adjusting for net cash. The valuation of the gold assets has been made on the basis of fair market value defined as the maximum price that could be realised in an open market over a reasonable period of time given current market conditions and currently available information, assuming that potential buyers have full information. Other assets have been valued on the basis of the net realisable value of those assets. | |||
There are four primary methodologies commonly used for valuing operating businesses: |
§ | capitalisation of earnings or cash flow; | ||
§ | discounting projected cash flows (DCF); | ||
§ | industry rules of thumb; and | ||
§ | estimation of the aggregate proceeds from an orderly realisation of assets. |
Each of these valuation methodologies has applications in different circumstances. The primary criterion for determining which methodology is appropriate is the actual practice adopted by purchasers of the type of business involved. | |||
Over many years Grant Samuels preferred approach to valuing gold assets has been through the application of the gold futures methodology. The gold futures methodology involves the valuation of future gold production by reference to the gold futures market. The present value of future gold production is estimated by discounting at discount rates that reflect the time value of money only (i.e. risk free rates). Similarly, future extraction costs (both capital and operating) are discounted to a present value using discount rates approximating risk free rates. The use of risk free rates is consistent with a view that there is limited systematic riskiness associated with variability in production profiles or extraction costs. Any systematic riskiness associated with the gold price is effectively reflected in the market-based gold futures prices used to value future gold production. Further information on the gold futures methodology is set out in Appendix 4. |
30 | Resources, reserves and production are attributable to LGL. |
52
Lihir Gold Limited Scheme Booklet | 207 |
53
11 Independent experts report continued | 208 |
54
Lihir Gold Limited Scheme Booklet | 209 |
55
11 Independent experts report continued | 210 |
June 2006 June 2008 | July 2008 June 2010 | |||||||
Barrick Gold Corporation
|
0.031 | 0.535 | ||||||
Goldcorp Inc.
|
0.352 | 0.535 | ||||||
Newmont Mining Corp.
|
0.153 | 0.723 | ||||||
AngloGold Ashanti Ltd
|
0.078 | 0.403 | ||||||
Kinross Gold Corporation
|
0.433 | 0.531 | ||||||
Minimum
|
0.061 | 0.403 | ||||||
Maximum
|
0.433 | 0.723 | ||||||
Average
|
0.215 | 0.545 |
56
Lihir Gold Limited Scheme Booklet | 211 |
57
11 Independent experts report continued | 212 |
58
Lihir Gold Limited Scheme Booklet | 213 |
7.2.2 | Valuation Assumptions | ||
The valuations of the key gold assets of LGL have been determined by reference to the gold futures methodology and other financial analysis. This analysis involves making a number of assumptions regarding gold prices, economic factors and discount rates. The valuations are sensitive to the assumptions used in the analysis. Relatively small changes in certain variables can cause significant changes in value. | |||
Key assumptions include: |
§ | spot gold prices in the range of US$1,200-1,240 per ounce, based on gold prices prevailing around 10 June 2010. For the purpose of the gold futures methodology, gold production is valued by reference to gold futures prices, estimated by escalating the current spot price at the risk free rate. Grant Samuel has also considered the impact on calculated values of assuming lower gold prices of around US$900 per ounce as a means of reflecting the apparent de-rating of gold equities relative to physical gold; | ||
§ | a spot exchange rate of A$1.00 = US$0.86; | ||
§ | a risk free rate of 3.25%, based on the 10-year US Treasury Bond yield prevailing around 10 June 2010; | ||
§ | long term United States inflation rates of 2.25% per annum; | ||
§ | tax depreciation schedules determined on the basis of tax written down values. Accumulated carry forward expenditures that are deductible for tax purposes have been allowed for in the financial models; and | ||
§ | a corporate tax rate of 30% in Australian and Papua New Guinea and 25% in Côte dIvoire; | ||
§ | a withholding tax rate in Côte dIvoire of 18% on dividends paid out of profits accrued during the five year tax holiday period and 12% thereafter. |
7.2.3 | Resources Projects and Optionality | ||
The conventional gold futures methodology implicitly assumes that the rate of output from a mining operation is pre-determined. This methodology ignores the value inherent in managements ability to vary production and other operating parameters in reaction to changes in commodity prices or other circumstances. Management may change the rate of production of a mine, close or re-open the mine or in certain circumstances even abandon it. Accordingly, a mine may be regarded as an option (or series of options) over the resources it contains. | |||
The value of management flexibility is illustrated by the example of a marginal mine, where the marginal cash production cost is equal to expected revenue. Application of the conventional discounted cash flow methodology would result in the estimate of a zero value for the mine. In reality, however, the mine will have some value, because management is able to reduce or cease production if marginal revenue falls below the marginal cash cost of production and to resume or increase production if commodity prices rise. | |||
Similarly, the designs and long term development alternatives for many mines allow management to change operating plans in light of future commodity prices and operating |
59
11 Independent experts report continued | 214 |
costs. Life of mine plans frequently involve mining marginal ore, making additional cut backs or making other operational decisions at some point in the future. However, management is commonly not required to commit to such decisions at the commencement of the mining project. Firm commitments are only required much later in the project, at which time management will be able to make decisions on the basis of the commodity prices and other circumstances then prevailing. The mining operations as they relate to (for example) the mining of marginal ore or a final cut back may be thought of as a series of call options exercisable at the marginal mining costs to be incurred at the time. These options represent additional value not captured by the conventional discounted cash flow or gold futures methodology. | |||
An alternative perspective is that management flexibility results in changes in commodity prices having an asymmetric impact on the value of a mining operation. If commodity prices rise unexpectedly, the mine will earn greater revenue (and may be able to mine additional mineralisation not originally scheduled for production). If commodity prices fall unexpectedly, production will be curtailed or, in the worst case, stopped. The mine will not continue, in the long term, to be operated at a cash operating loss. By contrast, deterministic valuation models implicitly assume that there is some possibility of the mine operating on a long term basis at a cash operating loss, in the same way that it implicitly assumes that the mine may earn super profits as a result of a persistent increase in commodity prices. | |||
Grant Samuel is aware of valuation methodologies that attempt to incorporate the option value associated with management flexibility, using a combination of conventional discounted cash flow analysis and option theory. However, the application of these methodologies is impractical in the context of the complex and unpredictable nature of mining operations. In making judgments on value, Grant Samuel has given general consideration as to the characteristics of the various mining operations and the value of management flexibility or underlying option value implicit in those characteristics. In particular, Grant Samuel has considered the extent to which: |
§ | operations are marginal or incorporate significant resources, not currently planned for mining, of marginal economics (i.e. the operations represent or incorporate options close to the money); and | ||
§ | length of mine life or other characteristics give management flexibility over the conduct of mining operations. | ||
The valuation of each project includes a subjective assessment of the real option value inherent in the project. |
7.3 | Lihir Island | ||
Grant Samuel has valued 100% of the Lihir Island operation in the range US$7.5-8.5 billion which equates to A$8.7-9.9 billion at an exchange rate of A$1.00 = US$0.86. | |||
The valuation of Lihir Island is key to the overall assessment of the value of LGL. However, valuation of Lihir Island is problematic. There are inherent difficulties associated with valuing gold assets in general as a result of the dislocation between the value of gold equities and physical gold that has become apparent since 2008. These difficulties are exacerbated by factors specific to Lihir Island: |
§ | the Lihir Island mine is exploiting one of the worlds largest gold deposits, with reserves sufficient to support operations for a further 27 years. In AMCs judgement, it is reasonable to expect that the current reserve base will ultimately be expanded substantially, with the result that a further 5-10 million ounces of gold will be mined and operations will continue for a further 5-10 years. It is not clear whether and to what extent gold investors (and in turn |
60
Lihir Gold Limited Scheme Booklet | 215 |
gold corporates) are prepared to attribute value to gold inventory that will be realised only many years into the future; | |||
§ | LGL is substantially advanced with the MOPU project, which LGL expects will increase annual production with effect from 2012 to around 1.0-1.2 million ounces. The MOPU project, together with other capital expenditures to substantially replace the mining fleet, is expected to reduce cash operating costs to approximately US$400 per ounce. AMC has accepted for the purpose of its valuation cases that the expected cost reductions are reasonable. However, it is likely that potential acquirers of Lihir Island would be cautious in attributing full value to the expected cost reductions before they are achieved; and | ||
§ | there are a number of operational risks that are not reflected in the valuation cases and associated cash flow projections. These include geotechnical risks, environmental risks and risks associated with the mines location in PNG. |
It appears that through the global financial crisis and more recently through the European sovereign debt crisis there has been a reduction in investors willingness to accept the risks involved in holding gold equities relative to physical gold. It is not clear how this increasing risk aversion would affect the value of Lihir Island. However, on balance, it appears reasonable to conclude that the value of Lihir Island would be more significantly affected than the value of shorter life gold operations with fewer uncertainties: |
§ | to the extent that costs of capital for gold mining companies have increased, the value attributed to that part of LGLs reserve base that will only be exploited in (say) 20-30 years time would be significantly reduced; | ||
§ | even if there has been no increase in the cost of capital for gold assets, investors may be applying more significant discounts against long dated production to account for unspecified risks that could result in production ultimately falling short of reserves. For example, investors may now be prepared to value in full only the first (say) 20 years of production from a mine rather than, previously, (say) 25 years. A mine with a very long expected life such as Lihir Island would be particularly affected by such a reassessment of risk. It is noteworthy that when LGL announced a major reserve upgrade for Lihir Island in October 2009 (reserves were increased by 36% or in absolute terms by approximately 7.5 million ounces to 28.8 million ounces), there was almost no positive market response (although the reserve upgrade may have been to some extent already reflected in LGLs share price, following an announcement in August 2009 of a substantial resource upgrade); and | ||
§ | Lihir Island does have unique risks and operational issues, including geotechnical risk, environmental risk, PNG sovereign risk and uncertainties associated with longer term power generation. All these factors may have resulted in a more severe reduction in the value of Lihir Island than for other gold assets. |
The valuation of Lihir Island is an overall judgement by Grant Samuel. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector. | |||
Grant Samuel has attempted to assess the possible impact of the apparent de-rating of gold equities relative to physical gold, particularly for long life projects such as Lihir Island, by: |
§ | making more conservative assumptions for Lihir Island regarding ultimate mining inventory and mine life. This approach effectively assumes that increasingly risk averse investors in gold equities have limited investment time horizons and are unwilling to attribute significant value to long dated gold production. The same result could be achieved by increasing discount rates (although Grant Samuel is not confident that on a prospective basis the systematic riskiness of gold equities has increased); and | ||
§ | (as an alternative) calculating values assuming gold prices of around US$900 per ounce. Although this is substantially lower than the current spot price of around US$1,200-1,240 per ounce, a gold price assumption of around US$900 per ounce appears to be broadly consistent |
61
11 Independent experts report continued | 216 |
with the overall level of the S&P TSX Global Gold Index (having regard to movements in the gold price and the Index since January 2008); |
It should be clear that these approaches (particularly the use of lower gold prices) are not theoretically correct. However, they are an attempt to explain and reflect the underperformance of gold equities relative to physical gold since the start of the global financial crisis in 2008. | |||
Grant Samuel prepared detailed financial models for the Lihir operations. These models were based on valuation cases, which incorporate production, capital and operating cost projections developed by AMC using information provided by LGL. AMCs review of Lihir Island suggests that, based on current measured and indicated resources not yet in reserves, and other currently identified mineralisation, there are likely to be substantial further increases in the Lihir Island gold reserves. AMC developed two cases based on its view that it is reasonable to expect reserve expansions of the order of 5-10 million ounces. | |||
Case 1 assumes the mining of 32.7 million ounces of contained gold, which is broadly consistent with reserves plus 5.6 million ounces from the Coastal Zone or equivalent area. The MOPU project is assumed to be successfully completed as planned at the end of 2011. Mining is assumed to continue until 2026 with stockpile processing to continue to 2042. In total, 368 million tonnes of ore are milled over the life of the project at an average gold grade of 2.8 g/t, for gold production of 26.8 million ounces. The average gold recovery rate assumed over the life of the operation is 82%. Closure expenses totalling US$100 million are incurred with US$55 million at the end of the mining period in 2026 and a further US$45 million at the end of the life of the project in 2042. | |||
Case 2 is an extended version of Case 1 and assumes the delineation of additional mineralisation in the Link Zone that adds 4.7 million ounces to the mining inventory. In total, 37.4 million ounces of gold are mined. Mining is assumed to continue to 2031 with stockpile processing continuing to 2047. In total, 427 million tonnes of ore are milled over the project life at an average gold grade of 2.7 g/t, for gold production of 31.2 million ounces. The average gold recovery rate assumed over the life of the operation is 83%. Closure expenses totalling US$100 million are incurred with US$55 million at the end of the mining period in 2032 and a further US$45 million at the end of the life of the project in 2047. | |||
In addition, Grant Samuel requested that AMC provide a valuation case based on development of existing reserves only. In AMCs view it is reasonable to expect that significantly more mineralisation than current reserves will ultimately be delineated and mined. However, the reserves only case is useful for the purpose of comparing modelling outputs with results estimated by gold equity market analysts. Reserves as at 30 June 2009 totalled 28.8 million ounces. AMC has assumed that as at 1 January 2010 total mining inventory after depletion and other adjustments was 27.1 million ounces. Mining is assumed to continue until 2025 with stockpile processing to continue to 2037. In total, 299 million tonnes of ore are milled over the life of the project at an average gold grade of 2.8g/t, for gold production of 22.2 million ounces. The average gold recovery rate assumed over the life of the operation is 82%. Closure expenses totalling US$100 million are incurred with US$55 million at the end of the mining period in 2025 and a further US$45 million at the end of the life of the project in 2037. |
62
Lihir Gold Limited Scheme Booklet | 217 |
The following table summarises projected production and costs for the three scenarios: |
Year ended 31 December | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | Total | ||||||||||||||||
100% | Forecast | Forecast | Forecast | Forecast | Life of Mine | |||||||||||||||
Reserves Case
|
||||||||||||||||||||
Ore mined (Mt)
|
16.9 | 19.1 | 15.1 | 13.5 | 236.4 | |||||||||||||||
Ore milled (Mt)
|
6.3 | 6.7 | 11.6 | 11.8 | 299.1 | |||||||||||||||
Gold milled grade (g/t)
|
4.93 | 4.67 | 3.53 | 3.33 | 2.82 | |||||||||||||||
Gold production (Moz)
|
0.82 | 0.86 | 1.12 | 1.05 | 22.2 | |||||||||||||||
Total cash costs (US$/oz Au)
31
|
520 | 536 | 481 | 511 | 459 | |||||||||||||||
Capital expenditure (US$ million)
|
720 | 450 | 294 | 84 | 3,228 | |||||||||||||||
Case 1
|
||||||||||||||||||||
Ore mined (Mt)
|
16.9 | 19.4 | 19.6 | 15.8 | 304.8 | |||||||||||||||
Ore milled (Mt)
|
6.3 | 6.8 | 12.0 | 11.7 | 367.5 | |||||||||||||||
Gold milled grade (g/t)
|
4.93 | 4.63 | 3.94 | 3.33 | 2.76 | |||||||||||||||
Gold production (Moz)
|
0.82 | 0.86 | 1.30 | 1.03 | 26.8 | |||||||||||||||
Total cash costs (US$/oz Au)
31
|
521 | 538 | 418 | 529 | 440 | |||||||||||||||
Capital expenditure (US$ million)
|
740 | 450 | 294 | 84 | 3,539 | |||||||||||||||
Case 2
|
||||||||||||||||||||
Ore mined (Mt)
|
16.9 | 19.4 | 19.6 | 15.8 | 363.8 | |||||||||||||||
Ore milled (Mt)
|
6.3 | 6.8 | 12.0 | 11.7 | 426.5 | |||||||||||||||
Gold milled grade (g/t)
|
4.93 | 4.63 | 3.94 | 3.33 | 2.73 | |||||||||||||||
Gold production (Moz)
|
0.84 | 0.87 | 1.32 | 1.05 | 31.2 | |||||||||||||||
Total cash costs (US$/oz Au)
31
|
512 | 516 | 375 | 474 | 407 | |||||||||||||||
Capital expenditure (US$ million)
|
740 | 450 | 294 | 84 | 3,621 |
31 | Total cash costs are per ounce of gold produced, before deferral of excess stripping and stockpile costs and after refining charges and royalties. |
63
11 Independent experts report continued | 218 |
The results of the financial analysis for the three cases are summarised below: |
Spot Gold Price | ||||||||||||
100% | US$1,200 | US$1,220 | USS$1,240 | |||||||||
Reserves Case
|
||||||||||||
Gold futures methodology
|
10,679 | 10,995 | 11,310 | |||||||||
DCF 0% real discount rate
|
9,000 | 9,303 | 9,606 | |||||||||
DCF 5% nominal discount rate
|
6,219 | 6,441 | 6,664 | |||||||||
DCF 10% nominal discount rate
|
3,588 | 3,732 | 3,877 | |||||||||
Case 1
|
||||||||||||
Gold futures methodology
|
14,203 | 14,588 | 14,972 | |||||||||
DCF 0% real discount rate
|
11,909 | 12,276 | 12,642 | |||||||||
DCF 5% nominal discount rate
|
7,778 | 8,032 | 8,286 | |||||||||
DCF 10% nominal discount rate
|
4,274 | 4,430 | 4,586 | |||||||||
Case 2
|
||||||||||||
Gold futures methodology
|
17,798 | 18,240 | 18,691 | |||||||||
DCF 0% real discount rate
|
14,874 | 15,300 | 15,726 | |||||||||
DCF 5% nominal discount rate
|
9,274 | 9,556 | 9,837 | |||||||||
DCF 10% nominal discount rate
|
4,911 | 5,076 | 5,241 |
The analysis assumes that carried forward tax losses totalling US$187 million are fully utilised in 2010. | |||
The results of the financial analysis provide evidence as to value that is, at best, of only limited utility. Grant Samuels experience is that the gold futures methodology, taking into account reasonable prospects for reserve extensions, has over a period of many years successfully explained trading and transaction values in the gold sector. However, it is clear that (especially for very long life assets) estimates of value based on the gold futures methodology are now significantly overstating market values. (This outcome is consistent with the overall performance of the gold index, which has increased little more than 20% since January 2008 despite an approximate 50% increase in the spot gold price. Ordinarily a 50% increase in the spot gold price (at least over a relatively short period of time) would have been expected to result in a substantial uplift in the value of gold equities.) On the other hand conventional DCF analysis, particularly using discount rates consistent with traditional Australian market practice (i.e. nominal discount rates of around 10%) significantly undervalues Lihir Island, given its very long operating life. | |||
The cash flows upon which the financial analysis is based and the results of that analysis do not incorporate various specific risk factors: |
§ | the geotechnical, sources and cost of power, environmental and other operating risks associated with the Lihir Island mine; and | ||
§ | the sovereign risk associated with the mines location in Papua New Guinea. While the Lihir Island mining operation is well established and sovereign risk may not be immediately apparent, from the perspective of an international investor in gold companies the mines location is likely to make the mine less attractive than if it was located (for example) in North America. |
On the other hand, the financial analysis does not capture the optionality inherent in very long life mining operations. | |||
In addition, the financial analysis does not reflect the possibility that investors in and corporate acquirers of gold projects, given greater investor risk aversion, are attributing no more than modest |
64
Lihir Gold Limited Scheme Booklet | 219 |
value to mining inventory that is only likely to be realised many years into the future. This is relevant for Lihir Island, in that a significant portion of any expanded reserve base would only be produced 20 to 40 years into the future. While the assessment is somewhat arbitrary, Grant Samuel has evaluated the potential impact on calculated values of such shorter investment timeframes by assuming that only the first 20 years of production is valued (this is broadly consistent with the average mine life of the major gold companies, having regard to their reserve bases and current production rates): |
Spot Gold Price | ||||||||||||
100% | US$1,200 | US$1,220 | USS$1,240 | |||||||||
Reserves Case
|
||||||||||||
Gold futures methodology
|
8,499 | 8,760 | 9,022 | |||||||||
DCF 0% real discount rate
|
7,390 | 7,645 | 7,899 | |||||||||
DCF 5% nominal discount rate
|
5,463 | 5,660 | 5,857 | |||||||||
DCF 10% nominal discount rate
|
3,435 | 3,571 | 3,708 |
Values calculated using the gold futures methodology for a mine life limited to 20 years are broadly consistent with the valuation range. | |||
An alternative explanation for the apparent underperformance of gold stocks relative to physical gold is that gold equity investors may effectively be imputing gold prices lower than the spot price into their gold stock valuations. As set out previously, a gold price of around US$900 per ounce appears broadly consistent with the overall valuation of gold equities. Accordingly, Grant Samuel has rerun its financial analysis assuming lower gold prices of US$880-920 per ounce. The results for the three cases are summarised below: |
Spot Gold Price | ||||||||||||
100% | US$880 | US$900 | USS$920 | |||||||||
Gold futures methodology
|
||||||||||||
Reserves Case
|
5,628 | 5,944 | 6,260 | |||||||||
Case 1
|
8,016 | 8,403 | 8,791 | |||||||||
Case 2
|
10,563 | 11,016 | 11,470 |
Given the uncertainties involved in the hypothesis that gold equity investors may implicitly be assuming gold prices lower than the spot price, and further uncertainties in selecting a gold price range around US$900 per ounce, the results of the analysis should be treated with considerable caution. Nevertheless, Grant Samuels valuation of Lihir Island in the range US$7.5-8.5 billion is broadly consistent with the gold futures values calculated for Case 1 above. | |||
Many share market analysts assess the value of gold companies or establish target prices by calculating NPVs using traditional DCF analysis and then applying a subjective multiple or uplift factor to incorporate the gold premium in their analysis. In Grant Samuels view this approach is methodologically questionable, not least because of the subjective nature of the multiple applied. However, application of this approach does provide some benchmarking for Grant Samuels valuation range for Lihir Island of US$7.5-8.5 billion. | |||
The following table sets out median broker NPV multiples for a number of major gold companies. The multiples represent current share market prices divided by broker estimates of NPV: |
65
11 Independent experts report continued | 220 |
Major Gold Companies | Median NPV multiple 32 | |||
Barrick Gold Corporation
|
1.5 | |||
Goldcorp Inc
|
1.8 | |||
Newmont Mining Corp.
|
2.1 | |||
AngloGold Ashanti Ltd
|
1.8 | |||
Kinross Gold Corporation
|
1.5 |
The broker NPV estimates are based on a variety of approaches and assumptions, including as to gold prices and the discount rates used in estimating NPVs. In general, however, the analysis shows that market values are in the approximate range of 1.5-2.0 times analyst NPVs. The NPVs are generally (although not exclusively) calculated using real rates in the range 5-7%. These real rates correspond (broadly) to the 10% nominal discount rates adopted by Grant Samuel as part of its DCF analysis. | |||
The following table shows the multiples of calculated NPVs (based on the reserves case) implied by Grant Samuels valuation of Lihir Island: |
NPV Multiple | ||||||||||||||||
Gold Price (US$/oz) | NPV (US$ million) | Low | High | |||||||||||||
Reserves Case
|
||||||||||||||||
Low
|
1,200 | 3,588 | 2.1 | 2.4 | ||||||||||||
Medium
|
1,220 | 3,732 | 2.0 | 2.3 | ||||||||||||
High
|
1,240 | 3,877 | 1.9 | 2.2 |
The valuation range for Lihir Island of US$7.5-8.5 billion represents multiples of 1.9-2.4 times NPV. These multiples are in a general sense consistent with the broker NPV multiples of around 1.5-2.0 times, given that the multiples implied by Grant Samuels valuation range reflect full underlying value (including a premium for control), while the broker NPV multiples are based on share market trading values. Notwithstanding the dubious validity of approaches based on multiples of NPV, the analysis provides some support for Grant Samuels valuation range. | |||
Given the limitations of the financial analysis, the valuation also has regard to the valuation parameters in terms of reserve, resource and production multiples implied by the share market capitalisations of the worlds major gold companies. The valuation range of US$7.5-8.5 billion implies the following valuation parameters: |
Variable | Implied Multiple | |||||||||||
Multiples of | (Moz) | Low | High | |||||||||
Gold resources
|
48.5 | 155 | 175 | |||||||||
Gold reserves
|
28.8 | 260 | 295 | |||||||||
Gold production 2009
|
0.85 | 8,788 | 9,960 | |||||||||
Gold production 2010 (projected)
33
|
0.84 | 8,982 | 10,180 |
A comparison of the multiples implied by the valuation of the Lihir Island operation with those implied by the market capitalisations of the major gold companies is summarised as follows: |
32 | Based on share prices as at 14 June 2010 | |
33 | Production forecast as disclosed in LGLs 2010 first quarterly report. |
66
Lihir Gold Limited Scheme Booklet | 221 |
Enterprise | Variable (Gold) (Moz) | EV Multiples (US$/oz) | ||||||||||||||||||||||||||
Value | Gold | Gold | Historical | Gold | Gold | Historical | ||||||||||||||||||||||
(US$ m) | Resources | Reserves | Production | Resources | Reserves | Production | ||||||||||||||||||||||
Lihir Island Low
|
7,500 | 48.5 | 28.8 | 0.853 | 155 | 260 | 8,788 | |||||||||||||||||||||
High
|
8,500 | 48.5 | 28.8 | 0.853 | 175 | 295 | 9,960 | |||||||||||||||||||||
Major Gold Companies
|
||||||||||||||||||||||||||||
Barrick Gold Corporation
|
45,164 | 234.3 | 141.2 | 7.423 | 193 | 320 | 6,084 | |||||||||||||||||||||
Goldcorp Inc
|
31,627 | 101.3 | 53.5 | 2.421 | 312 | 592 | 13,062 | |||||||||||||||||||||
Newmont Mining Corp.
|
27,741 | 91.8 | 91.8 | 5.292 | 302 | 302 | 5,242 | |||||||||||||||||||||
AngloGold Ashanti Ltd
|
18,984 | 226.7 | 71.4 | 4.599 | 84 | 266 | 4,128 | |||||||||||||||||||||
Kinross Gold Corporation
|
11,281 | 76.0 | 45.2 | 2.239 | 148 | 250 | 5,038 | |||||||||||||||||||||
Second Tier Gold Companies
|
||||||||||||||||||||||||||||
Gold Fields Limited
|
10,534 | 255.4 | 78.9 | 3.414 | 41 | 134 | 3,085 | |||||||||||||||||||||
Agnico-Eagle Mines Limited
|
9,838 | 29.8 | 18.4 | 0.493 | 330 | 535 | 19,956 | |||||||||||||||||||||
Eldorado Gold Corporation
34
|
9,188 | 25.7 | 14.6 | 0.553 | 357 | 631 | 16,611 | |||||||||||||||||||||
Polyus Gold Mining company
|
9,024 | 110.2 | 74.1 | 1.261 | 82 | 122 | 7,156 | |||||||||||||||||||||
Yamana Gold Inc.
|
8,083 | 39.8 | 17.1 | 1.026 | 203 | 472 | 7,881 | |||||||||||||||||||||
Randgold Resources Limited
|
7,319 | 27.3 | 15.6 | 0.488 | 268 | 470 | 14,991 | |||||||||||||||||||||
Red Back Mining Inc.
|
6,427 | 12.3 | 7.4 | 0.342 | 525 | 874 | 18,788 | |||||||||||||||||||||
IAMGOLD Corporation
|
6,058 | 28.7 | 14.5 | 0.939 | 211 | 418 | 6,452 |
The multiples of reserves and resources implied by the valuation of Lihir Island are modest by comparison with the reserve and resource multiples implied by the share prices of major gold companies (particularly given that the valuation of Lihir Island represents a full underlying value, including a premium for control). On the other hand, the production multiples implied by the valuation are relatively high by comparison with the production multiples for comparable gold companies. This reflects, in part, Lihir Islands very long expected mine life. | |||
The average mine life of the major gold companies set out above (based on current production and reserve levels) is approximately 20 years. While the analysis is somewhat arbitrary, it is useful to consider the valuation parameters that would apply if the market was effectively discounting production beyond a 20 year time horizon. At current production levels, a 20 year mine life would imply an adjusted reserve for Lihir Island of approximately 17 million ounces. Based on this adjusted reserve, the valuation range for Lihir Island would imply multiples of US$441-500 per ounce. These multiples are considered reasonable by comparison with the reserve multiples implied by the share prices of the major gold companies, given that the multiples for the comparables do not include a premium for control. | |||
Overall, Grant Samuel believes that the multiples implied by its valuation of Lihir Island are reasonable, having regard to the particular characteristics of the mine and the risk factors set out above. |
Grant Samuel has valued LGLs 90% interest in the Bonikro operations in the range US$595-645 million, which equates to A$692-750 million at an exchange rate of A$1.00 = US$0.86. |
34 | Historical gold production for Eldorado Gold assumes the acquisition of Sino Gold by Eldorado Gold was completed on 1 January 2009. |
67
11 Independent experts report continued | 222 |
The valuation of Bonikro is an overall judgement on value. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector, and takes into account the sovereign risk in Côte dIvoire. The valuation incorporates an amount of US$20 million in respect of LGLs Côte dIvoire exploration interests. | |||
Grant Samuel prepared detailed financial models for the Bonikro operations. These models were based on two valuation cases, which incorporate production, capital and operating cost projections developed by AMC using information provided by LGL. The models also take into account the value of the inter-company amounts due to LGL by its Côte dIvoire subsidiaries. These amounts are required to be repaid prior to the payment of dividends to the shareholders. The models incorporate the five year tax holiday agreed with the Côte dIvoire Government that expires on 31 December 2013. | |||
Case 1 assumes the mining of 1.7 million ounces of contained gold, which is estimated to be broadly consistent with reserves plus 318,000 ounces from Bonikro Deeps and 432,000 ounces from the Hiré deposits. The case assumes that debottlenecking of the Bonikro processing plant allows an increase in annual production capacity from the current 2.2 million tonnes to 2.4 million tonnes. Mining continues until 2019 and the processing of stockpiles until 2021. In total, 27.2 million tonnes of ore is mined over the life of the project at an average gold grade of 1.9 g/t, for gold production of 1.6 million ounces, of which approximately 900,000 ounces are not currently in reserves. Closure expenses totalling US$10 million are incurred in 2022. | |||
Case 2 is an extended version of Case 1 and assumes the mining of 171,000 ounces of the 232,000 ounces currently defined at Dougbafla East and an additional mining inventory of 303,000 ounces from exploration targets in the Bonikro, Hiré and Dougbafla areas. The case assumes an expansion of the Bonikro processing plants capacity to 3.5 million tonnes per annum. Case 2 assumes that, in total, 2.1 million ounces of gold are mined, including approximately 1.4 million ounces sourced from resources not currently in reserves or not yet delineated. Mining is assumed to continue to 2019 and processing to complete in 2020. In total, 35.1 million tonnes of ore is mined over the project life at an average gold grade of 1.9 g/t, for gold production of 2.0 million ounces. Closure expenses totalling US$20 million are incurred in 2020 and 2021. | |||
The following table summarises projected production and costs for the two scenarios: |
Year ended 31 December | Total Life | |||||||||||||||||||||||
100% | 2010 | 2011 | 2012 | 2013 | 2014 | of Mine | ||||||||||||||||||
Case 1
|
||||||||||||||||||||||||
Ore milled (000s t)
|
2,018 | 2,163 | 2,163 | 2,163 | 2,211 | 27,167 | ||||||||||||||||||
Gold milled grade (g/t)
|
2.19 | 2.15 | 2.14 | 1.00 | 1.80 | 1.91 | ||||||||||||||||||
Gold production (000s oz)
|
134 | 140 | 140 | 66 | 120 | 1,580 | ||||||||||||||||||
Total cash costs (US$/oz)
35
|
494 | 456 | 423 | 818 | 469 | 432 | ||||||||||||||||||
Capital expenditure (US$ million)
|
10 | 6 | 5 | 5 | 2 | 43 | ||||||||||||||||||
Case 2
|
||||||||||||||||||||||||
Ore milled (000s t)
|
2,018 | 2,496 | 2,591 | 3,329 | 3,493 | 35,078 | ||||||||||||||||||
Gold milled grade (g/t)
|
1.58 | 1.20 | 2.12 | 2.52 | 1.83 | 1.90 | ||||||||||||||||||
Gold production (000s oz)
|
96 | 91 | 170 | 259 | 195 | 2,046 | ||||||||||||||||||
Total cash costs (US$/oz)
|
670 | 762 | 504 | 374 | 467 | 421 | ||||||||||||||||||
Capital expenditure (US$ million)
|
15 | 35 | 48 | 12 | 2 | 147 |
35 | Total cash costs are per ounce of gold produced and after refining charges and royalties. |
68
Lihir Gold Limited Scheme Booklet | 223 |
The results of the financial analysis are summarised below: |
Spot Gold Price | ||||||||||||
LGL Interest | US$1,200 | US$1,220 | USS$1,240 | |||||||||
Case 1
|
||||||||||||
Gold futures methodology
|
806 | 814 | 822 | |||||||||
DCF 0% real discount rate
|
741 | 759 | 777 | |||||||||
DCF 5% nominal discount rate
|
604 | 619 | 634 | |||||||||
DCF 10% nominal discount rate
|
436 | 447 | 458 | |||||||||
Case 2
|
||||||||||||
Gold futures methodology
|
980 | 990 | 1,001 | |||||||||
DCF 0% real discount rate
|
900 | 924 | 948 | |||||||||
DCF 5% nominal discount rate
|
728 | 748 | 768 | |||||||||
DCF 10% nominal discount rate
|
511 | 526 | 540 |
Grant Samuels valuation of Bonikro in the range US$575-625 million (excluding the value of exploration interests) takes into account the results of the financial analysis set out above. It also reflects the sovereign risk in Côte dIvoire. The situation in Côte dIvoire has been volatile since 1999. A military coup overthrew the Government in December 1999, a failed coup attempt in September 2002 sparked a civil war and the country has experienced several periods of unrest since then, largely related to the unresolved political situation. Elections have been postponed several times since 2002 and there have been disagreements about the eligibility of some key political figures. In February 2010, the President of Côte dIvoire dissolved the coalition government, which was headed by a rebel leader, and disbanded the electoral commission in charge of organising elections, raising further questions about the outcome of the peace process. The United Nations and France have troops in the country, which reflects the persisting risk of conflict. LGLs operations have not been materially affected by civil unrest in recent years and LGL has not experienced any significant problems with the local communities. Nonetheless, it appears reasonable to conclude that the value of Bonikro is materially affected by sovereign risk issues associated with the mines location in Côte dIvoire. | |||
The value range implies the following valuation parameters: |
Variable | Implied Multiple | |||||||||||
Multiples of LGLs Interest in | (000s oz) | Low | High | |||||||||
Gold resources
|
2,113 | 272 | 296 | |||||||||
Gold reserves
|
684 | 841 | 914 | |||||||||
Gold production 2009
|
135 | 4,259 | 4,630 | |||||||||
Gold production 2010 (projected)
|
108 | 5,324 | 5,787 |
Grant Samuel has compared these valuation parameters with the reserve, resource and production multiples implied by the share market capitalisations of comparable listed companies with projects in Africa: |
69
11 Independent experts report continued | 224 |
Variable (Gold) (000s oz) | EV Multiples (US$/oz) | |||||||||||||||||||||||||||||||
Enterprise | 2010 Cash | |||||||||||||||||||||||||||||||
Value | 2010 | 2010 | Costs | |||||||||||||||||||||||||||||
(US$ m) | Resources | Reserves | Production | Resources | Reserves | Production | (US$/oz) | |||||||||||||||||||||||||
Bonikro Low
|
575 | 2,113 | 684 | 108 | 272 | 841 | 5,324 | 420 | ||||||||||||||||||||||||
High
|
625 | 296 | 914 | 5,787 | ||||||||||||||||||||||||||||
Mines
|
||||||||||||||||||||||||||||||||
Crew
36
|
602 | 5,219 | 2,988 | 178 | 115 | 201 | 2,596 | 809 | ||||||||||||||||||||||||
Golden Star
|
987 | 6,623 | 3,357 | 360 | 149 | 294 | 2,742 | 585 | ||||||||||||||||||||||||
MDL
37
|
530 | 3,159 | 1,466 | 155 | 168 | 361 | 3,414 | 512 | ||||||||||||||||||||||||
Resolute
|
505 | 10,344 | 2,216 | 400 | 49 | 228 | 1,264 | A$ | 790 | |||||||||||||||||||||||
Projects
|
||||||||||||||||||||||||||||||||
Perseus
38
|
441 | 6,309 | 1,927 | 207 | 70 | 229 | 2,128 | 392 |
The reserve multiples implied by the valuation are very high by comparison with the comparable companies, but are considered reasonable taking into account AMCs high levels of confidence that substantial additional reserves will be delineated and mined at and around Bonikro. The resource and production multiples are consistent with those of the comparable companies. | |||
AMC has valued LGLs interest in the Côte dIvoire exploration tenements in the range US$13-27 million. Grant Samuel has assumed a value of US$20 million for the exploration interests for the purposes of this valuation. |
Grant Samuel has valued 100% of the Mount Rawdon mine in the range US$340-390 million, which equates to A$395-453 million at an exchange rate of A$1.00 = US$0.86. | |||
The valuation of Mount Rawdon is an overall judgement on value. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector. | |||
Grant Samuel prepared a detailed financial model for the Mount Rawdon operation. The model was based on a single valuation case, which incorporates production, capital and operating cost projections developed by AMC using information provided by LGL. It essentially reflects the established operating history of the Mount Rawdon operation and the limited potential for mine life extension beyond the reported reserves. | |||
The model assumes the mining of approximately 880,000 ounces of contained gold, which is broadly consistent with reserves of 835,000 ounces as at 1 January 2010. In total, 33 million tonnes of ore are milled over the life of the project at an average gold grade of 0.81 g/t for gold production of 776,018 ounces. Total capital expenditure over the life of the operation is estimated at approximately A$32 million and includes A$11 million in closure related expenditure incurred after the completion of mining and processing operations in 2019. |
36 | Production statistics for Crew relate to 2009 production. | |
37 | Costs for MDL relate to the weighted average cash costs for the nine months ended 31 March 2010. | |
38 | Production and cash costs for Perseus relate to the CAGP project only and are for the first year of production. |
70
Lihir Gold Limited Scheme Booklet | 225 |
The following table summarises projected production and costs for Mount Rawdon: |
Total | ||||||||||||||||||||||||
Year ended 31 December | Life of | |||||||||||||||||||||||
100% | 2010 | 2011 | 2012 | 2013 | 2014 | Mine | ||||||||||||||||||
Ore mined (000s tonnes)
|
6,947 | 4,256 | 3,454 | 5,529 | 6,735 | 33,574 | ||||||||||||||||||
Ore milled (000s tonnes)
|
3,472 | 3,638 | 3,648 | 3,648 | 3,648 | 33,774 | ||||||||||||||||||
Gold milled grade (g/t)
|
0.89 | 0.95 | 0.80 | 1.05 | 1.23 | 0.81 | ||||||||||||||||||
Gold production (000s ounces)
|
87 | 98 | 83 | 110 | 130 | 776 | ||||||||||||||||||
Total cash costs (US$/oz)
39
|
743 | 683 | 800 | 562 | 423 | 596 | ||||||||||||||||||
Capital expenditure (A$ million)
|
7.6 | 3.8 | 3.8 | 1.3 | 1.3 | 31.9 |
The results of the financial analysis at gold prices around the spot price as at the date of this report are summarised below: |
Spot Gold Price | ||||||||||||
100% | US$1,200 | US$1,220 | US$1,240 | |||||||||
Gold futures methodology
|
424 | 435 | 446 | |||||||||
DCF 0% real discount rate
|
404 | 415 | 426 | |||||||||
DCF 5% nominal discount rate
|
360 | 370 | 380 | |||||||||
DCF 10% nominal discount rate
|
301 | 309 | 318 |
The analysis assumes that Mount Rawdon can utilise carried forward tax losses within the Australian group of LGL. These losses total approximately A$390 million and mean that Mount Rawdon would pay only modest tax, at the end of the life of the mine. | |||
The valuation range for Mount Rawdon of US$340-390 million implies the following valuation parameters: |
Variable | Implied Multiple | |||||||||||
Multiples of | (000s oz) | Low | High | |||||||||
Gold resources
|
1,340 | 254 | 291 | |||||||||
Gold reserves
|
835 | 407 | 467 | |||||||||
Gold production 2009
|
108 | 3,148 | 3,611 | |||||||||
Gold production 2010 (projected)
40
|
95 | 3,579 | 4,105 |
Grant Samuel has compared these valuation parameters with the reserve, resource and production multiples implied by the share market capitalisations of comparable listed companies with projects in Australia: |
39 | Total cash costs are per ounce of gold produced and after refining charges and royalties. | |
40 | Production forecast is the mid point of the forecast range of 90,000-100,000 ounces as disclosed in LGLs 2010 First Quarter Production Report 2010. |
71
11 Independent experts report continued | 226 |
Variable (Gold) (000s oz) | EV Multiples (US$/oz) | ||||||||||||||||||||||||||||||||
Enterprise | |||||||||||||||||||||||||||||||||
Value | 2010 | 2010 | 2010 Cash | ||||||||||||||||||||||||||||||
(US$ m) | Resources | Reserves | Production | Resources | Reserves | Production | Costs/oz | ||||||||||||||||||||||||||
Mount Rawdon
41
Low
|
340 | 1,340 | 835 | 95 | 254 | 407 | 3,579 | <US$ | 700 | ||||||||||||||||||||||||
High
|
390 | 291 | 467 | 4,105 | |||||||||||||||||||||||||||||
Mines
|
|||||||||||||||||||||||||||||||||
Dominion
42
|
240 | 1,461 | 702 | 87 | 164 | 342 | 2,759 | A$ | 607 | ||||||||||||||||||||||||
Silver Lake
|
267 | 1,488 | n/a | 65 | 180 | n/a | 4,108 | n/a | |||||||||||||||||||||||||
Catalpa
43
|
200 | 1,910 | 1,024 | 130 | 105 | 195 | 1,538 | A$ | 648 | ||||||||||||||||||||||||
Projects
|
|||||||||||||||||||||||||||||||||
Regis Resources
44
|
318 | 3,554 | 761 | 90 | 89 | 418 | 3,533 | A$ | 557 |
The multiples of reserves and resource implied by the valuation of Mount Rawdon are broadly consistent with the multiples for the comparable companies, given that the valuation of Mount Rawdon represents a full underlying value, including a premium for control, while the multiples for the comparable companies are based on share market trading values. |
LGL incurs corporate costs that have not been included in the valuations of the gold assets. The costs include expenses associated with maintaining a head office, the executive management team and finance, human resources and administration activities. It is likely that a significant portion of these costs could be eliminated by a corporate acquirer. Costs associated with being a public listed company would also be eliminated by an acquirer of LGL. An allowance of US$80-100 million has been made in the valuation for the capitalised value of the residual overhead costs. |
LGL had net cash of US$422 million as at 31 December 2009. Grant Samuel has adjusted this net cash balance for a number of items including proceeds from the sale of Ballarat and LGLs obligations relating to share rights outstanding under the LESP and the LESOP. LGL proposes to acquire LGL shares on market and provide these shares to the holders of the share rights prior to the implementation of the Scheme. The adjusted net cash for the purposes of the valuation is US$394 million. |
41 | Production guidance provided in First Quarter Production Report 2010 and cash cost guidance provided in FY2009 annual report. | |
42 | FY2010 production forecast includes actuals to 31 March 2010 and guidance provided for quarter ending 30 June 2010. Cash cost forecast does not include royalty payments and is as per guidance provided in November 2009. | |
43 | Production forecast is based on average annual production of 100,000 ounces at Edna May and 30,000 ounces at Cracow mine (representing Catalpas interest in the Cracow mine). Cash costs forecast is a weighed average of the cash costs guidance of A$663 per ounce at Edna May and A$600 per ounce at Cracow mine. | |
44 | Production and cash costs are based on LOM production and cash costs as reported in the definitive feasibility study. |
72
Lihir Gold Limited Scheme Booklet | 227 |
In Grant Samuels opinion the Proposal is in the best interests of LGL shareholders, in the absence of a superior proposal. | |||
Given the relative size of Newcrest and LGL, the Proposal can be analysed either as a merger of the companies or as a takeover of LGL by Newcrest. A group of major institutional shareholders that holds around 26% of LGL also holds approximately 35% of Newcrest, and for these shareholders in particular it may be appropriate to assess the Scheme on the basis of merger analysis rather than as a takeover. | |||
The combination of Newcrest and LGL (the merged Newcrest) will create one of the worlds largest gold companies, with very long life assets, competitive cash costs and the potential for substantial growth in gold reserves. Having regard to relative contributions of reserves, resources, production and share market values, LGL shareholders will hold a share in the merged Newcrest that is broadly consistent with (and in some cases exceeds) their contribution to the merged Newcrest. In this sense, the Proposal is fair to LGL shareholders. While movements in gold price and exchange rates make it difficult to quantify precisely the premium implied by the terms of the Proposal, in Grant Samuels view, LGL shareholders will receive a meaningful premium. | |||
Moreover, merging the companies will realise some synergies (Newcrest has estimated these at A$85 million per annum). There are also arguments that the significant increase in the size of the merged Newcrest and the likely increase in its trading liquidity will attract additional investor interest, lower the cost of capital and ultimately result in a re-rating. While such benefits are difficult to quantify, in Grant Samuels view the benefits are nevertheless likely to be real. Overall, on the basis of merger analysis the Proposal is in the best interests of LGL shareholders. | |||
Evaluation of the Proposal in terms of takeover analysis requires a comparison of the underlying value of LGL shares with the value of the Consideration offered by Newcrest. Judgements regarding the value of LGL and of the Consideration offered by Newcrest are subject to uncertainty. This uncertainty reflects factors including recent gold price and exchange rate volatility, and the complexity and unique characteristics of LGLs flagship Lihir Island operation. | |||
The Consideration to be received by LGL shareholders will principally consist of shares in the merged Newcrest. On the basis of Newcrest share prices in the range A$33.50-34.50, Grant Samuel has attributed a value of A$4.20-4.32 per LGL share to the Consideration. | |||
The apparent premium provided by the Consideration at the time the Proposal was announced (in the range 36-40%, depending on the time frame for measurement) was attractive. Between 1 April 2010 and 13 July 2010, Newcrest shares underperformed global gold equities (in US$ terms) by around 10%, potentially reflecting amongst other factors the fall in the copper price over that period. Accordingly, it is likely that the actual premium provided by the Consideration has declined. The current level of the premium (i.e. relative to the price at which LGL shares would be trading absent the Scheme proposal, recognising that LGL has no exposure to copper) cannot be accurately determined, given the movement in gold prices and exchange rates over the period. However, in Grant Samuels view, it is likely that the terms of the Proposal continue to represent a significant (although reduced) premium for LGL shareholders. | |||
Grant Samuel has valued LGL in the range A$4.28-4.83 per share. This valuation range reflects recent gold prices in the range US$1,200-1,240 per ounce and an exchange rate of around A$1.00 = US$0.86. The valuation range would change for different gold prices and exchange rates. The key judgement in the valuation of LGL relates to the value of the Lihir Island mine. The valuation takes into account Lihir Islands status as one of the worlds largest gold deposits, with gold reserves of 28.8 million ounces. It reflects the expected improvements in Lihir Islands operating performance following the completion of the Million Ounce Processing Upgrade (MOPU) project, including increased annual gold production and reduced cash operating costs, and the |
73
11 Independent experts report continued | 228 |
potential for a material expansion of the Lihir Island reserve base. The valuation also takes into account various risks associated with Lihir Island, including geotechnical and other technical risks, and sovereign risks associated with the mines location in Papua New Guinea. | |||
On the basis of a comparison of the estimated value of the Consideration (A$4.20-4.32) with the estimated underlying value of LGL (A$4.28-4.83), the Consideration is fair (albeit marginally). There are uncertainties associated with judgements regarding the value of LGL and Newcrest shares. The valuation of gold assets is intrinsically uncertain. Theoretical models for valuing gold assets appear to have lost predictive power, following a de-linking of gold equities and physical gold through the global financial crisis in 2008 and the more recent European sovereign debt crisis. Lihir Island is a unique gold operation and there is uncertainty as to how its very long operating life should be captured in a valuation assessment. Accordingly, conclusions as to fairness based on theoretical valuation analysis should be treated with caution (particularly since the estimated value of the Consideration only just falls within the bottom end of the valuation range for LGL). | |||
However, far more reliable evidence as to value is available. Since LGLs announcement on 1 April 2010 that it had received and rejected an acquisition proposal from Newcrest, LGL and its advisers have conducted an extensive process to solicit alternative offers for the company. The Merger Implementation Agreement between Newcrest and LGL contained a specific carve out that allowed LGL to engage with potential acquirers (including through the provision of detailed information regarding LGL) up to 8 June 2010. Given LGLs size, there are only a limited number of credible potential acquirers of LGL. It is reasonable to conclude that all these potential acquirers have been aware of LGLs process to seek a superior proposal and, if potentially interested, have conducted sufficient due diligence on LGL to allow them to frame alternative proposals. By the time LGL shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. | |||
If no superior proposal is forthcoming, there will be good reason for LGL shareholders to vote in favour of the Scheme. On one view, the competitive sale process undertaken by LGL will provide the best possible evidence as to the current underlying value of LGL. On this view, the absence of a superior proposal would confirm that the Consideration reflects full underlying value. This argument has additional weight given the uncertainties inherent in the valuation analysis for LGL and for Newcrest shares. In the context of these uncertainties, market based evidence as to value (as revealed through LGLs sale process) would generally be preferred and the Consideration would be deemed fair. | |||
Because all market participants (including investors and potential acquirers of LGL) face uncertainty in their valuation judgements regarding LGL, the sale process conducted by LGL and its advisers will not provide incontrovertible evidence as to the underlying value of LGL. In particular, it is likely that any competing proposal will be developed and framed by reference to the LGL share price. There is some risk that the pre-announcement LGL share price did not properly reflect the value of LGL. Accordingly, there is a risk that even a proposal at an apparently attractive premium to the LGL share price might not reflect full underlying value. The logical consequence of this argument would be that LGL shareholders would be better off continuing to hold their LGL shares for the medium term, in expectation of a market re-rating of LGL. However, the argument effectively relies on two instances of market failure a failure of the public equity markets to properly value LGL shares, and a subsequent failure of the market for corporate control to attribute an appropriate control value to LGL. On balance, Grant Samuel believes that it is reasonable to conclude that the sale process conducted by LGL and its advisers is likely to deliver a value outcome that approaches underlying value and that the Consideration is therefore fair. | |||
The merger of Newcrest and LGL will have a number of other advantages and disadvantages for LGL shareholders. It will provide project diversification (given LGLs current focus on Lihir Island), although this diversification could also be achieved at an investor level through portfolio allocation. It will provide exposure to Newcrests growth projects, particularly at Cadia East and |
74
Lihir Gold Limited Scheme Booklet | 229 |
Wafi-Golpu in Papua New Guinea. On the other hand, it will dilute LGLs status as a pure gold developer, given Newcrests significant copper exposure. It will expose LGL shareholders to Newcrest project development risk. In particular, LGL shareholders will be exposed to the risks associated with development of Newcrests Cadia East underground mine, which will have capital costs of around A$2 billion and will mine a very large, very low grade gold/copper ore body using the block caving mining method. All of these advantages, disadvantages and risks should already be reflected in the Newcrest share price and do not significantly affect the assessment of the Proposal. | ||
The recent LGL share price has closely tracked the Newcrest share price and appears to reflect an expectation that the Proposal will proceed. Shareholders should understand that if the Proposal does not proceed then (absent some alternative proposal) the LGL share price is likely to fall, potentially significantly. | ||
Overall, Grant Samuel has concluded on the basis of merger analysis that the Proposal is fair and in the best interests of LGL shareholders. Evaluation of the Proposal on the basis of takeover analysis requires consideration of both subjective valuation judgements regarding the value of LGL and objective market based evidence (as revealed by LGLs process to find alternative proposals for the acquisition of LGL). Grant Samuel has concluded having regard to theoretical valuation analysis that the Consideration is fair (although this conclusion is marginal). More importantly, if LGLs process to seek an alternative offer for the company does not result in a superior proposal, there are strong market based grounds to conclude that the Consideration is the highest value available to LGL shareholders. On this basis, the Consideration represents full underlying value and the Proposal is therefore by definition fair and reasonable. | ||
In Grant Samuels view, in the absence of a superior proposal, the Proposal is in the best interests of LGL shareholders. | ||
LGL shareholders should understand that the valuation of LGL, the value of the Consideration and the overall assessment as to whether the Proposal is in their best interests could change, potentially significantly, as a result of changes in the gold price, exchange rates, market conditions, the operational prospects for the assets of Newcrest and LGL or for other reasons. |
Grant Samuel has evaluated the Proposal on the basis of both merger and takeover analysis. The combination of Newcrest and LGL through the Proposal has many of the characteristics of a merger: |
§ | the proportions of value in the merged Newcrest that will be attributable to Newcrest and LGL shareholders are reasonably even. LGL shareholders will hold approximately 37% of the aggregate value of the merged Newcrest, and will share in approximately 38% of the total value available if the cash component of the Consideration is taken into account; | ||
§ | a group of three institutional shareholders holds around 26% of the shares in LGL and 35% of the shares in Newcrest. There are likely to be further shareholders that hold shares in both companies. Merger analysis is likely to be particularly appropriate for these common shareholders; and | ||
§ | the merged Newcrest will have an open register, with no controlling shareholder or shareholders. Arguably, control will not pass at a shareholder level. |
On the other hand, there are factors that suggest that the transaction should be evaluated as a takeover: |
§ | control of LGL will clearly pass in the sense of Board and management control; | ||
§ | both Newcrest and LGL have effectively treated the transaction as a takeover, with Newcrest offering a premium and LGL conducting a process to seek a superior proposal; and |
75
11 Independent experts report continued | 230 |
§ | while the share register of the merged Newcrest will be open and in that respect there will be no impediment to a takeover offer for the merged Newcrest, as a practical matter, the size of the merged Newcrest relative to the other gold majors will significantly reduce the potential for a subsequent takeover offer for the merged Newcrest. The prospects for LGL shareholders of realising a takeover premium through a subsequent transaction are consequently limited. Accordingly it is a relevant consideration for LGL shareholders as to whether they will realise full underlying value (including a full premium for control) through the Proposal. |
8.3 | Merger Analysis | ||
Merger analysis is based on comparing the relative contributions of LGL and Newcrest shareholders with the shares of the merged Newcrest that they will hold if the Scheme is implemented. The following table illustrates the proportions of reserves, resources and production that the two groups of shareholders will contribute: |
Variable | LGL | Newcrest | LGL Contribution | |||||||||
Gold reserves
45
(Moz)
|
30.3 | 42.8 | 41 | % | ||||||||
Gold equivalent reserves
46
(Moz)
|
30.3 | 68.6 | 31 | % | ||||||||
Gold resources
45
(Moz)
|
52.1 | 80.0 | 39 | % | ||||||||
Gold equivalent resources
46
(Moz)
|
52.2 | 158.7 | 25 | % | ||||||||
Gold production
|
||||||||||||
- twelve months to 30 June 2009 (000s oz)
|
1,166 | 1,631 | 42 | % | ||||||||
- nine months to 31 March 2010 (000s oz)
|
732 | 1,236 | 37 | % | ||||||||
Share market values
|
||||||||||||
- pre-announcement (A$ billion)
|
7.2 | 15.9 | 31 | % | ||||||||
- pro-forma current (A$ billion)
|
8.4 | 16.8 | 33 | % | ||||||||
LGL shareholder interest in merged Newcrest (shareholding) | 37 | % | ||||||||||
LGL shareholder interest in aggregate value (including cash consideration) | 38 | % |
The analysis shows that the share of the merged company held by LGL shareholders will be broadly consistent with their contribution of reserves, resources, production and share market values. Based on gold reserves and resources, LGL shareholders are contributing marginally more than their share of the merged company. Based on gold equivalent reserves and resources (which includes the value of Newcrests reported copper and silver reserves and resources), LGL shareholders contribution is significantly less than their share of the merged company. On this measure the terms of the Proposal appear favourable to LGL shareholders. | |||
Based on share market values immediately before the announcement of the Initial Proposal on 1 April 2010, LGL shareholders are contributing significantly less than their share of the merged company, suggesting that the terms of the Proposal are favourable to LGL shareholders. This is consistent with the significant premium implied by the Consideration based on share prices at the time of the announcement of the Initial Proposal. |
45 | All gold reserve and resource data are based on the reserves and resources most recently reported by LGL and Newcrest. | |
46 | Gold equivalent reserve and resource data are based on converting copper and silver reserves and resources at a gold price of US$1,220 per ounce, a copper price of US$3.00 per pound and a silver price of US$18.75 per ounce. |
76
Lihir Gold Limited Scheme Booklet | 231 |
off of Australian equities). LGL shares have traded in line with Newcrest shares (at approximately the ratio implied by the Proposal terms). In the absence of the Proposal, LGL shares would almost certainly have risen, reflecting the rise in the gold price and the fall in the Australian dollar over the period. The pro-forma share market value for Newcrest set out in the table above is based on its current share price. The pro-forma share market value for LGL assumes that the LGL share price would have risen in line with global gold equities (by around 17% in A$ terms between 1 April 2010 and 13 July 2010), but for the announcements of the Initial Proposal and Proposal. It is not possible to predict with any accuracy the price at which LGL and Newcrest shares would be trading in the current market place, absent the Proposal. Accordingly, the analysis based on pro-forma current share market values needs to be assessed with caution. However, it suggests that the terms of the Proposal are fair to LGL shareholders. | |||
The analysis does not take into account the net debt position of Newcrest as at 31 December 2009 of A$137 million and LGLs adjusted net cash of US$394 million. Relative contributions of reserves, resources and production do not take into account any asset quality differentials in terms of production costs, production growth potential or other factors. In Grant Samuels view, however, the merger analysis suggests that the terms of the Proposal are fair having regard to the interests of LGL shareholders. | |||
LGL shareholders would also share in any value created through the combination of Newcrest and LGL. Newcrest has estimated that annual synergies of around A$85 million should ultimately be available to the merged company. The value of these synergies would be significant, although not material in the context of the size of the merged Newcrest. In addition, the creation through the Proposal of a gold company much larger than either Newcrest or LGL has the potential to lead to a re-rating of the merged company. The size and asset quality of the merged company and the likely liquidity in the market for its shares should make it attractive for international investors in gold equities. It is reasonable to expect some benefits in terms of a reduced cost of capital for the merged Newcrest, although these benefits are difficult to quantify. |
8.4 | Premium for Control | ||
Based on the VWAP for Newcrest and LGL shares for various periods prior to the announcement on 1 April 2010 that Newcrest had made an acquisition proposal, the Consideration represented the following premiums to the LGL pre announcement share price: |
LGL | Newcrest | VWAP | Consideration Range Premium | |||||||||||||||||
Date/Period | VWAP (A$) | VWAP (A$) | Premium | A$4.20 | A$4.32 | |||||||||||||||
1 day
|
3.05 | 32.93 | 36 | % | 38 | % | 42 | % | ||||||||||||
5 days
|
3.06 | 33.37 | 37 | % | 37 | % | 41 | % | ||||||||||||
1 month
|
3.03 | 33.55 | 39 | % | 39 | % | 43 | % | ||||||||||||
3 months
|
2.99 | 33.41 | 40 | % | 41 | % | 45 | % |
Source: Bloomberg and Grant Samuel analysis |
The value attributed to the Consideration of A$4.20-4.32 implied a premium to LGLs VWAP before the announcement on 1 April 2010 of Newcrests initial takeover proposal in the range 37%-45%, depending on the time frame for measurement of the premium. On this basis, the apparent premium provided by the Consideration is attractive. | |||
However, movements in the gold market since the announcement of Newcrests initial takeover proposal mean that premium estimates based on historical share prices are misleading. Between 31 March 2010 and 13 July 2010, the S&P TSX Global Gold Index increased by 12%. By contrast, the Newcrest share price (in US$ terms) increased by only 2%. This underperformance of around 10% means that it is likely that the effective premium has fallen. | |||
Since the announcement of the Initial Proposal, the LGL share price has broadly tracked the Newcrest share price. If LGL shares had instead performed in US$ terms in line with the S&P |
77
11 Independent experts report continued | 232 |
TSX Global Gold Index in the period ended 13 July 2010, LGL shares would have been trading at around A$3.54. On the basis of Newcrests closing share price on 13 July 2010 of A$34.83, the implied value of the Consideration would have been approximately A$4.36, which would represent a premium of around 23%. Some caution must be applied to this analysis, given the assumptions that it involves in relation to LGLs share price performance in the absence of the Proposal. Having regard to the negative sentiment that appears to have affected Australian stocks generally, it may well be that LGL would not have performed in line with the S&P TSX Global Gold Index. Moreover, while LGL shares have broadly tracked the S&P TSX Global Gold Index in recent times (at least in a directional sense), LGL shares have overall underperformed relative to the S&P TSX Global Gold Index since January 2008: |
Source: Bloomberg and Grant Samuel analysis |
On the other hand, this underperformance may have reflected specific factors (e.g. the unsuccessful Ballarat acquisition) that no longer apply. It may not be appropriate to extrapolate LGLs historical average underperformance across shorter periods characterised by strong gold prices. There is an argument that LGL may have outperformed other gold stocks in recent weeks, given the significant falls in the copper price since 1 April 2010 and given that LGL (unlike almost all the major gold stocks) has no copper exposure. | |||
The following table shows the premiums implied by the Consideration (based on Newcrests closing share price of A$34.83 on 13 July 2010) for various assumptions regarding LGLs performance relative to the S&P TSX Global Gold Index in the period ended 13 July 2010, in the absence of the Proposal: |
Assumed LGL performance relative to S&P TSX Global Gold Index | ||||||||||||
-10% | -5% | In line | ||||||||||
Effective Premium
|
35 | % | 29 | % | 23 | % |
Source: Bloomberg and Grant Samuel analysis |
The table shows that if it is assumed that LGL would have performed in line with the S&P TSX Global Gold Index in the absence of the Proposal, then the effective premium would be around 23%. However, if it is assumed that LGL would have underperformed relative to the S&P TSX Global Gold Index in the absence of the Proposal by (say) 10%, then the premium implicit in the Consideration would be approximately 35%. |
78
Lihir Gold Limited Scheme Booklet | 233 |
Overall, any conclusions regarding the effective premium now implicit in the Consideration are inevitably uncertain. Nevertheless, while it is likely that the premium has fallen, in Grant Samuels view the premium remains significant. |
8.5 | Takeover Analysis | ||
Takeover analysis requires a comparison of the estimated value of the Consideration with the estimated underlying value of LGL. Grant Samuel has valued the Consideration in the range A$4.20-4.32 per LGL share, based on a market value of Newcrest shares of A$33.50-34.50 per share. | |||
In assessing the fairness of the Consideration, Grant Samuel has considered two sets of evidence as to the underlying value of LGL. On the one hand, Grant Samuel has had regard to its valuation of LGL in the range A$4.28-4.83. On the other hand, Grant Samuel has considered evidence as to the value of LGL that can be derived from the process by which LGL and its advisers have sought alternative proposals for the company. Underlying value (or control value) is generally defined as the highest price that can be realised for an asset or a company within a reasonable time frame, assuming a thorough sale process, that potential buyers are fully informed and that both buyers and the seller are willing but not anxious participants in the process. It is generally reasonable to conclude that the highest price realised by a competitive, properly conducted sale process represents full underlying value. | |||
On the basis of a comparison of the estimated value of the Consideration (A$4.20-4.32) with the estimated value for LGL (A$4.28-4.83), the Consideration is fair (albeit marginally). However, this conclusion should be treated with caution. The valuation of LGL is inherently uncertain, given a variety of issues relating to the valuation of gold assets generally and given the particular characteristics of LGLs Lihir Island asset. | |||
Moreover, relatively small changes in the valuation parameters could lead to a different conclusion as to fairness. Newcrest shares have recently traded at around A$35.50, which implies a value for the Consideration of approximately A$4.44 per LGL share. The valuation of LGL was based on an exchange rate of A$1.00 = US$0.86. Exchange rates continue to fluctuate and have subsequently varied between A$1.00 = US$0.88 and A$1.00 = US$0.84. Although there is not necessarily a direct relationship between exchange rates and the valuation range, Grant Samuels analysis suggests (assuming all other assumptions remain constant) that a one cent movement in the exchange rate will affect the valuation of LGL by approximately A$0.05 per LGL share. | |||
More importantly, however, there is useful and in Grant Samuels view more reliable evidence as to value to be derived from LGLs sale process for the company. Since LGLs announcement on 1 April 2010 that it had received and rejected an acquisition proposal from Newcrest, LGL has conducted a formal process to solicit alternative offers for the company. LGL established a data room with extensive technical and other information and made contact with a number of parties that could potentially have interest in putting forward a competing proposal. The Merger Implementation Agreement between Newcrest and LGL contained a specific carve out that allowed LGL to engage with potential acquirers up to 8 June 2010. Given LGLs size, there are only a limited number of credible potential acquirers. It is reasonable to conclude that all these potential acquirers have been aware of LGLs process to seek a superior proposal and, if potentially interested, have conducted sufficient due diligence on LGL to allow the framing of alternative proposals. By the time LGL shareholders vote on the Scheme, potential counter-bidders will have had ample time to consider their positions and, if interested, submit an alternative proposal to LGL. (Although a break fee of US$60 million would be payable in the event that LGL preferred an alternative proposal, this amount is not significant in the context of the overall transaction size). | |||
If no superior proposal is forthcoming, there will be good reason for LGL shareholders to vote in favour of the Scheme. On one view, the competitive sale process undertaken by LGL will provide the best possible evidence as to the underlying value of LGL. On this view, the absence of a |
79
11 Independent experts report continued | 234 |
superior proposal would confirm that the Consideration reflects full underlying value. This argument has considerable weight, given the uncertainties inherent in the valuation analysis for LGL and for Newcrest shares. In the context of these uncertainties, market based evidence as to value (as revealed through LGLs sale process) would generally be preferred. At a minimum, the absence of any superior proposal would suggest that the Proposal provides consideration close to underlying value. | |||
Given that all market participants (including investors and potential acquirers of LGL) face uncertainty in their valuation judgements regarding LGL, the sale process conducted by LGL and its advisers will not provide incontrovertible evidence as to the underlying value of LGL. In particular, it is likely that any competing proposal will be developed and framed by reference to the LGL share price. There is some risk that the pre-announcement LGL share price did not properly reflect the value of LGL. Accordingly, there is a risk that even if LGL received a proposal at an apparently attractive premium to the LGL share price, that proposal might not reflect full underlying value. The logical consequence of this argument would be that LGL shareholders would be better off continuing to hold their LGL shares for the medium term, in expectation of a market re-rating of LGL. However, the argument effectively relies on two instances of market failure a failure of the public equity markets to properly value LGL shares, and a subsequent failure of the market for corporate control to attribute an appropriate control value to LGL. On balance, Grant Samuel believes that it is reasonable to conclude that the process conducted by LGL and its advisers is likely to deliver a value outcome that at least approaches underlying value. | |||
Assessment of the fairness of the Consideration requires in part a weighing up of theoretical valuation analysis against evidence as to value that can be derived from LGLs sale process. In the absence of a superior proposal, there are strong grounds to conclude that the Consideration is the highest value available to LGL shareholders. On this basis the Consideration represents full underlying value and the Proposal is fair and reasonable. |
8.6 | Other Advantages, Disadvantages and Risks | ||
If the Proposal is implemented, LGL shareholders will be exposed to the development and general operational risks associated with, in particular, the Cadia East development and the Telfer mine. | |||
Overall, these issues and risks should be well understood by analysts and investors and should be incorporated in the Newcrest share price. However, LGL shareholders should understand that any extreme manifestation of these risks (such as a failure of the bulk underground mining method proposed for Cadia East) could have a material adverse effect on the Newcrest share price. The extent of this effect could be exacerbated by a market re-assessment of the premium rating that Newcrest shares currently enjoy. | |||
Other factors that LGL shareholders should consider are: |
§ | since the announcement of the Proposal, the LGL share price has generally tracked the Newcrest share price on a basis consistent with the terms of the Proposal. In the absence of the Proposal or some similar proposal for a change of control of LGL, it is likely that the LGL share price would fall, potentially significantly. Shareholders would be unlikely in the short term to realise the value delivered by the Proposal (assuming the continuation of current market conditions) through selling their LGL shares in the ordinary course of share market trading; |
80
Lihir Gold Limited Scheme Booklet | 235 |
§ | with an approximate 37% interest in the merged Newcrest, LGL shareholders will retain some exposure to any potential upside in LGLs assets; | ||
§ | the Proposal provides increased diversification for LGL shareholders in terms of both assets and geographic exposure. On the other hand, LGL shareholders could achieve this diversification through portfolio allocation (buying and selling shares in Newcrest and LGL); | ||
§ | LGL shareholders current pure gold exposure will be diluted. Newcrest has a significant exposure to copper, with approximately 23% of its revenue for the year to 30 June 2009 and approximately 38% of gold equivalent reserves attributable to copper; | ||
§ | total transaction costs related to the Proposal are expected to be approximately US$23 million. Of these costs, approximately US$18 million will have been committed prior to the LGL shareholder meeting to vote on the Proposal. These costs are not material in the context of the merged Newcrest and represent approximately 0.2% of the merged Newcrests net assets; and | ||
§ | the acquisition of LGL by Newcrest is a substantial transaction for Newcrest, increasing reserves and resources by 71% and 65% respectively. While there are integration risks in any merger, given the similar nature of the asset bases of LGL and Newcrest these risks should not be material. |
8.7 | Ineligible Foreign Shareholders | ||
Ineligible foreign shareholders will not receive Newcrest shares. The Newcrest shares that would otherwise have been issued to them will instead be issued to a nominee in trust for such shareholders, who will sell the shares and distribute the net proceeds to them. They may also have to pay tax on any profit on the disposal of the LGL shares (in their country of residence). However: |
§ | their Newcrest shares will be sold for market value; | ||
§ | they can acquire Newcrest shares through the ASX if they wish to retain an exposure to the merged Newcrest; and | ||
§ | shareholder representing only approximately 0.2% of LGLs issued capital are expected to be impacted by these provisions. |
8.8 | Taxation Issues | ||
Details of the taxation consequences of the Proposal for Australian resident and foreign shareholders are set out in Section 10 of the Scheme Booklet. Some shareholders are expected to be eligible for tax rollover relief in their home country on the exchange of LGL shares for Newcrest shares. In any event, the taxation consequences for shareholders will depend upon their individual circumstances. If in any doubt, shareholders should consult their own professional adviser. |
8.9 | Shareholder Decision | ||
The decision whether to vote for or against the Proposal is a matter for individual shareholders based on each shareholders views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. In particular, taxation consequences may vary from shareholder to shareholder. If in any doubt as to the action they should take in relation to the Proposal, shareholders should consult their own professional adviser. | |||
Similarly, it is a matter for individual shareholder as to whether to buy, hold or sell securities in LGL or Newcrest. These are investment decisions upon which Grant Samuel does not offer an opinion and are independent of a decision on whether to vote for or against the Proposal. Shareholders should consult their own professional adviser in this regard. |
81
11 Independent experts report continued | 236 |
82
Lihir Gold Limited Scheme Booklet | 237 |
9 | Qualifications, Declarations and Consents |
9.1 | Qualifications | ||
The Grant Samuel group of companies provide corporate advisory services (in relation to mergers and acquisitions, capital raisings, debt raisings, corporate restructurings and financial matters generally), property advisory services, manages specialist funds and provides marketing and distribution services to fund managers. The primary activity of Grant Samuel & Associates Pty Limited is the preparation of corporate and business valuations and the provision of independent advice and experts reports in connection with mergers and acquisitions, takeovers and capital reconstructions. Since inception in 1988, Grant Samuel and its related companies have prepared more than 430 public independent expert and appraisal reports. | |||
The persons responsible for preparing this report on behalf of Grant Samuel are Stephen Cooper BCom (Hons) ACA CA(SA) ACMA and Cameron Stewart LLB BCom. Each has a significant number of years of experience in relevant corporate advisory matters. Matt Leroux, Shakeel Mohammed and Tina De Young assisted in the preparation of the report. Each of the above persons is an authorised representative of Grant Samuel pursuant to its Australian Financial Services Licence under Part 7.6 of the Corporations Act. |
9.2 | Disclaimers | ||
It is not intended that this report should be used or relied upon for any purpose other than as an expression of Grant Samuels opinion as to whether the Proposal is in the best interests of shareholders. Grant Samuel expressly disclaims any liability to any LGL shareholder who relies or purports to rely on the report for any other purpose and to any other party who relies or purports to rely on the report for any purpose whatsoever. | |||
This report has been prepared by Grant Samuel with care and diligence and the statements and opinions given by Grant Samuel in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading. However, no responsibility is accepted by Grant Samuel or any of its officers or employees for errors or omissions however arising in the preparation of this report, provided that this shall not absolve Grant Samuel from liability arising from an opinion expressed recklessly or in bad faith. | |||
Grant Samuel has had no involvement in the preparation of the Scheme Booklet issued by LGL and has not verified or approved any of the contents of the Scheme Booklet. Grant Samuel does not accept any responsibility for the contents of the Scheme Booklet (except for this report). |
9.3 | Independence | ||
Grant Samuel and its related entities do not have at the date of this report, and have not had within the previous two years, any shareholding in or other relationship with LGL or Newcrest that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal. Grant Samuel advises that it was engaged separately by each of LGL and Newcrest to undertake preparatory work that would form the basis of an independent experts report if such a report was required: |
§ | Newcrest August 2005 and December 2009; and | ||
§ | LGL October 2008. |
These engagements did not result in the commissioning of an independent experts report and Grant Samuel did not provide either party with views on valuation. The engagements did not affect Grant Samuels independence or its ability to prepare an independent experts report in relation to the Proposal. Grant Samuel was not involved in setting the terms of, or any negotiations leading to, the Proposal. |
83
11 Independent experts report continued | 238 |
In addition, Grant Samuel group executives hold parcels of LGL and Newcrest shares totalling less than 46,000 shares in LGL and 600 shares in Newcrest. | |||
Grant Samuel had no part in the formulation of the Proposal. Its only role has been the preparation of this report. | |||
Grant Samuel will receive a fixed fee of A$1.9 million for the preparation of this report. This fee is not contingent on the outcome of the Proposal. Grant Samuels out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Samuel will receive no other benefit for the preparation of this report. | |||
Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 October 2007. |
9.4 | Declarations | ||
LGL has agreed that it will indemnify Grant Samuel and its employees and officers in respect of any liability suffered or incurred as a result of or in connection with the preparation of the report. This indemnity will not apply in respect of the proportion of any liability found by a court to be primarily caused by any conduct involving gross negligence or wilful misconduct by Grant Samuel. LGL has also agreed to indemnify Grant Samuel and its employees and officers for time spent and reasonable legal costs and expenses incurred in relation to any inquiry or proceeding initiated by any person. Any claims by LGL are limited to an amount equal to the fees paid to Grant Samuel. Where Grant Samuel or its employees and officers are found to have been grossly negligent or engaged in wilful misconduct Grant Samuel shall bear the proportion of such costs caused by its action. | |||
Advance drafts of this report were provided to LGL and its advisers. Advance drafts of Sections 4, 5 and Appendix 2 of this report were also provided to Newcrest and its advisers. The advance drafts of the report provided to LGL and its advisers incorporated an estimated value for the Consideration of A$4.02-4.20 per LGL share, based on Newcrest share prices in the range A$32.00-33.50. The advance drafts also included a valuation of LGL in the range A$4.42-4.99 per share, based on an exchange rate of A$1.00 = US$0.83. Comparison of the estimated value of the Consideration with the estimated underlying value of LGL suggested (based on theoretical valuation analysis) that the Consideration was (marginally) not fair. However, the theoretical valuation analysis is subject to considerable uncertainty. Given the additional (and in Grant Samuels view more reliable) evidence as to value provided by the process whereby LGL sought alternative takeover proposals for the company, Grant Samuel concluded that the Proposal was fair and reasonable. | |||
Subsequent drafts were provided to reflect the increase in the Newcrest share price (potentially as a result of a strengthening of the copper price) and the strengthening of the A$ against the US$ in the days to 18 June 2010. Grant Samuel adopted an assessed value of the Consideration of A$4.20-4.32 per share, based on Newcrest share prices in the range A$33.50-34.50. The impact of the strengthening of the A$ was to reduce the estimated underlying value of LGL to A$4.28-4.83. On the basis of a comparison of these revised valuation ranges, the Consideration was deemed fair (albeit marginally). | |||
A further draft was provided on 7 July 2010 to reflect the effective withdrawal of the RSPT for gold and copper companies. As there was no clear evidence that the Newcrest share price had significantly outperformed the share price of the major global gold companies, Grant Samuel did not change the range of Newcrest share prices used to assess the value of the Consideration. Consequently, the estimated value for the Consideration remained A$33.50-34.50. Grant Samuel had previously made an adjustment for the potential impact of the RSPT on the assessed value of Mount Rawdon (LGLs other operations were not impacted by the RSPT). The effective withdrawal of the RSPT resulted in an increase in the assessed value of Mount Rawdon. However, this change was not significant in the context of the overall valuation of LGL and did not result in |
84
Lihir Gold Limited Scheme Booklet | 239 |
a change in the valuation range on a per share basis. Consequently, the valuation of LGL remained in the range A$4.28-4.83 per share. | |||
A final draft was provided on 15 July 2010. Changes made to the report related to the premium analysis, which was updated to reflect the recent relative outperformance of Newcrest shares compared to global gold equities (possibly due to the markets reaction to the effective withdrawal of the RSPT for gold and copper companies announced on 2 July 2010 and other factors). No changes were made to the valuation range of LGL shares or the estimated value of the Consideration. | |||
Grant Samuels conclusion as to the merits of the Proposal has not changed. As set out in this report, the uncertainties inherent in the theoretical valuation range mean that conclusions as to fairness based purely on theoretical valuation analysis need to be treated with caution. LGLs sale process provides more reliable evidence as to value and (absent a higher offer) provides good reason to conclude that the Consideration represents full underlying value and that the Proposal is therefore fair and reasonable. Certain consequential changes were made to the drafting of the report as a result of the revised ranges adopted for the value of the Consideration, the full underlying value of LGL and the effective withdrawal of the RSPT. Other than these changes, there was no alteration to the methodology, evaluation or conclusions as a result of issuing the drafts. |
9.5 | Consents | ||
Grant Samuel consents to the issuing of this report in the form and context in which it is to be included in the Scheme Booklet to be sent to shareholders of LGL. Neither the whole nor any part of this report nor any reference thereto may be included in any other document without the prior written consent of Grant Samuel as to the form and context in which it appears. |
9.6 | Other | ||
The accompanying letter dated 15 July 2010 and the Appendices form part of this report. | |||
Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act. The Financial Services Guide is set out at the beginning of this report. |
85
11 Independent experts report continued | 240 |
1 | Lihir Island | |
Overview | ||
LGL owns 100% of the Lihir Island operations. Lihir Island is the largest of the Lihir Group of four islands and is located 900 kilometres north-east of Port Moresby in Papua New Guinea. It is a volcanic seamount that rises steeply from the sea to about 600 metres above sea level. The island is approximately oval in shape, roughly 22 kilometres from north to south and 15 kilometres from east to west at its widest point. The Lihir Island operation exploits a very large mineralised system and is one of the largest gold mines in the world. Gold in the form of doré is the sole product from the operation. | ||
Lihir Island consists of five volcanic units. Geothermal activity is still present in the Luise Caldera, which is the site of mining operations. Two adjacent overlapping pits, the Minifie and Lienetz pits, are currently in production. The Kapit pit is expected to be the main source of production after 2013. The Borefields and Coastal areas and the Link zone (located between the Lienetz and Kapit pits) are potential sources of additional production. The following map shows the location of Lihir Island and the pit configuration: |
Source: LGL |
Exploration at the island commenced in 1982, conducted by a joint venture between Kennecott Explorations Australia (acquired by Rio Tinto in 1988) and Nuigini Mining (now a wholly-owned subsidiary of LGL). The joint venture was managed by Lihir Management Company Limited (LMC), a wholly-owned subsidiary of Rio Tinto. Extensive drilling and numerous studies were conducted during the following decade and resulted in the submission of a feasibility report to the Papua New Guinea |
1
Lihir Gold Limited Scheme Booklet | 241 |
Government in March 1992. A Special Mining Lease, which gave the joint venture exclusive mining rights until 2035, was issued on 17 March 1995. The joint venture also has exclusive rights to explore for gold and other minerals on the island. | ||
In April 1995, LMC entered into a comprehensive set of benefits and compensation arrangements, known as the Integrated Benefits Package (IBP), with the various levels of governments (National, Provincial and Local) and the representatives of various groups of landowners and residents on Lihir Island. The IBP set out compensation arrangements based on destruction (relocation and compensation), development (royalty, equity participation, etc), security (trust funds, long term development plans, etc) and rehabilitation (mine closure provisions, etc). The IBP was revised in 2006 to incorporate additional payments relating to health, education and community development programs. | ||
In June 1995, LGL was incorporated to acquire the project and LMC was retained as the manager of the operation. Clearance of the site began during the last quarter of 1995 and production of gold from oxide ore commenced in May 1997. Production of gold from sulphide ore commenced in October 1997. After just over a decade of management under LMC, LGL moved to independent management and acquired all the shares in LMC in October 2005. | ||
Geology and Mineralisation | ||
Lihir Island consists of five Miocene-Pleistocene volcanic units with remnant geothermal activity still present in the Luise Caldera volcanic crater. The Luise Caldera measures approximately 5.5 kilometres by 3.5 kilometres. The currently defined gold mineralisation occurs near the centre of the caldera within an area of approximately 2.0 kilometres by 1.5 kilometres. The mineral deposits are hosted by volcanics, intrusives and breccias with extensive alteration of the rocks within the caldera. Gold occurs primarily as sub-micron size particles in sulphide minerals with pyrite being the main sulphide mineral. While the average sulphide content in the reserves, including stockpile material, is 4.82%, the sulphur content is highly variable. |
2
11 Independent experts report continued | 242 |
The following diagram shows the location of the zones of mineralisation: |
Source: LGL |
The Lihir mineralisation is contained within a single large and complex system, within which a number of adjacent and partially overlapping zones of mineralisation have been defined. The bulk of currently defined mineralisation is in the Lienetz, Minifie and Kapit pits, but the Link, Coastal and Borefields zones also contribute significantly to the mining inventory. The Minifie zone is the largest zone of mineralisation and is about 1,000 by 600 meters with mineralisation extending from surface (50 metres above sea level) to 250 metres below sea level. The Lienetz zone is north of Minifie and measures about 800 by 400 meters with mineralisation extending from the surface (140 metres above sea level) to 300 metres below sea level. The Coastal zone is smaller and adjoins Lienetz, separating it from the sea. The Borefields zone is an extension of the Minifie mineralisation and extends to the north-east. Kapit is a high-grade zone adjacent to Lienetz. The Kapit mineralisation covers an area of about 450 by 300 metres with mineralisation extending from near the surface (30 metres above sea level) to 250 metres below sea level. | ||
Mining and Processing | ||
The Minifie pit was the main source of ore until late 2004 but is now mostly mined out. Currently, gold production is primarily sourced from the Lienetz pit. The pit is being developed in phases and is expected to account for the majority of the gold produced until 2014. Development of the Kapit pit commenced in 2009. The Kapit pit is expected to be the primary source of production from 2014, with contributions from the Minifie and Lienetz pits progressively declining. The Link, Coastal and Borefields zones are expected to provide further ore as mining progresses. |
3
Lihir Gold Limited Scheme Booklet | 243 |
Mining is undertaken at faster rates than processing, with a variable mill feed cut-off grade for direct process ore for each year of the mining period. Higher grade ores are scheduled to be processed first and lower grade ores are stockpiled for later processing. While mining is scheduled for completion in 2021, processing of stockpiles will continue until scheduled completion around 2040. The ore is mined by conventional open pit blast and haul mining methods. An independent operator undertakes blasting operations, while LGL is responsible for the haulage of material. | ||
Most of the Lihir ore is refractory and requires pressure oxidation to liberate the gold from the sulphide mineralisation prior to carbon-in-leach processing. The commissioning of a three million tonnes per annum flotation circuit and additional milling capacity in 2007 increased the plant throughput to more than 6.5 million tonnes per year. The ore is crushed by a gyratory crusher and conveyed to a stockpile at the Putput processing plant. The crushed ore is segregated into flotation feed ore (FGO) and direct feed high-grade ore (HGO) and then milled in two separate milling circuits. The FGO feed is concentrated in a flotation circuit to produce higher grade slurry. The FGO and HGO slurries are then blended to form the feed slurry for the autoclaves, where the preheated slurry is subjected to pressure oxidation. The oxidation of the sulphide minerals liberates gold particles. The slurry containing the gold particles is passed through the two stage counter-current decantation thickener circuit to neutralise its acidity. The liberated gold is leached through cyanidation and loaded onto activated carbon, before recovery through carbon stripping, electro-winning and smelting. The plant tailings are detoxified before being discharged offshore within the confines of the mining lease. The current autoclave gold recovery rates range between 85% and 92%. Autoclave recoveries from the low grade material that will be processed once mining is completed are expected to range between 84% and 87%. The overall plant recovery rate is expected to range between 75% and 90% depending on the ore type. The doré is shipped to the Perth Mint for refining and the gold is sold in global markets. | ||
Despite the increase in processing capacity as a result of the commissioning of the flotation circuit, processing capacity remains a bottleneck. Annual ore production of approximately 8 million tonnes significantly exceeds the plants processing capacity of 6.5 million tonnes per annum. The untreated ore is being stockpiled for later processing. | ||
A feasibility study to increase the processing plant capacity and bring forward production was concluded in February 2008. The proposed MOPU project is estimated to cost approximately US$700 million (excluding power costs) and will involve the addition of a fourth autoclave, twice the size of each of the three existing autoclaves, along with additional crushing and milling capacity, another large oxygen plant and a new leach circuit. The upgrade will increase throughput capacity to 10-12 million tonnes per annum and gold production by an average of 240,000 ounces per year over the life of the operation. The unit operating costs are expected to decrease by approximately US$80 per ounce of gold as a result of economies of scale with regards to processing and administrative costs. An additional one million ounces of gold are expected to be produced over the life of the operation as the lower operating costs will reduce the cut-off grade. | ||
Construction work on the MOPU project commenced in 2009. In April 2010, LGL reported that work on the project was more than 50% complete and that the expanded plant was on track to be commissioned by late 2011. | ||
The total annual power requirement for the Lihir Island operation is expected to increase from 76 megawatts currently to 126 megawatts following the proposed MOPU expansion. Lihir Island operations have been harnessing underground steam reserves to generate electricity since 2003 with the existing geothermal power stations capable of providing 56 megawatts of power generating capacity, although power generation from geothermal is currently only 35 megawatts because of well availability and pipework. The balance is provided by heavy fuel oil generators. Initial plans to increase the capacity of the geothermal plant have been put on hold following inconsistent steam supply from some of the steam wells and alternatives are being evaluated. A detailed feasibility study for an interim power station was completed and approved in 2009. The interim power station will include eight barge-mounted generators powered by heavy fuel oil, providing an additional 70 megawatts of power generating capacity. The interim power station is estimated to cost around US$160 million and construction work commenced in 2009. |
4
11 Independent experts report continued | 244 |
There are five operating dewatering wells that keep the water table below the operating level of the mine. To reduce the threat to operations from the residual geothermal activity, the temperature and pressure in the vicinity of the pit are reduced by discharging steam through surface, shallow and deep wells. | ||
Reserves and Resources | ||
Lihir Island Ore Reserves as at 30 June 2009 and Mineral Resources as at August 2009 are summarised below: |
Tonnes | Average Grade | Contained Gold | ||||||||||
(Mt) | (g/t) | (Moz) | ||||||||||
Resources
2
|
||||||||||||
Measured
|
59.4 | 2.48 | 4.7 | |||||||||
Indicated
|
494.0 | 2.41 | 38.3 | |||||||||
Inferred
|
87.3 | 1.95 | 5.5 | |||||||||
Total Resources
|
640.7 | 2.35 | 48.5 | |||||||||
Reserves
3
|
||||||||||||
Proved (stockpiled ore)
|
61.6 | 2.46 | 4.9 | |||||||||
Probable
|
269.2 | 2.77 | 23.9 | |||||||||
Total Reserves
|
330.8 | 2.71 | 28.8 |
Source: LGL |
On 26 August 2009, LGL reported a 34% increase in Mineral Resources at Lihir Island, primarily in the Indicated category. The increase in resources reflects the inclusions of approximately 7.8 million ounces in the Link Zone and 2.5 million ounces below the existing Minifie pit. The resource estimate for the Link Zone, which is located between the Lienetz and Kapit pits, incorporates the results from drilling undertaken between June 2007 and November 2008. The addition of resources at Minifie follows the reinterpretation of previous drilling results. | ||
On 29 October 2009, LGL reported a 36% increase in Lihir Island Ore Reserves. The reserves estimates are based on a December 2008 block model. The increase in reserves is supported by drill results and the inclusion of additional mining inventory as a result of the MOPU expansion and refinement of the proposed pit shell, in part reflecting the increase in the gold price assumption from US$675 per ounce to US$800 per ounce. The reserves include stockpiled material totalling 61.6 million tonnes at an average grade of 2.46 g/t. | ||
Exploration | ||
Drilling has been focussed on the proposed Kapit pit, the Link Zone and in the area to the west of the original Minifie pit, with encouraging results. A US$10 million infill drilling program is planned for 2010 to upgrade resources within the proposed Kapit pit. |
1 | Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies. | |
2 | Resources as at August 2009 and are based on a cut-off grade of 1.0g/t. The number of contained ounces does not indicate the ounces that will be ultimately recovered. | |
3 | Reserves as at 30 June 2009 and have been calculated using an average cut off grade for mill feed of 1.36g/t Au. The reserves reflect an assumed life-of-mine gold price of US$800 per ounce. Proved reserves are from stockpiled ore and reflect ore above cut-off on stockpile as at 30 June 2009. |
5
Lihir Gold Limited Scheme Booklet | 245 |
Operating Performance | ||
Lihir Islands operating performance for the four years ended 31 December 2009 and for the quarter ending 31 March 2010 is summarised below: |
Quarter ended | ||||||||||||||||||||
Year ended 31 December | 31 March | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
Material moved (Mt)
|
56.2 | 58.3 | 50.7 | 46.4 | 10.5 | |||||||||||||||
Ore mined (Mt)
|
||||||||||||||||||||
- high grade ore
|
4.2 | 6.1 | 6.2 | 6.1 | 1.6 | |||||||||||||||
- economic grade ore
|
3.8 | 4.4 | 8.3 | 6.6 | 2.1 | |||||||||||||||
Ore milled (Mt)
|
4.3 | 4.8 | 6.2 | 6.5 | 1.7 | |||||||||||||||
Autoclave grade (g/t)
|
5.14 | 5.51 | 5.86 | 6.41 | 5.01 | |||||||||||||||
Recovery (%)
|
90.2 | 86.0 | 82.5 | 81.3 | 81.1 | |||||||||||||||
Gold produced (000s oz)
|
650.8 | 700.2 | 771.5 | 853.4 | 180.3 | |||||||||||||||
Gross cash costs
(US$/oz)
4
|
397 | 442 | 545 | 507 | 608 | |||||||||||||||
Total cash costs
(US$/oz)
5
|
297 | 299 | 406 | 394 | 510 | |||||||||||||||
Gold sold (000s oz)
|
643 | 707 | 765 | 852 | 157 | |||||||||||||||
Average price realised (US$/oz)
|
510 | 666 | 865 | 971 | 1,111 |
Source: LGL |
Gold production has increased in each of the last four calendar years, reflecting a combination of increased equipment availability, improved productivity, enhanced throughput capacity and higher grades. The feed grades to the autoclave improved significantly following the commissioning of the flotation circuit in 2007. The strip ratio over this period ranged from 3.4 to 6.0 (waste/ore). Pre stripping associated with the Kapit pit commenced in 2009 and is included in the material movement during that year. Unit cash costs rose modestly between 2006 and 2007 but increased significantly in 2008, primarily as a result of rising fuel costs and adverse currency movements, particularly in the first half of 2008. These cost pressures subsequently abated somewhat, with lower oil prices and favourable currency movements causing unit cash costs to trend downwards in 2009. LGL has also benefited from the increasing use of low cost geothermal power with savings in 2009 estimated at US$33.9 million, equivalent to approximately US$40 per ounce. The reduction in gold recoveries since 2008 follows the commissioning of the flotation circuit and LGLs strategy of boosting plant throughput rates and overall gold production, even at the expense of lower recovery rates. | ||
Gold production during the first quarter of 2010 was considerably lower than in the corresponding period in the previous year but was in line with plan. The lower production contributed to the increase in unit cash costs in the quarter. Current expectations are for 2010 production to range between 800,000 and 870,000 ounces and for total cash costs to remain under US$450 per ounce. | ||
2 | Mount Rawdon | |
Overview | ||
The Mount Rawdon project is an open pit gold-silver operation located in south-east Queensland, approximately 80 kilometres south-west of Bundaberg and 300 kilometres north-north-west of Brisbane. The mine site is serviced from the small township of Mount Perry, approximately 20 kilometres north of the mine. The project is wholly owned by LGL and was acquired through its acquisition of Equigold in June 2008. |
4 | Before deferral of excess stripping and stockpile costs. | |
5 | After deferral of excess stripping and stockpile costs. |
6
11 Independent experts report continued | 246 |
Equigold acquired the project in August 1998 from a joint venture which included Samson Exploration and Resolute Limited and successfully completed a bankable feasibility study in June 1999. The construction of the treatment plant and related infrastructure was completed in early 2001 at a total cost of US$35.5 million and gold production commenced in February 2001. Following an increase in the reserve base, the pit was extended and the capacity of the treatment plant was increased from 2.5 to 3.4 million tonnes per annum in 2003. More than 885,000 ounces of gold have been produced at Mount Rawdon since 2001. Current reserves are expected to support annual production of approximately 80,000-100,000 ounces of gold over the next 8-10 years at relatively low cash costs. | ||
Geology and Mineralisation | ||
The Mount Rawdon deposit lies at the southern end of the Carboniferous Coastal Block. The gold deposit is a massive, volcaniclastic hosted, low grade deposit, which supports low cost mining and treatment. The local geology is dominated by co-magmatic dacite intrusives and dacite-rich volcaniclastics, which have been intruded by a sequence of acid to basic dykes and plugs. Two major lineaments in the region are the east-north-east trending Swindon Fault zone and the north-north-west trending Perry Fault zone. The surface extent of mineralisation forms a roughly ovoid zone of 200 metres by 300 metres at gold grades greater than 0.7 grams per tonne. Mineralisation occurs as fine pyrite disseminations within a matrix of volcaniclastics and more discrete sulphide veinlets. The gold grades generally increase with pyrite alteration and sulphide veining intensity. The host volcaniclastics strike north-east and have a shallow to moderate dip to the south-west. Recent drilling suggests that exploration potential in the area is limited. | ||
Mining and Processing | ||
The ore is mined from a single open pit using conventional mining techniques. The treatment process includes primary and secondary crushing, SAG and ball milling and conventional cyanidation leaching. Mill feed is based on a gold cut-off grade of 0.5 grams per tonne. Lower grade material is stockpiled. A gravity circuit is included in the design to recover coarse gold. The free gold recovered from the gravity circuit is batch treated in an intensive carbon in leach process. The main carbon in leach circuit recovers gold and silver, which are stripped from the carbon rods using a split elution circuit. The gold and silver recovery rates have remained fairly stable at approximately 90% and 60% respectively. | ||
The processing plant has a throughput of 3.4 million tonnes per annum. Power for the operations is supplied from the grid and the water is sourced from either the nearby Perry River weir or the Burnett River. | ||
Following a re-optimisation of the resources, a major cutback to access additional ore commenced in late 2009. The cutback is expected to be completed over three years and although it will negatively impact the cash costs during this period, it will extend the life of the operation. |
7
Lihir Gold Limited Scheme Booklet | 247 |
Reserves and Resources | ||
Mount Rawdons Mineral Resources and Ore Reserves as at 1 January 2010 are summarised below: |
Tonnes | Average Grade | Contained Gold | ||||||||||
(Mt) | (g/t) | (000s oz) | ||||||||||
Resources
7
|
||||||||||||
Measured
|
2.3 | 0.75 | 60 | |||||||||
Indicated
|
48.4 | 0.73 | 1,140 | |||||||||
Inferred
|
7.1 | 0.61 | 140 | |||||||||
Total Resources
|
57.8 | 0.72 | 1,340 | |||||||||
Reserves
8
|
||||||||||||
Proved
|
1.5 | 0.82 | 38 | |||||||||
Proved (stockpile)
|
0.4 | 0.79 | 10 | |||||||||
Probable
|
30.1 | 0.81 | 786 | |||||||||
Total Reserves
|
32.0 | 0.81 | 835 |
Source: LGL |
The reserves estimate is based on an April 2009 resources model that has been updated to reflect the impact of depletion since the last resources statement in April 2007 and incorporates results from drilling undertaken since then. The latest reported reserves have been calculated assuming a higher gold price of US$800 an ounce (previously A$550), revised cost assumptions and a lower cut off grade 0.31g/t (previously 0.495g/t). | ||
Operating Performance | ||
Mount Rawdons operating performance for the two years ended 30 June 2008 (as reported by Equigold), and for the two years ended 31 December 2009 and the three months ended 31 March 2010 (as reported under LGL ownership) is summarised below: |
6 | Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies. | |
7 | Resources are based on a cut-off grade of 0.31g/t. The number of contained ounces does not indicate the ounces that will be ultimately recovered. | |
8 | Reserves have been calculated using a cut off grade of 0.31g/t Au. The reserves reflect an assumed life-of-mine gold price of US$800 per ounce. |
8
11 Independent experts report continued | 248 |
Quarter ended | ||||||||||||||||||||
Year ended 30 June | Year ended 31 December | 31 March | ||||||||||||||||||
2007 | 2008 | 2008 | 2009 | 2010 | ||||||||||||||||
Ore mined (Mt)
|
3.4 | 3.4 | 3.5 | 3.2 | 0.6 | |||||||||||||||
Ore milled (Mt)
|
3.4 | 3.5 | 3.5 | 3.4 | 0.8 | |||||||||||||||
Grade (g/t)
|
1.13 | 1.14 | 1.03 | 1.11 | 0.97 | |||||||||||||||
Recovery (%)
|
89.2 | 90.2 | 89.8 | 90.8 | 90.2 | |||||||||||||||
Gold produced (000s oz)
|
111.0 | 115.1 | 102.4 | 107.8 | 22.9 | |||||||||||||||
Gross cash costs (per
ounce)
|
n.a. | n.a. | n.a. | US$ | 462 | US$ | 695 | |||||||||||||
Total cash costs (per
ounce)
|
A$ | 373 | A$ | 375 | n.a. | US$ | 396 | US$ | 572 | |||||||||||
Gold sold (000s oz)
|
n.a. | n.a. | 55.510 | 109.0 | 21.6 | |||||||||||||||
Ave price realised
(US$/oz)
|
n.a. | n.a. | 651 | 968 | $ | 1,102 |
Source: LGL |
The production of gold at Mount Rawdon has been fairly consistent over the last few years at slightly above 100,000 ounces per annum. During this period, mined ore has demonstrated positive reconciliations in terms of both tonnes and grade against the reserves. Mount Rawdons cash costs of production have historically been low but are expected to increase over the next three years due to the ongoing cut-back development work. | ||
Production during the first quarter of 2010 exceeded plan as a result of higher than anticipated grades. As expected, the cash costs were high due to the commencement of the cutback. Current expectations are for 2010 production to range between 90,000 and 100,000 ounces. | ||
3 | Bonikro | |
Overview | ||
The Bonikro gold project is located in central-southern Côte dIvoire, in West Africa. It is approximately 230 kilometres north-west of Abidjan, the nations commercial capital, nine kilometres from the nearest regional town, Hiré, and 15 kilometres from another regional town, Oumé. Access to the site is via a bitumen road, which passes within seven kilometres of the site and is connected to the main arterial highway system, which links Abidjan to Yamassoukro. |
9 | The Mount Rawdon operation was operated by Equigold until its acquisition by LGL in June 2008. | |
10 | Attributable to LGL and represents production since LGL acquired the operation |
9
Lihir Gold Limited Scheme Booklet | 249 |
Source: LGL |
Geophysical studies and soil sampling were undertaken in the Oumé project area by French, British and Canadian interests in the 1970s and by BHP Minerals from 1988 to 1994. In August 1996, the Oumé Exploration Permit was granted to Equigold Côte dIvoire SA, in which Equigold had a 94% stake. Equigold discovered the Bonikro geotechnical anomaly in 1998 following soil sampling and test drilling. In early 2000, test work confirmed widespread gold mineralisation and subsequent drilling at the gold-in-soil anomaly culminated in resource estimation and pit optimisation studies. In July 2006, Equigold completed a bankable feasibility study into the development of the Bonikro gold project. Equigold incorporated a new holding company, Equigold Mines CI SA, which has been renamed LGL Mines CI SA, to which the exploration permit was transferred. This new holding company applied for and was granted the Bonikro Exploitation permit in January 2007. Construction of the open pit mine and process plant commenced in mid 2007 and first gold was poured on 6 October 2008. The operation is expected to produce an average of 120,000 ounces of gold per annum with an estimated mine life of eight years. | ||
In accordance with the Mining Law in Côte dIvoire, the Government was given a 10% free carried interest in the issued capital of the holding company Equigold Mines CI SA (to be renamed LGL Mines CI SA on 30 June 2010) upon granting of the mining permit. However, the inter-company loan payable by Equigold Mines CI SA to LGLs Australian group is to be repaid in full before the government of Côte dIvoire is paid dividends. As at 30 April 2010, the balance of shareholder loans payable to LGL Australia by its Côte dIvoire subsidiaries was US$95.3 million, of which US$73.6 million was payable to Equigold Mines CI SA. Following the acquisition of Equigold, LGL bought out the minority shareholders in LGL Mines CI SA and therefore has a 90% stake in the operations. | ||
LGL signed a Mining Investment Convention with the Government of Côte dIvoire in May 2007. The Convention includes the following key financial terms: |
§ | a Government royalty of 3% of the sale value of the gold, net of transport and refining charges; |
10
11 Independent experts report continued | 250 |
§ | the supply of electricity to the project at preferential rates; | ||
§ | exemptions from various taxes and duties; | ||
§ | a withholding tax of 16.5% on interest paid on shareholder loans, with interest to be paid at the London Interbank Offering Rate plus 3%; | ||
§ | an income tax holiday for the first five years of production, which is due to expire on 31 December 2013; | ||
§ | withholding tax on dividends of 18% during the five year income tax holiday and 12% thereafter; and | ||
§ | a guarantee from the Government of Côte dIvoire that the project will not be impacted by any new or increased taxes for the term of the Mining Convention (10 years). The terms of the Mining Convention will have to be renegotiated at the end of the 10 year period. |
Geology and Mineralisation | ||
Two main rock types have been identified, but the mineralisation is predominantly found within a granodiorite with a strike length of 800 to 900 metres. The granodiorite is fairly well confined within basalt and metasediment formations to the east and west. In the south, where most of the mineralisation is found, the mineralisation is contained within a planar lode dipping to the east. In the north, the extent and grade of the mineralisation increases as it encroaches on the surfacing granodiorite. In the granodiorite itself, mineralisation is diffuse and found in conjunction with quartz veins. | ||
The ore body contains laterite, oxidised, transitional and fresh material. The laterite material, over the centre of the pit, was up to 10 metres thick. The oxidised ore was 30 to 40 metres thick. The transitional material is relatively limited. The ore has been classified into low grade (from 0.5 grams per tonne to 0.9 grams per tonne) and high grade (greater than 0.9 grams per tonne), but LGL aims to further optimise the grade of the stockpiles to allow for greater flexibility during processing. | ||
LGL believes that the features of the ore body, including the strong visual evidence of mineralisation (quartz veining, silicification and alteration) should facilitate grade control during mining. | ||
Mining and Processing | ||
Ore is mined by conventional open pit mining methods comprising drill and blast and load and haul. The drilling and blasting operations are contracted to third parties but the mining equipment is owned by LGL. Loading and hauling operations are undertaken by LGL personnel. | ||
The development of an interim pit to a depth of 130 metres in the higher grade central section of the ore body has now been completed. A series of four cutbacks on all sides of the pit but predominantly to the west and south is now underway. The final pit is expected to extend to a depth of 270 metres. Since production commenced in October 2008, the operation has transitioned from mining the softer, oxidised top layers to mining the harder fresh rock, and fresh rock now accounts for all of the ore mined. | ||
The Bonikro plant is a conventional carbon in leach operation. After primary and secondary crushing, the ore is fed to a single stage grinding process, followed by a gravity circuit and carbon-in-leach circuit. The gold recovery is principally via the carbon-in-leach process, although test work and performance to date show that in excess of 30% of the gold could be recovered from the gravity circuit. The plant is currently running at a throughput rate of 2.0 million tonnes per annum, which corresponds to its nameplate capacity when processing harder ore, but is designed to run at rates of up to 2.75 million tonnes per annum when processing softer oxide ore. Recovery rates are expected to average 94% over the life of the mine. Commissioning of the plant began on 22 August 2008 and was completed in late October 2008. | ||
Power is sourced from the national electricity grid 15 kilometres from the Bonikro site. The tailings dam, located three kilometres east of the processing plant, is complete although the walls will have to be raised at a later stage to increase capacity. Over the life of the mine, it is estimated that 50% of the water will be |
11
Lihir Gold Limited Scheme Booklet | 251 |
sourced from tails return with the balance coming from a water supply dam, groundwater and water caught in the catchment area during the wet season. | ||
Reserves and Resources | ||
Bonikros Mineral Resources and Ore Reserves as at 31 March 2010 are summarised below. The data reflects 100% of Bonikros reserves and resources: |
Tonnes | Average Grade | Contained Gold | ||||||||||
(000s t) | (g/t) | (000s oz) | ||||||||||
Resources
12
|
||||||||||||
Indicated
|
21,500 | 1.33 | 918 | |||||||||
Inferred
|
8,400 | 1.13 | 306 | |||||||||
Total Resources
|
29,900 | 1.27 | 1,224 | |||||||||
Reserves
13
|
||||||||||||
Proved
|
1,100 | 0.86 | 31 | |||||||||
Probable
|
16,100 | 1.41 | 729 | |||||||||
Total Reserves
|
17,200 | 1.38 | 760 |
Source: LGL |
Operating Performance | ||
Gold production started on 6 October 2008. The quarterly performance of the Bonikro operations to date is summarised in the table below. The data reflects 100% of Bonikros production: |
Quarter ended | ||||||||||||||||||||||||
31 Dec | 31 Mar | 30 Jun | 30 Sep | 31 Dec | 31 Mar | |||||||||||||||||||
2008 | 2009 | 2009 | 2009 | 2009 | 2010 | |||||||||||||||||||
Ore mined (000s tonnes)
|
668 | 520 | 572 | 647 | 632 | 413 | ||||||||||||||||||
Ore milled (000s tonnes)
|
635 | 534 | 570 | 426 | 518 | 481 | ||||||||||||||||||
Grade (g/t)
|
2.19 | 2.31 | 2.42 | 2.39 | 2.42 | 1.83 | ||||||||||||||||||
Recovery (%)
|
90.0 | 92.8 | 96.7 | 95.8 | 94.2 | 94.2 | ||||||||||||||||||
Gold produced (000s oz)
|
36.7 | 40.1 | 43.6 | 31.9 | 34.4 | 26.6 | ||||||||||||||||||
Gross cash costs (US$/oz)
|
300 | 345 | 396 | 516 | 605 | 715 | ||||||||||||||||||
Total cash costs (US$/oz)
|
307 | 385 | 396 | 387 | 503 | 503 | ||||||||||||||||||
Gold sold (000s oz)
|
26.9 | 35.2 | 49.1 | 27.8 | 41.4 | 21.6 | ||||||||||||||||||
Price realised
(US$/oz)
|
798 | 916 | 922 | 958 | 1,096 | 1,112 |
Source: LGL |
Production in the early stages of the operation was affected by issues related to commissioning, the transition from softer oxidised ore to harder fresh ore, and heavy rainfall. However, gold grades have generally been higher than expected and production for the year to 31 December 2009 totalled 150,000 ounces, at the higher end of the guidance range of 130,000-160,000 ounces. The transition to fresh rock is now complete and production is expected to stabilise, despite the fact that issues with the primary crusher are yet to be fully resolved. Overall, LGL expects that the average grade for the year ending |
11 | Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies. The reserves are those remaining below the 31 March 2010 mining surface. | |
12 | Resources are based on a cut-off grade of 0.5g/t. The number of contained ounces does not indicate the ounces that will be ultimately recovered. | |
13 | The reserves reflect an assumed life-of-mine gold price of US$900 per ounce. |
12
11 Independent experts report continued | 252 |
31 December 2010 will be less than 2.0 g/t, resulting in production in the range 110,000-130,000 ounces of gold at cash costs below US$420 per ounce. | ||
Exploration and Expansion | ||
The focus of exploration at and around Bonikro has been on extending reserves at depth at Bonikro and developing the resource base in the Hiré permit area, approximately 10 kilometres from the Bonikro operations. A feasibility study is currently underway to assess the development of the Hiré deposits and the expansion of the Bonikro process plant to allow for the processing of ore from Hiré. | ||
At Bonikro, LGL has been drilling the Bonikro Deeps target, which includes approximately 300,000 ounces of inferred resource below the bottom of the current ultimate pit design. Drilling results have been encouraging and the programme is due to be completed in the next few months, which is expected to result in the conversion of a substantial proportion of the inferred resource to reserves. There is also potential for a further extension of resources and reserves below Bonikro Deeps. | ||
A number of areas of mineralisation have been identified immediately west of Hiré, within the Hiré permit area. LGL has delineated resources at Akissi-so, Assondji-so, Agbalé and Chappelle and drilling is continuing to further develop and upgrade the resource base. A number of other targets have been identified (including Ditula, Gui and Chappelle South). LGL last reported resources for the Hiré permit area in August 2009 as summarised below: |
Tonnes | Average Grade | Contained Gold | ||||||||||
(000s t) | (g/t) | (000s oz) | ||||||||||
Akissi-so
|
||||||||||||
Indicated
|
3,248 | 3.4 | 352 | |||||||||
Inferred
|
512 | 3.1 | 50 | |||||||||
Assondjiso
|
||||||||||||
Indicated
|
797 | 3.5 | 90 | |||||||||
Inferred
|
219 | 3.2 | 22 | |||||||||
Agbalé
|
||||||||||||
Inferred
|
1,324 | 2.7 | 115 | |||||||||
Chapelle
|
||||||||||||
Inferred
|
3,636 | 2.2 | 263 | |||||||||
Total Hiré
|
9,736 | 2.8 | 892 |
Source: LGL |
The Akissi-so, Assondji-so, Agbalé and Chapelle deposits are within three kilometres of one another and all run in a south-west, north-east direction. They consist of individual lodes hosted within the same granodiorite host. All the Hiré prospects, except Agbalé, remain open. The current drilling programme should be completed in late June / early July 2010. | ||
There are plans to expand the Bonikro plants capacity from the current 2.0 million tonnes per annum (based on the processing of fresh rock) to 3.5 million tonnes per annum to allow for the processing of ore from the Hiré deposits. The combination of higher throughput and the relatively higher grade of the Hiré ore would almost double gold production capacity at Bonikro to approximately 250,000 ounces per year from 2012. The plant expansion involves the addition of a ball mill circuit, three leach tanks and the associated infrastructure. The cost of developing the Hiré mines, constructing a haul road from Hiré to Bonikro, expanding the plant and adding the required infrastructure has been estimated at US$150 million. The existing tailings dam at Bonikro is expected to accommodate production for the life |
14 | Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies. Resources are based on a cut-off grade of 0.7g/t at Akissi-so and 0.5g/t at Assondji-so, Chappelle and Agbalé. The number of contained ounces does not indicate the ounces that will be ultimately recovered. |
13
Lihir Gold Limited Scheme Booklet | 253 |
of the Bonikro and the Hiré mines, although the dam walls will have to be lifted. LGL expects to complete the Hiré feasibility study in the September 2010 quarter, with construction commencing soon thereafter. LGL is currently applying for a mining licence for Hiré. | ||
4 | Côte dIvoire Regional Exploration | |
Very limited exploration has been undertaken to date in Côte dIvoire but the similarities between the greenstone belts found in the country and the gold-rich geological features of neighbouring countries are promising. In particular, more than one third of the regional birimian structure is found in Côte dIvoire but gold discoveries in the country account for only 6% of the gold identified to date in the region. | ||
LGL has extensive exploration acreage in this birimian greenstone belt. The company holds seventeen granted exploration licenses, including the Hiré licence, covering an area of 10,715 square kilometres (including those held through joint ventures). A further eleven licences covering 7,195 square kilometres are pending approvals. LGL estimates that its tenements cover a total of 7% of the land mass of Côte dIvoire. | ||
In the past few months, LGL has focused its Côte dIvoire exploration programme on developing the resources at Bonikro and Hiré and has therefore devoted less attention to its other targets. LGL had defined resources at the Dougbafla East prospect, which is located within the Bonikro Exploitation Permit Extension Application area, approximately 15 kilometres from the Bonikro operations. The Government was given a 10% free carried interest in the project but the following table shows 100% of the mineral resources reported on 26 August 2009 (no ore reserves have been declared to date): |
Tonnes | Average Grade | Contained Gold | ||||||||||
(000s t) | (g/t) | (000s oz) | ||||||||||
Dougbafla East
|
||||||||||||
Indicated
|
5,148 | 1.3 | 217 | |||||||||
Inferred
|
407 | 1.2 | 15 | |||||||||
Total Dougbafla East
|
5,555 | 1.3 | 232 |
Source: LGL |
Dougbafla East covers a zone of 1,200 metres by 400 metres. Extensive drilling and some diamond drilling have been undertaken. Four other areas (Dougbafla North, West, South and Central) have shown potential but are not as advanced. | ||
LGL has a number of other prospective exploration targets. The Kokoumbo prospect, approximately 50 kilometres from the Bonikro mine, is located in an area of historic mining and could potentially provide ore feed for the Bonikro mill. Further afield, promising targets include the Didiévi, Bouaflé and Bouake-Dabakala/Bouake/Timbe prospects. At Didiévi, the most significant target is Blaffo-Guetto, where drilling has yielded encouraging gold intersections. Mineralisation has been found near surface, seems to extend over a 1.8 kilometres strike length and shows high grade at depth. LGL believes that the Didiévi area has the potential to be a high grade, fairly large resource that could support a small open pit and an underground mine. | ||
LGL has indentified a number of other targets that are not as advanced. Further details of LGLs exploration interests in Côte dIvoire can be found in the AMC report provided in Appendix 5. |
15 | Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies. Resources are based on a cut-off grade of 0.7g/t. The number of contained ounces does not indicate the ounces that will be ultimately recovered. |
14
11 Independent experts report continued | 254 |
1 | Cadia Valley | |
Background | ||
The Cadia Valley Operations are 100% owned by Newcrest and are located approximately 20 kilometres south-west of Orange in central western New South Wales. The operations comprise two operating gold-copper mines, the Cadia Hill open pit mine and the Ridgeway underground mine, and the Cadia East underground gold-copper project. The Newcrest Board recently approved the development of Cadia East and it is expected to commence production in June 2011. | ||
The location of the Ridgeway, Cadia Hill and Cadia East deposits is shown in the following diagram: |
Source: Newcrest |
The Cadia Valley district has a long history of exploration and mining dating back over 150 years. Newcrest acquired the Cadia Valley mining leases in 1991 and the Cadia Hill ore body was discovered in 1992. Construction of the mine was completed in 1998. The Ridgeway ore body was discovered in 1996 and the Ridgeway underground mine was commissioned in 2002. While the Cadia Hill and Ridgeway mines share various infrastructure facilities and services, ore from the mines is treated separately in dedicated processing plants. Approximately 20% of the gold is recovered via gravity circuits and produced as gold doré on site. The remaining gold is recovered to a gold enriched copper concentrate. The copper concentrates from the two plants are combined and transported to Port Kembla for shipping. | ||
The Cadia Valley operations are in a period of transition. Mining from the Cadia Hill open pit mine is expected to wind down over the next three years. At Ridgeway, the sublevel caving operation is essentially complete and mining has transitioned to the Ridgeway Deeps block cave, which will ramp up through 2010. The long term future of the Cadia Valley operations will be underpinned by the Cadia East underground mine, where a large panel caving operation is expected to support significant gold production for at least the next 30 years. Newcrest announced on 8 January 2010 that it had received planning approval for the project and on 9 April 2010 that the Newcrest Board had approved the development of Cadia East underground. |
1
Lihir Gold Limited Scheme Booklet | 255 |
The following chart shows an indicative production profile for the Cadia Valley operations, illustrating the decline in Cadia Hill and Ridgeway production, the growth in Ridgeway Deeps production and the long term reliance on the Cadia East underground mine: |
Source: Newcrest |
The on-site workforce for the Cadia Valley Operations currently totals approximately 1,000, most of whom live in Orange. Newcrest sources its electricity from the New South Wales power grid. Power requirements are expected to increase by approximately two thirds by 2015 following the ramp-up of operations at Cadia East. Water is largely sourced from thickener water recovery and tailings return water, supplemented by treated effluent water from the city of Orange, nearby dams, on-site bores and dewatering and pumping from allocated water licenses. There are two tailings storage facilities with ultimate storage capacity sufficient to support production for about 20 years. | ||
During the financial year ended 30 June 2009, the Cadia Valley Operations produced more than 530,000 ounces of gold and approximately 57,000 tonnes of copper. For the first 10 years following the development of Cadia East Underground, annual production from the Cadia Valley Operations is expected to range between 700,000 and 800,000 ounces of gold and 75,000 to in excess of 100,000 tonnes of copper. Cadia East will underpin production for Cadia Valley for at least the next 30 years. |
1.1 | Cadia Hill Gold-Copper Mine | ||
Overview | |||
Cadia Hill is one of the largest open pit gold-copper mines in Australia. Since its commissioning in 1998, the Cadia Hill mine has produced more than 3.4 million ounces of gold and 300,000 tonnes of copper. The development of the Cadia Hill operation has been underpinned by bulk mining techniques and large scale processing of the gold-copper ore to deliver the low unit costs required to profitably mine and process the relatively low grade ore body. |
2
11 Independent experts report continued | 256 |
Geology and Mineralisation | |||
The porphyry mineralisation at Cadia Hill lies within a northwest trending corridor two kilometres wide and six kilometres long and is principally associated with a late Ordovician monzonitic intrusive, which intrudes a sequence of Ordovician volcanics and sediments. The gold mineralisation is hosted by sheeted quartz veins. | |||
Mining and Processing | |||
The Cadia Hill open pit is expected to be completed in 2012. Processing should complete in 2013. The deposit is mined by conventional load and haul open pit mining methods. Since April 2005, Newcrest has been operating its own mining fleet. | |||
The ore is first fed into a primary crusher and then ground in a semi-autogenous grinding (SAG) mill, considered one of the biggest in the world, followed by two ball mills in parallel. A gravity circuit is incorporated in the grinding circuit to recover approximately 20% of the gold, which is smelted on-site to produce gold bars (doré). The remaining gold is recovered to a gold-copper concentrate by flotation. The concentrate is blended with the concentrate produced in the Ridgeway plant, pumped via a 35 kilometre pipeline to Blayney where it is filtered and dried, and then transported by rail to Port Kembla to be shipped to smelters. | |||
The Cadia Hill plant has a nominal capacity of 17 million tonnes per annum but has processed in excess of its nameplate capacity in recent times. The use of high capacity equipment in a single processing line minimises operating and capital costs. | |||
Resources and Reserves | |||
Cadia Hill Mineral Resources as at 30 June 2009 are summarised as follows: |
Measured | Indicated | Inferred | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | |||||||||||||||||||||||||||||||||||||||||||
Cadia Hill Open Pit
|
221 | 0.51 | 0.13 | 37 | 0.40 | 0.13 | 170 | 0.34 | 0.10 | 427 | 0.43 | 0.12 | 5.9 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||
Cadia Extended
|
| | | 53 | 0.39 | 0.22 | | | | 53 | 0.39 | 0.22 | 0.7 | 0.12 | ||||||||||||||||||||||||||||||||||||||||||
Big Cadia
|
| | | | | | 37 | 0.38 | 0.47 | 37 | 0.34 | 0.47 | 0.4 | 0.17 |
Source: Newcrest |
Cadia Hill Ore Reserves as at 30 June 2009 are summarised as follows: |
Proved | Probable | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | ||||||||||||||||||||||||||||||||||
Cadia Hill Open Pit
|
131 | 0.62 | 0.15 | 3.4 | 0.37 | 0.13 | 134 | 0.61 | 0.15 | 2.6 | 0.20 |
Source: Newcrest |
Cadia Extended refers to the gold/copper mineralisation located on the north-west limits of the Cadia Hill mine. Ore was mined from Cadia Extended between 2003 and 2004 and Newcrest believes the deposit could be further mined using bulk mining methods. No new Ore Reserves have been delineated to date. | |||
The Big Cadia deposit is north of the Cadia Hill open pit and east of Ridgeway. Mineral Resources have been included in the Cadia Hill Resource statement, but it is yet to be determined |
3
Lihir Gold Limited Scheme Booklet | 257 |
whether any ore sourced from Big Cadia would be processed in the Ridgeway plant or the Cadia Hill plant. No Ore Reserve had been estimated for Big Cadia as at 30 June 2009. | |||
Operating Performance | |||
Cadia Hills historical operating performance is summarised below: |
Nine | ||||||||||||||||||||
months to | ||||||||||||||||||||
Year to 30 June | 31 March | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
Material mined (000s tonnes)
|
51,700 | 47,159 | 46,923 | 34,004 | 24,525 | |||||||||||||||
Ore treated (000s tonnes)
|
15,501 | 16,624 | 16,792 | 17,163 | 12,689 | |||||||||||||||
Gold head grade (g/t)
|
0.65 | 0.58 | 0.94 | 0.71 | 0.62 | |||||||||||||||
Copper head grade (%)
|
0.17 | 0.16 | 0.18 | 0.19 | 0.18 | |||||||||||||||
Gold recovery (%)
|
76.8 | 79.7 | 82.1 | 75.6 | 80.8 | |||||||||||||||
Copper recovery (%)
|
85.1 | 89.3 | 88.8 | 85.2 | 90.3 | |||||||||||||||
Gold production (oz)
|
248,312 | 246,661 | 414,171 | 297,889 | 205,676 | |||||||||||||||
Copper production (t)
|
22,209 | 23,181 | 26,352 | 28,083 | 20,920 | |||||||||||||||
Gross cash costs (A$/oz)
1
|
243 | 231 | 162 | 407 | 265 | |||||||||||||||
Net cash costs (A$/oz)
2
|
84 | 109 | 251 | 499 | 197 |
Source: Newcrest |
Gold and copper production in the year ended 30 June 2007 was in line with production for the previous year, with the increase in the amount of ore processed in 2007 broadly offset by the slightly lower gold and copper grades. Gross cash costs were also similar to those in the previous year. | |||
During the 2008 financial year an increase in the head grade and improved recoveries resulted in a substantial increase in gold production. Copper production was also higher, largely because of higher copper grades. As a result of higher production, gross cash costs were lower than in previous years, despite significant industry wide costs pressures due to higher labour and diesel costs. | |||
Gold production during the 2009 financial year was significantly lower as the high grade material treated in 2008 was replaced by lower grade ore including from stockpiles. The volume of material moved was lower as mining moved deeper in the pit. The gross cash costs were significantly higher than in the previous years as a result of lower copper prices and reduced gold production. | |||
In the nine months to 31 March 2010, the average grade of the feed progressively increased as the mining transitioned from waste mining to ore mining and mining moved into the higher grade zones of the pit. Mill shutdowns adversely impacted mill throughput, but recovery was higher. The strengthening of the copper price had a positive impact on cash costs. | |||
Exploration | |||
No drilling has been done to date at Cadia Hill below 1,000 metres from the original surface. Newcrest believes this zone, known as Cadia Hill Lower, has exploration potential and could be developed into a caving operation. |
1 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
2 | After stripping and ore inventory adjustments. |
4
11 Independent experts report continued | 258 |
Outlook | |||
The contribution from Cadia Hill is expected to progressively decline as the pit reaches the end of Cutback 3 in 2012. Lower grade stockpiles will be used to supplement the feed to the processing plant until the Cadia East Underground operation ramps up. | |||
1.2 | Ridgeway Gold/Copper Mine | ||
Overview | |||
The Ridgeway underground mine is one of the largest underground operations in Australia. The Ridgeway deposit, which lies approximately three kilometres north-west of the Cadia Hill open cut mine, was discovered in November 1996. The Ridgeway mine was officially opened in April 2002 following the commissioning of a dedicated process plant. The mining of the original Ridgeway resource using sub-level caving was completed in the first half of 2010, to a depth of 800 metres. | |||
Operations are now focusing on mining the Ridgeway Deeps resource, which is below the initial Ridgeway resource and extends down to a depth of 1,100 metres. The development of the Ridgeway Deeps project was approved by the Newcrest Board in 2007. It included the development of the block cave, the extension of the underground ore handling system (including the installation of new underground crushers) and modifications to the processing plant, at a total cost of A$505 million. | |||
Geology and Mineralisation | |||
The Ridgeway deposit is the western most deposit identified in the Cadia mineralised corridor. The ore body, which measures approximately 450 metres by 250 metres, lies 500 metres below surface and extends more than 850 metres vertically with mineralisation open at depth. The Ridgeway lode is sub-vertical and is developed around a monzonite body, which intrudes a sequence of Ordovician volcanics and sediments. Gold-copper mineralisation at Ridgeway is associated with the monzonite intrusion and occurs within quartz veins, sheeted quartz sulphide veins and stockworks, principally within the monzonite. | |||
Mining and Processing | |||
Mining of the Ridgeway sublevel cave was substantially completed during the March 2010 quarter and operations have transitioned to mining the Ridgeway Deeps block cave. Whereas Ridgeway was mined using sub-level caving (whereby the ore body was sequentially extracted from the top down through drilling and blasting on 14 sub-levels located at 30 metre intervals), Ridgeway Deeps will be mined through block caving. | |||
Block caving involves the development of a single extraction horizon at the bottom of the ore body. Following blasting of the ore body immediately above the extraction horizon, fractured ore falls through drawbells excavated into the roof of the extraction horizon, before being extracted by remotely controlled boggers, crushed underground and transported to the surface (in the case of Ridgeway Deeps) by a 3.5 kilometre long conveyor. As ore is removed from the drawbells, the ore body caves in, with further ore fracturing and falling into the draw bells, providing a steady stream of production. As a result, once development is completed and the block cave has commenced to propagate, operating costs should be extremely low. |
5
Lihir Gold Limited Scheme Booklet | 259 |
A comparison of the Ridgeway and Ridgeway Deeps mining methods is illustrated below: |
Source: Newcrest |
The Ridgeway treatment plant is similar to that used at Cadia Hill but designed to treat lower volumes of higher grade ore. After crushing and grinding, the ore is concentrated in a flotation circuit to produce a gold-copper concentrate. This is blended with the concentrate from Cadia Hill, before being transported by pipeline to Blayney and railed to Port Kembla for shipping to smelters. A gravity circuit recovers approximately 25% of the gold, which is processed into doré on site. The hardness of the Ridgeway Deeps ore required the addition of a secondary crushing unit and a concentrate regrind mill to the existing plant to maintain the plants throughput rate at 5.6 million tonnes and increase recoveries. The modifications were completed in the June 2009 quarter. | |||
Resources and Reserves | |||
Ridgeways Mineral Resources and Ore Reserves as at 30 June 2009 are summarised below. Approximately 96% of the reported Ore Reserves are contained within Ridgeway Deeps: |
Tonnes | Gold Grade | Copper Grade | Contained Gold | Contained | ||||||||||||||||
(Mt) | (g/t) | (%) | (Moz) | Copper (kt) | ||||||||||||||||
Mineral Resources
|
||||||||||||||||||||
Measured
|
19 | 1.1 | 0.48 | 0.7 | 0.09 | |||||||||||||||
Indicated
|
109 | 0.78 | 0.36 | 2.7 | 0.39 | |||||||||||||||
Inferred
|
24 | 0.46 | 0.46 | 0.4 | 0.11 | |||||||||||||||
Total Mineral Resources
|
152 | 0.77 | 0.39 | 3.8 | 0.59 | |||||||||||||||
Ore Reserves
|
||||||||||||||||||||
Proved
|
7 | 1.3 | 0.51 | 0.3 | 0.04 | |||||||||||||||
Probable
|
91 | 0.8 | 0.38 | 2.4 | 0.35 | |||||||||||||||
Total Ore Reserves
|
98 | 0.8 | 0.39 | 2.7 | 0.38 |
Source: Newcrest |
6
11 Independent experts report continued | 260 |
Operating Performance | ||
Ridgeways historical operating performance is summarised below: |
Nine months | ||||||||||||||||||||
Year to 30 June | to 31 March | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
Material mined (000s tonnes)
|
5,700 | 5,853 | 5,913 | 6,103 | 4,366 | |||||||||||||||
Ore treated (000s tonnes)
|
5,538 | 5,694 | 5,775 | 5,860 | 4,324 | |||||||||||||||
Gold head grade (g/t)
|
2.40 | 2.00 | 1.93 | 1.52 | 1.29 | |||||||||||||||
Copper head grade (%)
|
0.79 | 0.73 | 0.67 | 0.56 | 0.51 | |||||||||||||||
Gold recovery (%)
|
86.2 | 85.7 | 84.7 | 80.9 | 78.7 | |||||||||||||||
Copper recovery (%)
|
91.1 | 90.6 | 89.6 | 86.9 | 85.9 | |||||||||||||||
Gold production (oz)
|
366,520 | 314,028 | 301,417 | 234,298 | 140,679 | |||||||||||||||
Copper production (t)
|
39,938 | 37,939 | 34,335 | 28,889 | 18,914 | |||||||||||||||
Gross cash costs (A$/oz)
3
|
(445 | ) | (512 | ) | (437 | ) | (53 | ) | (196 | ) | ||||||||||
Net cash costs (A$/oz)
4
|
(429 | ) | (544 | ) | (425 | ) | (4 | ) | (124 | ) |
Source: Newcrest |
Ridgeway has been an extremely low cost operation, with copper credits more than offsetting total costs of production, resulting in negative cash costs. In the four years to 30 June 2009, mining has progressed to the lower levels of the mine resulting in an expected decline in head grade. While the amount of ore processed has increased steadily, declining head grades and recoveries have resulted in a sharp reduction in gold and copper production. Fluctuations in the copper price have also impacted by-product credits and therefore cash costs. In particular, cash costs were significantly higher in the 12 months to 30 June 2009, although they remained negative. During the nine months to 31 March 2010, transitioning from the sublevel cave operation to the block cave operation has resulted in expected variations in throughput and grade. Newcrest benefited from the addition of the secondary crusher and additional vertimills, which are expected to improve recoveries. Cash costs were positively impacted by the reduction in stripping required in block cave mining and the strengthening of the copper price. | ||
Exploration | ||
Newcrest believes that there is exploration potential below the currently defined Ridgeway Deeps resource, in the zone known as Ridgeway Deeps 2. Newcrest has undertaken preliminary studies that support the development of a caving operation to exploit mineralisation in this zone. |
3 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
4 | After stripping and ore inventory adjustments. |
7
Lihir Gold Limited Scheme Booklet | 261 |
1.3 | Cadia East Underground | |
Overview | ||
The Cadia East ore body is a large gold-copper porphyry deposit located next to the eastern edge of the Cadia Hill ore body within the Cadia mineralised corridor. Mineralisation was discovered in 1992 by Newcrest and development studies commenced in the early 1990s. A number of development options for Cadia East were considered including an open pit followed by an underground operation. Recent studies have however concluded that a large underground operation is the preferred option. During the March 2010 quarter, Newcrest completed feasibility for the project and, on 9 April 2010, Newcrest announced that the Newcrest Board had approved the development of the project. First production is expected in the second half of 2012. Once ramp up is complete, total production for Cadia Valley should be in the range 700,000 to 800,000 ounces of gold and 75,000 to in excess of 100,000 tonnes of copper at low cash costs. | ||
Geology and Mineralisation | ||
The system is up to 600 metres wide and extends to approximately 1.9 kilometres below the surface. The mineralisation comprises an upper section dominated by zones of intensely disseminated copper and minor gold mineralisation and a deeper section characterised by zones of higher grade vein and disseminated mineralisation with native gold, chalcopyrite and bornite as the main metalliferous minerals. | ||
Resources and Reserves | ||
Cadia East Undergrounds Mineral Resources and Ore Reserves as at 30 June 2009 are summarised below. The deposit also contains molybdenum and silver at commercial levels: |
Tonnes | Gold Grade | Copper Grade | Contained Gold | Contained | ||||||||||||||||
(Mt) | (g/t) | (%) | (Moz) | Copper (Mt) | ||||||||||||||||
Mineral Resources
|
||||||||||||||||||||
Measured
|
| | | | | |||||||||||||||
Indicated
|
2,246 | 0.44 | 0.29 | 32.0 | 6..41 | |||||||||||||||
Inferred
|
102 | 0.35 | 0.18 | 1.1 | 0.18 | |||||||||||||||
Total Mineral Resources
|
2,347 | 0.44 | 0.28 | 33.2 | 6.59 | |||||||||||||||
Ore Reserves
|
||||||||||||||||||||
Proved
|
| | | | | |||||||||||||||
Probable
|
961 | 0.6 | 0.33 | 18.7 | 3.16 | |||||||||||||||
Total Ore Reserves
|
961 | 0.6 | 0.33 | 18.7 | 3.16 |
Source: Newcrest |
8
11 Independent experts report continued | 262 |
Development and Exploration | ||
The mining of the ore body will be by way of panel caving (essentially the progressive block caving of adjacent panels of mineralisation) as illustrated below: |
Source: Newcrest |
The diagram below illustrates the proposed development of Cadia East: |
Source: Newcrest |
Development of an exploration decline into the Cadia East ore body commenced in May 2005. The large, finely disseminated low grade ore is suited to the low cost, bulk underground mining method of panel caving. | ||
The development will require initial capital estimated at A$1.91 billion. Major items for capital expenditure include decline completion, underground and surface ventilation infrastructure, |
9
Lihir Gold Limited Scheme Booklet | 263 |
underground crushers and conveying infrastructure, development of the extraction horizon, cave development and the mobile underground mining fleet. | |||
Mining will extend from 200 metres to approximately 1,650 metres below surface. Intensive preconditioning and high undercutting techniques will be used to mitigate risks associated with cave propagation at depth and to improve fragmentation and draw rates. It is currently contemplated that two mining lifts will be developed initially and mining will commence at the base of the higher grade ore body in Lift 2. Ore extraction will advance across the ore body. Broken ore will be bogged out by remotely controlled underground mobile loaders, crushed underground and transported to the surface by conveyors. The existing Cadia Valley processing facilities will be modified and upgraded to process the harder Cadia East ore, and will continue to produce both gold bullion and a gold/copper concentrate. Enhancements and debottlenecking should increase the processing plant capacity for the Cadia Valley from 24 million tonnes per annum to 26 million tonnes per annum by 2016. | |||
Following the ramp-up of the Cadia East Underground operations, electricity requirements are expected to increase from the current 85 megawatts per annum to 160 megawatts per annum by 2015, which may require increased supply into Orange. Similarly, water and tailings storage facilities will be upgraded. | |||
The current production plan envisages that the operation will produce for period of at least 30 years. However, the ore body is still open to the west, to the east and at depth. | |||
A number of other studies to enhance the economics of the Cadia Valley Operations are being undertaken. These include conceptual studies to increase annual copper production by mining the high grade copper at the upper levels of the Cadia Hill and Cadia East ore bodies, using a separate mine development and mine access from the Cadia Hill pit, and the potential to develop a third lift to recover high grade material below Lift 2 at Cadia East Underground. |
2 | Telfer | |
Overview | ||
The Telfer operation is 100% owned by Newcrest and is located in the Great Sandy Desert in north-west Western Australia, 450 kilometres east of Port Hedland. Gold was first discovered at Telfer in 1971 and mining between 1977 and 2000 yielded almost six million ounces of gold. Ore was mined from open pits and higher grade underground reefs and processed through a conventional carbon-in-leach (CIL) plant and heap leaching (for lower grade ores) to produce gold on site. Operations were suspended in July 2000 and the mine site was placed on care and maintenance as increasing amounts of cyanide soluble copper depressed gold recoveries and increased operating costs. | ||
A feasibility study including a substantial drilling program was undertaken to assess the potential development of expanded mining and processing operations based on bulk mining of open pit and underground resources and conventional flotation treatment to produce a gold/copper concentrate and gold doré. The production of the gold/copper concentrate would realise the value of the copper mineralisation that had previously effectively been an impost on the operation. | ||
The feasibility study was completed in November 2002 and board approval for the project was granted soon after. The redevelopment was carried out in two phases: |
§ | stage 1 was completed in February 2004 and included the development of an open pit operation, the development of the haulage shaft for the underground mine and of the related infrastructure; and | ||
§ | stage 2 involved the development of the underground mine and related infrastructure and the construction of the pyrite concentrate plant. |
Production commenced from the open pit operation in November 2004 and from the underground operation in March 2006. The mine was officially re-opened in July 2005. |
10
11 Independent experts report continued | 264 |
The Telfer operation is currently mining the Main Dome ore body, both from underground and from the Main Dome open pit. Open pit mining will ultimately extend to the West Dome ore body. The operation produces a copper-gold concentrate, exported via Port Headland, and gold doré. | ||
Geology and Mineralisation | ||
Telfer gold and copper mineralisation is contained in structurally controlled reefs and stockwork hosted within a sequence of Proterozoic sedimentary rocks. The reefs run parallel to the sedimentary layering whereas the stockworks cut across the layering. The Main Dome and West Dome were formed by the folding of the structure. The Main Dome deposit is the largest in the Telfer area with mineralisation defined to a depth of 1.3 kilometres. It was mined prior to the suspension of operations in 2000 using open pit and selective underground mining methods. The West Dome deposit is located two kilometres northwest of Main Dome and has mineralisation defined to a depth of 600 metres of a similar style but at lower grades than at Main Dome. West Dome was previously mined as an open pit. Both deposits are generally oxidised down to a depth of 200 metres with local oxidation occurring down to a depth of 1,000 metres. Both the Main Dome and West Dome deposits are open at depth. | ||
Mining and Processing | ||
Newcrest is currently sourcing ore from the Main Dome open pit and the underground mine. Future production is expected to be supplemented from the currently inactive West Dome. | ||
Mining in the open pit is a conventional load and haul operation. Newcrest is using selective methods to extract high grade material from the reefs and bulk mining methods for the lower grade mineralisation in stockwork. The Main Dome and West Dome pits will be deepened by cut-backs and will eventually form a single open pit approximately 3 kilometres long, 1.5 kilometres wide and 650 metres in depth. Open pit mining is undertaken by Newcrest. | ||
Underground mining is done by sub-level caving. Selective reef mining is expected to be used in the future in the Western Flank area, to the east and west of the sub-level cave. Ore is crushed in an underground crusher and transported via a 1,100 metre deep haulage shaft to the surface, following which it is transported by a conveyor system to the treatment plant. Underground mining is done by a contractor. | ||
A relatively small portion of Telfer ore is oxide material, which is treated by way of heap leaching. The remaining ore is fed to one of two processing trains. Each train consists of a crushing and grinding circuit, including a SAG mill and a ball mill, followed by a gravity gold recovery circuit. The throughput rate is in the range 17-21 million tonnes per annum depending on the hardness of the ore. The gravity circuits recover approximately 40% of the gold, which is smelted on site to produce doré. Ore with lower pyrite content is then treated in a single stage flotation circuit to produce copper-gold concentrate. Ore with higher pyrite content is treated in a sequential flotation process. The first stage produces a gold-copper concentrate and tails. The second stage involves the further flotation of the tails to produce a pyrite-gold concentrate, which is then treated through a conventional carbon in leach circuit to produce doré on site. The concentrate is trucked to Port Hedland from where it is shipped to smelters, principally in East Asia. | ||
Power is generated on site using three gas turbines. A diesel power station provides back-up power. Gas is transported from Port Hedland via a 450 kilometre pipeline. Groundwater suitable for drinking and production is sourced from the area. | ||
The total workforce on site (including contractors) is around 1,000 and operates on a fly-in, fly-out roster. |
11
Lihir Gold Limited Scheme Booklet | 265 |
Resources and Reserves | ||
Telfers Mineral Resources at 30 June 2009 are summarised below: |
Measured | Indicated | Inferred | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | |||||||||||||||||||||||||||||||||||||||||||
Main Dome Pit
|
15 | 0.53 | 0.11 | 288 | 1.0 | 0.11 | 41 | 0.78 | 0.11 | 344 | 1.0 | 0.11 | 10.8 | 0.37 | ||||||||||||||||||||||||||||||||||||||||||
West Dome Pit
|
| | | 166 | 0.74 | 0.06 | 47 | 0.68 | 0.05 | 213 | 0.73 | 0.06 | 5.0 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||
Telfer Underground
|
| | | 57 | 1.5 | 0.32 | 3.3 | 1.67 | 0.27 | 60 | 1.5 | 0.32 | 2.9 | 0.19 | ||||||||||||||||||||||||||||||||||||||||||
VSC
|
| | | | | | 14 | 1.39 | 0.49 | 14 | 1.4 | 0.49 | 0.6 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||
Satellite Deposits
|
| | | 0.57 | 4.2 | 0.03 | 1.7 | 2.6 | 0.08 | 2.3 | 4.1 | 0.07 | 0.3 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||
Total
|
19.6 | 0.76 |
Source: Newcrest |
Telfers Ore Reserves at 30 June 2009 are summarised below: |
Proved | Probable | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | ||||||||||||||||||||||||||||||||||
Main Dome Pit
|
15 | 0.53 | 0.11 | 277 | 1.0 | 0.10 | 292 | 0.94 | 0.10 | 8.8 | 0.30 | |||||||||||||||||||||||||||||||||
West Dome Pit
|
| | | 146 | 0.66 | 0.06 | 146 | 0.66 | 0.06 | 3.1 | 0.09 | |||||||||||||||||||||||||||||||||
Telfer Underground
|
0.21 | 12 | 1.5 | 42 | 1.6 | 0.34 | 42 | 1.6 | 0.35 | 2.2 | 0.14 | |||||||||||||||||||||||||||||||||
Total
|
14.1 | 0.53 |
Source: Newcrest |
The following table shows movements in Telfer gold and copper reserves since 2005: |
Tonnes | Au | Cu | Au | Cu | ||||||||||||||||
Year | (Mt) | (g/t) | (%) | (Moz) | (Mt) | |||||||||||||||
2005
|
360 | 1.5 | 0.18 | 17 | 0.64 | |||||||||||||||
2006
|
390 | 1.4 | 0.15 | 17 | 0.59 | |||||||||||||||
2007
|
453 | 1.0 | 0.12 | 14.6 | 0.53 | |||||||||||||||
2008
|
461 | 0.98 | 0.12 | 14.5 | 0.55 | |||||||||||||||
2009
|
480 | 0.91 | 0.11 | 14.1 | 0.53 |
Source: Newcrest |
In August 2006, resources and reserves at Telfer were adjusted to reflect the fact that realised grades were lower than those predicted by the resource model. Reserves and resources were further downgraded the following year following a substantial review of the previous estimates which lead to adjustments to resource classification, grade calibration, cut-off approach and dilution parameters for the supergene portion of the Main Dome deposit. Overall, resources were downgraded by 5.6 million ounces and reserves by 3.1 million ounces as a result of these 2006 and 2007 reviews In August 2009, Newcrest released an initial resource for the Vertical Stock Corridor, which is located below the Main Dome resource. |
12
11 Independent experts report continued | 266 |
Operating Performance | ||
Telfers historical operating performance is summarised below: |
Nine months | ||||||||||||||||||||
Year ended 30 June | to 31 March | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
Material mined (Mt)
|
49.8 | 61.1 | 66.3 | 52.1 | 38.6 | |||||||||||||||
Ore treated (Mt)
|
20.4 | 20.6 | 18.3 | 18.8 | 15.8 | |||||||||||||||
Gold head grade (g/t)
|
1.19 | 1.16 | 1.13 | 1.14 | 1.09 | |||||||||||||||
Copper head grade (%)
|
0.28 | 0.21 | 0.20 | 0.20 | 0.19 | |||||||||||||||
Gold recovery (%)
|
81.4 | 76.9 | 83.8 | 88.2 | 89.4 | |||||||||||||||
Copper recovery (%)
|
66.6 | 65.3 | 73.3 | 87.0 | 86.0 | |||||||||||||||
Gold production (oz)
|
650,016 | 627,077 | 590,217 | 629,108 | 500,034 | |||||||||||||||
Copper production (t)
|
38,374 | 27,820 | 26,771 | 32,905 | 25,912 | |||||||||||||||
Gross cash costs (A$/oz)
5
|
130 | 535 | 657 | 707 | 570 | |||||||||||||||
Net cash costs (A$/oz)
6
|
115 | 429 | 607 | 708 | 545 |
Source: Newcrest |
Following the recommencement of operations in 2004, Telfer reached design throughput rates fairly quickly, but gold production was below expectation. The disappointing performance was attributable to a number of factors, including poor delineation of waste-ore boundaries, lack of mining accuracy, lower than expected grades, unexpectedly high levels of arsenic impacting the quality of the concentrates and low recoveries. Performance has improved as mining of the supergene and high-arsenic ores has been substantially completed and mining has moved into fresh rock. Reviews of the resource models, the upgrading of the gravity circuit and the commissioning of the pyrite plant have also resulted in improved performance. | ||
Production increased significantly during 2006 as operations ramped up, but gold grades were lower than predicted by the resource model and gold and copper recoveries were lower than planned. While the unit costs of key inputs increased, Newcrest benefited from significantly higher copper spot prices. The 2006 financial year also marked the commencement of the underground operations, which only marginally contributed to overall production. | ||
In 2007 ore production and gold grades were in line with those of the previous year, but copper grades and gold recoveries fell significantly, resulting in reduced gold and copper production. These factors combined with the continued increases in unit prices of key inputs, the October 2006 power supply outage and the March 2007 cyclonic events, all contributed to unit cash costs increasing approximately four-fold. | ||
In the 2008 financial year, the quantity of ore treated fell significantly because of the hardness of the ore, maintenance issues and an explosion at the Apache Varanus Island gas facility in June 2008, which reduced the supply of gas to Telfers power plant. This was partially offset by higher gold and copper recoveries. Cash costs continued to rise as a result of the fall in production and increase in input prices. | ||
2009 saw improvements in gold and copper recoveries driven by stabilisation of production volumes through the plant. However, lower copper prices resulted in higher cash costs. | ||
During the nine months to 31 March 2010, grades decreased slightly but ore throughput increased on an annualised basis compared to the 2009 financial year and recoveries remained high. These factors combined with other cost saving initiatives at the Telfer operations resulted in a sharp fall in cash costs. |
5 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
6 | After stripping and ore inventory adjustments. |
13
Lihir Gold Limited Scheme Booklet | 267 |
Exploration | ||
Newcrest has developed a number of early stage resources and exploration targets, both in the immediate vicinity of the mining operations and further afield, that have the potential to provide additional feed to the Telfer treatment plant. Newcrest expects to upgrade resources at the Vertical Stockwork Corridor in the next few months. At Camp Dome, recent drilling suggests the presence of a blanket of supergene copper mineralisation close to the surface. At Trotmans Stockwork, recent results support the potential for tungsten and copper mineralisation near the surface. | ||
3 | Gosowong | |
Overview | ||
Newcrest has an 82.5% stake in the Gosowong gold operations, which are located on the Halmahera Island approximately 380 kilometres east of the major regional town of Manado in Sulawesi. The remaining 17.5% interest is owned by PT Aneka Tambang. The Gosowong gold province is a highly prospective, high grade, epithermal mineral region covering an area of approximately 30,000 hectares. | ||
To date the Gosowong operation has mined three deposits: Gosowong, Toguraci and Kencana. The Gosowong deposit was discovered in September 1993 and production commenced in February 1999 from an open pit. Mining from this initial pit was completed in May 2002 with a total of 772,000 ounces at a gold grade of 22 g/t produced over that period. The Toguraci deposit was discovered in 1995 and is located approximately two kilometres south-west of the Gosowong pit. Mining at Toguraci commenced in September 2003 from an open pit and ended in October 2006. The Toguraci open pit yielded a total of 489,000 ounces of gold at an average grade of 27 g/t. Newcrest is currently mining the Kencana deposit, which is located one kilometre south of the Gosowong pit. Development of the Kencana underground mine commenced in February 2005 and first ore was mined in March 2006. | ||
Gosowong is currently undergoing an expansion which includes an extension of the existing underground mine into the K2 and K Link high-grade epithermal gold deposits and an increase in the capacity of the process plant. Newcrest will also seek to extend the life of the Gosowong operation through reworking the Gosowong pit and mining mineralisation to the north of the Toguraci pit, and by identifying additional mineralisation, both through extensions to the existing Kencana deposit and by way of new discoveries within the Contract of Work. | ||
Geology and Mineralisation | ||
Two styles of mineralisation have been recognised to date within the Gosowong district: low-grade and uneconomic copper-gold porphyry mineralisation and high-grade gold-silver epithermal veining. The three deposits discovered to date have been low sulphidation epithermal vein deposits. | ||
The Kencana system, which includes the K1, K2 and K-Link deposits, is a mesh of moderately northeast dipping (30-50 degrees), northwest trending low sulphidation epithermal shoots located just 800 metres to the south of the original Gosowong mine. The parallel K1 and K2 shoots are north-east dipping while the north-west trending K-Link shoot forms a linking structure between the K1 and K2 shoots. K1 occurs approximately 70 metres below the surface and K2 and K-Link are located 350 metres below surface. | ||
Mining and Processing | ||
The Kencana deposit is accessed via a single decline and has historically been mined using the underhand cut and fill mining method. This mining method allows good ore selectivity, which limits dilution and increases recovery. It is also suitable for the poor ground conditions and variable grade that have historically characterised the Kencana deposit. However, recently improved ground conditions in the K1 deposit have allowed the trialling of mining by open stoping. If successful, future mining is expected to utilise a combination of underhand cut and fill and open stoping. Mining is currently taking place in the K1 and K2 ore bodies. Mining operations were transferred back to Newcrest in July 2009. | ||
Ore is first blended to ensure a consistent grade before being crushed and ground through a SAG and ball mill circuit and a recently completed Vertimill circuit. An additional SAG mill is to be commissioned in |
14
11 Independent experts report continued | 268 |
the September 2010 quarter. The ore then undergoes a conventional cyanide leaching process. Gold and silver from the cyanide solution is recovered using the Merrill-Crowe process and smelted to produce doré bars. Power for the operations is provided by diesel generators. The nominal treatment rate of the plant after the installation of the Vertimill in May 2009 is 575,000 tonnes per annum. | ||
Resources and Reserves | ||
Mineral Resources and Ore Reserves at Gosowong as at 30 June 2009 can be summarised as follows: |
Tonnes | Gold Grade | Silver Grade | Contained Gold | Contained Silver | ||||||||||||||||
(Mt) | (g/t) | (g/t) | (Moz) | (Moz) | ||||||||||||||||
Mineral Resources
|
||||||||||||||||||||
Measured
|
| | | | | |||||||||||||||
Indicated
|
3.0 | 28 | 21 | 2.7 | 2.0 | |||||||||||||||
Inferred
|
0.67 | 3.4 | 5.5 | 0.1 | 0.1 | |||||||||||||||
Total Mineral Resources
|
3.7 | 24 | 18 | 2.8 | 2.2 | |||||||||||||||
Ore Reserves
|
||||||||||||||||||||
Proved
|
| | | | | |||||||||||||||
Probable
|
3.1 | 24 | 16 | 2.4 | 1.6 | |||||||||||||||
Total Ore Reserves
|
3.1 | 24 | 16 | 2.4 | 1.6 |
Source: Newcrest |
Due to the high variability of the grades and reef geometrics present at Gosowong, Mineral Resources are not normally classified as Measured until grade control sampling has been completed. | ||
Operating Performance | ||
Recent production from the Gosowong site is summarised as follows: |
Year to 30 June | Nine months | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | to 31 March | ||||||||||||||||
Material mined
8
(000s tonnes)
|
7,300 | 570 | 304 | 452 | 411 | |||||||||||||||
Ore treated (000s tonnes)
|
267 | 313 | 309 | 425 | 431 | |||||||||||||||
Gold head grade (g/t)
|
22.9 | 37.4 | 43.2 | 32.3 | 22.3 | |||||||||||||||
Gold recovery (%)
|
96.5 | 94.2 | 92.3 | 90.4 | 95.5 | |||||||||||||||
Gold production (ounces)
|
187,316 | 347,807 | 400,202 | 400,220 | 295,139 | |||||||||||||||
Gross cash costs (A$/oz)
9
|
330 | 237 | 230 | 339 | 314 | |||||||||||||||
Net cash costs (A$/oz)
10
|
337 | 238 | 234 | 336 | 318 |
Source: Newcrest |
The operating performance in the 2006 and 2007 financial years reflected the transition from the Toguraci open pit to the Kencana underground mine; operations at Toguraci ceased in October 2006 while production at Kencana commenced in March 2006. The ramp-up of mining at Kencana combined with the higher grades of the K1 ore body and optimisations of the process plant resulted in a significant increase in gold production and a commensurate fall in cash costs in the 2007 financial year. Gold production increased further in the financial year 2008 primarily as a result of higher grade. In the 2009 |
7 | Represents 100% basis. | |
8 | Material mined for open pit includes ore and waste. Material mined for underground operations includes only ore production. | |
9 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
10 | After stripping and ore inventory adjustments. |
15
Lihir Gold Limited Scheme Booklet | 269 |
financial year, gold production was comparable to the 2008 production, with increased throughput offset by lower head grades. The lower head grades and adverse foreign exchange rate movements resulted in higher unit costs in 2009. Performance for the nine months to 31 March 2010 reflects the increased plant throughput and improved recoveries and the lower head grade resulting from the development of the K2 ore body and the treatment of lower grade stockpiles to fill the mill. Cash costs were positively affected by lower labour costs. | ||
Exploration | ||
Newcrest has been focusing exploration at Toguraci North and has identified two high grade mineralised structures, Damut and Yahut, for which it is expecting to release initial resource estimates during the June 2010 quarter. A number of other targets are being investigated. | ||
4 | Morobe Joint Venture | |
Following the execution of a joint venture agreement with Harmony in May 2008, Newcrest has acquired a 50% interest in Harmonys Morobe gold assets in Papua New Guinea. The key assets of the joint venture are the Hidden Valley gold operations and the Wafi-Golpu gold project, both located in the Morobe Province of Papua New Guinea. The location of the Morobe joint ventures holdings is shown on the map below: |
Source: Newcrest |
16
11 Independent experts report continued | 270 |
4.1 | Hidden Valley | |
Overview | ||
The Hidden Valley gold and silver operations are located in the Morobe province approximately 90 kilometres south-west of the port town of Lae. The Morobe Province is a significant gold province, located within a porphyry copper belt that stretches from the north western tip to the south eastern tip of the New Guinea island, and has yielded significant gold discoveries including Grasberg, the worlds largest gold mine in terms of reserves. | ||
Access to the site is via a good quality dirt road from Bulolo, which can be reached either by sealed road from Lae or by charter plane from Port Moresby. The operations are located in a hilly region and are scattered along ridges, hilltops and valleys at altitudes ranging from 2,000 metres to 2,700 metres. They comprise the Hidden Valley-Kaveroi open pit, which mines the Hidden Valley and the Kaveroi deposits from a single open pit and contains 80% of current gold reserves and all the silver reserves, the Hamata open pit, which is a smaller but higher grade open pit, a processing plant and a tailings storage facility, both located next to the Hamata pit. The Hidden Valley-Kaveroi pit sits on a mountain top overlooking the rest of the operations and the Hamata pit, process plant and tailings dam are all in the valley. A 5.4 kilometre long pipe conveyor is used to transport the crushed ore from the Hidden Valley-Kaveroi pit down to the process plant. The operation produces both gold and silver bullion. The layout of the operations is shown on the map below: |
Source: Newcrest |
Geology and Mineralisation | ||
The Hidden Valley deposits are located in the Wau Graben, which is the host of a number of major gold and silver deposits. The deposits are structurally controlled vein-stockwork mineralised systems, with most of the mineralisation hosted by granodiorite. The Hidden Valley deposit dips |
17
Lihir Gold Limited Scheme Booklet | 271 |
to the east. The Kaveroi deposit lies to the east of the Hidden Valley deposit and dips steeply also to the east. Both deposits are bounded by faults. The Hidden Valley and Kaveroi deposits are fairly homogeneous epithermal gold deposits and contain largely fresh ore with gold and high grades of silver. The shallower Hamata deposit is located approximately five kilometres north-north-west of the Hidden Valley-Kaveroi pit and is also an epithermal gold deposit. It contains mainly oxide ore at a higher gold grade than the Hidden Valley-Kaveroi pit, but no silver. | ||
Mining and Processing | ||
Mining at Hidden Valley is by conventional open pit methods. Both pits are expected to be mined simultaneously. The process plant is designed to treat oxide ore, sulphide ore and transitional oxide/sulphide ore. The treatment of all ore types commences with crushing and grinding. Oxide ore, which is sourced mainly from the Hamata pit and only contains gold, is then treated through a conventional carbon in leach circuit followed by elution. After crushing and grinding, primary or sulphide ore, which contains gold and silver, is leached with cyanide. The leach solution is concentrated in a counter current decantation circuit and treated using the Merrill-Crowe process to precipitate the gold and silver. Feed made up of both oxide and sulphide ores is floated to separate the sulphides, which are leached and treated through the Merrill-Crowe process, while the oxide flotation tails go through the CIL circuit. Gold and silver are recovered in the form of separate gold and silver bullions. Construction and commissioning were delayed because of heavy rainfall, gearbox failures and plant modifications, but are now completed. The plant is now expected to reach full capacity in the June 2010 quarter. | ||
Power is currently sourced from 19 diesel generator sets located on site. The Yonki hydro scheme is expected to become the permanent source of power in late 2010. | ||
Resources and Reserves | ||
Hidden Valleys Mineral Resources at 30 June 2009 are summarised below. These figures represent 100% of the Mineral Resources: |
Measured | Indicated | Inferred | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Au | Ag | Au | Ag | Au | Ag | Au | Ag | Au | Ag | |||||||||||||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (g/t) | Mt | (g/t) | (g/t) | Mt | (g/t) | (g/t) | Mt | (g/t) | (g/t) | (Moz) | (Moz) | |||||||||||||||||||||||||||||||||||||||||||
Hidden Valley-Kaveroi
|
5.6 | 2.2 | 41 | 46 | 1.9 | 34 | 30 | 1.5 | 27 | 82 | 1.8 | 32 | 4.6 | 84.0 | ||||||||||||||||||||||||||||||||||||||||||
Hamata
|
0.34 | 2.2 | | 7.8 | 2.3 | | 1.22 | 2.6 | | 9.2 | 2.4 | | 0.8 | | ||||||||||||||||||||||||||||||||||||||||||
Total
|
5.4 | 84.0 |
Source: Newcrest |
Hidden Valleys Ore Reserves at 30 June 2009 are summarised below. These figures represent 100% of the Ore Reserves: |
Proved | Probable | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | Ag | Au | Ag | Au | Ag | Au | Ag | |||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (g/t) | Mt | (g/t) | (g/t) | Mt | (g/t) | (g/t) | (Moz) | (Moz) | ||||||||||||||||||||||||||||||||||
Hidden Valley-Kaveroi
|
2.8 | 2.3 | 39 | 36 | 2.0 | 37 | 38 | 2.0 | 37 | 2.4 | 45.2 | |||||||||||||||||||||||||||||||||
Hamata
|
0.20 | 2.1 | | 3.8 | 2.7 | | 4.0 | 2.7 | | 0.4 | | |||||||||||||||||||||||||||||||||
Total
|
2.8 | 45.2 |
Source: Newcrest |
Reserves are currently constrained by the capacity of the tailings storage facility. The identification of additional storage capacity would result in a significant uplift of reserves from the currently delineated measured and indicated resource. |
18
11 Independent experts report continued | 272 |
Operating Performance | ||
Hidden Valleys historical operating performance is summarised below. These figures represent 100% of production: |
Quarter ended | ||||||||||||
30 Sep 2009 | 31 Dec 2009 | 31 Mar 2010 | ||||||||||
Material mined (000s tonnes)
|
| 5,376 | 3,954 | |||||||||
Ore treated (000s tonnes)
|
| 778 | 806 | |||||||||
Gold head grade (g/t)
|
| 2.25 | 1.96 | |||||||||
Gold recovery (%)
|
| 79.3 | 70.7 | |||||||||
Gold production (oz)
|
6,336 | 43,028 | 35,360 | |||||||||
Gross cash costs (A$/oz)
11
|
| | | |||||||||
Net cash costs (A$/oz)
12
|
| | |
Source: Newcrest |
The joint venture is currently investigating a number of near mine targets, most of which are located within the mining licence. | ||
Outlook | ||
Newcrest has revised its initial gold production forecast for its 50% share of Hidden Valley for the year ending 30 June 2010 from 110,000-125,000 ounces to 65,000-75,000 ounces. | ||
4.2 | Wafi-Golpu | |
Overview | ||
The Wafi-Golpu project is located in an emerging mineral district, approximately 60 kilometres southwest of the port city of Lae. The project comprises two separate ore systems covered by four contiguous exploration licences. The project is in a hilly area, with no infrastructure in place. | ||
Geology and Mineralisation | ||
The joint venture has identified a major porphyry copper-gold system at Golpu, epithermal gold mineralisation at Wafi and the weaker mineralised Nambonga porphyry copper-gold system. Mineralisation in the Wafi deposit occurs as disseminated sulphides and quartz veins and stockworks; most of the mineralisation is refractory and approximately 15% is oxidised or partially oxidised. Mineralisation at Nambonga occurs as disseminated veins and stockworks. The map below shows the location of the main known ore bodies at Wafi-Golpu: |
11 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
12 | After stripping and ore inventory adjustments. |
19
Lihir Gold Limited Scheme Booklet | 273 |
Source: Newcrest |
A number of other zones of mineralisation and prospects have been identified in the area, including within the Wafi Transfer structure, which has a strike length in excess of 15 kilometres. | ||
Mineralisation remains open and the Joint Venture is continuing its exploration programme. The exploration target for the Wafi-Golpu area has been updated to in excess of 20 million ounces of gold and four million tonnes of copper. Recent drilling at Golpu indicates that the porphyry deposit might be significantly larger than currently defined and that grade increases at depth. An updated resource estimate is expected to be completed in the June 2010 quarter. A number of other early porphyry style targets are to be tested. | ||
Resources and Reserves | ||
Wafi-Golpus Mineral Resources at 30 June 2009 are summarised below. These figures represent 100% of the Mineral Resources: |
Measured | Indicated | Inferred | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | |||||||||||||||||||||||||||||||||||||||||||
Nambonga
|
| | | | | | 40 | 0.79 | 0.22 | 40 | 0.8 | 0.22 | 1.0 | 0.08 | ||||||||||||||||||||||||||||||||||||||||||
Wafi
|
| | | 64 | 2.0 | | 40 | 1.7 | | 104 | 1.9 | | 6.2 | | ||||||||||||||||||||||||||||||||||||||||||
Golpu
|
| | | 88 | 0.63 | 1.39 | 76 | 0.49 | 0.72 | 164 | 0.57 | 1.1 | 3.0 | 1.76 | ||||||||||||||||||||||||||||||||||||||||||
Total
|
10.2 | 1.84 |
Source: Newcrest |
20
11 Independent experts report continued | 274 |
Wafi-Golpus Ore Reserves at 30 June 2009 are summarised below. These figures represent 100% of the Ore Reserves: |
Proved | Probable | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | Moz) | (Mt) | ||||||||||||||||||||||||||||||||||
Golpu
|
| | | 70 | 0.61 | 1.1 | 70 | 0.61 | 1.1 | 1.4 | 0.80 |
Source: Newcrest |
The Ore Reserve at Golpu is based on the assumption that mining will be done in a block cave underground mine to produce a copper and gold concentrate. | |||
4.3 | Regional Exploration | ||
The joint venture is actively exploring across its tenements to assess known prospects and to identify new targets. The tenements are considered to be prospective for porphyry copper mineralisation, copper-gold skarn mineralisation and epithermal gold mineralisation. The aim is to identify new deposits with the potential to support stand-alone operations. |
5 | Cracow | |
Overview | ||
Newcrest has a 70% interest in the Cracow gold mine. The remaining interest is owned by Sedimentary Holdings, a wholly owned subsidiary of Catalpa Limited. Cracow is a high grade, underground gold operation situated in the Cracow Goldfield approximately 1.5 kilometres from the township of Cracow and about 500 kilometres northwest of Brisbane in central Queensland, Australia. Gold has been mined intermittently in the Cracow Goldfield since 1932 with historical ventures producing in excess of 820,000 ounces of gold, predominantly from the Golden Plateau deposit. | ||
The current mining operations at Cracow mine are focussed on deposits discovered since 1996. In 2002 the underground mine was developed and the treatment plant refurbished and upgraded. The Cracow operation has consistently produced around 100,000 ounces of gold per annum over the last four years with throughput capacity exceeding 400,000 tonnes per annum. | ||
Geology and Mineralisation | ||
The Cracow gold deposits are quartz (carbonate), low sulphidation, epithermal gold-silver deposits formed within lode channels in steep-dipping fault zones, which range in strike from north-north-east to north-west. The main deposits occur within a zone around six kilometres long by two kilometres wide, although there are a number of other historical mines some kilometres to the east. The structural regime is developed within Permian andesitic lavas, tuffs and coarse fragmentals. Gold grade is generally high grade (approximately 10g/t) and is associated with silver. | ||
Mining and Processing | ||
The mining and development activities at the Cracow mine are undertaken by Downer EDI under an Alliance Agreement. All mining is from underground, using the downhole benching method with concurrent backfill. After blasting, ore is transported directly to the run-of-mine pad located adjacent to the ore treatment plant. A decline driven from the surface at a gradient of approximately 1:7 provides access to the Royal Shoot deposit while the Klondyke North and Crown Shoot ore bodies are accessed via a decline that branches off the Royal decline. The Sovereign ore body is currently being accessed by developing a new decline branching off the Crown decline. The Kilkenny ore body will be accessed from another new decline branching off the Crown decline. Ventilation is currently provided by three exhaust raises. | ||
Cracow employs a conventional gold processing technology which includes a CIL gold processing circuit and associated mill and onsite infrastructure. |
21
Lihir Gold Limited Scheme Booklet | 275 |
Reserves and Resources | ||
Cracow mine Reserves and Resources at 30 June 2009 are summarised below: |
Tonnes | Average Grade | Contained Gold | ||||||||||
(Mt) | (g/t) | (Moz) | ||||||||||
Resources
|
3.2 | 8.2 | 0.84 | |||||||||
Reserves
|
1.0 | 7.2 | 0.23 |
Source: Newcrest |
Operating Performance |
The operating performance of Cracow for the four years ended 30 June 2009 and the nine months ended 31 March 2009 is summarised below: |
Nine months | ||||||||||||||||||||
Year ended 30 June | to 31 March | |||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
Ore mined (000s tonnes)
|
320 | 376 | 431 | 463 | 357 | |||||||||||||||
Ore milled (000s tonnes)
|
316 | 386 | 414 | 437 | 351 | |||||||||||||||
Average head grade (g/t)
|
11.6 | 10.1 | 8.7 | 7.6 | 7.2 | |||||||||||||||
Gold recovery (%)
|
94.3 | 93.9 | 92.0 | 92.4 | 92.0 | |||||||||||||||
Gold produced (000s ounces)
|
111.0 | 116.7 | 107.4 | 99.2 | 74.5 | |||||||||||||||
Gross cash costs (A$/oz)
15
|
319 | 376 | 474 | 530 | 537 | |||||||||||||||
Net cash costs (A$/oz)
16
|
306 | 342 | 473 | 519 | 527 |
Source: Newcrest |
The financial year ending 30 June 2006 was the first full year of gold production at Cracow. Since then gold production at Cracow has been reasonably consistent at around 100,000 ounces per annum. The production level has been maintained despite declining head grades by increased mill throughput, although cash costs have increased over the period. | ||
Exploration | ||
Exploration at Cracow has been directed at indentifying high-grade gold mineralisation within close proximity to the existing deposits. Recent exploration has focussed on drilling of the Kilkenny structure as well as identifying additional resource potential within the Roses Pride, Empire, Phoenix and Stirling vein structures. Drilling has also commenced to the north and south of the mine. | ||
6 | Namosi Joint Venture | |
Newcrest has a 69.94% interest in the Namosi Joint Venture. The joint venture was established in late 2007 with Nittetsu Mining Co. Ltd and Mitsubishi Materials Corporation to explore for porphyry copper-gold and epithermal-style gold mineralization in the Namosi region of Fiji. Newcrest earned its 69.94% interest in the joint venture by funding A$21.5 million of exploration expenditure over 5.5 years. |
13 | Numbers may not add up due to rounding. | |
14 | Cracow Mine reported on 100% basis. | |
15 | Net of by-product credits calculated at spot prices and before stripping and ore inventory adjustments. | |
16 | After stripping and ore inventory adjustments. |
22
11 Independent experts report continued | 276 |
The Namosi tenement, which is located approximately 30 kilometres west of Fijis capital city, Suva, covers approximately 15% of the area of the main island. It has been periodically explored over the past 40 years and the potential for gold and base metals was established in the 1960s. | ||
Namosis Mineral Resources as at 30 June 2009 are summarised as follows. The figures represent 100% of the resource: |
Indicated | Inferred | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | ||||||||||||||||||||||||||||||||||||||||||||
Mt | Au (g/t) | Cu (%) | Mt | Au (g/t) | Cu (%) | Mt | Au (g/t) | Cu (%) | (Moz) | Cu (Mt) | ||||||||||||||||||||||||||||||||||
Namosi
|
506 | 0.16 | 0.47 | 795 | 0.12 | 0.39 | 1,301 | 0.14 | 0.42 | 5.7 | 5.5 |
Source: Newcrest |
Current exploration activity is focused on upgrading the existing resources and identifying new discoveries in the Waivaka corridor. Initial activity will be directed to the more than 15 significant copper and gold prospects already identified during previous reconnaissance level exploration. |
7 | Regional Exploration |
7.1 | OCallaghans | ||
OCallaghans is a polymetallic deposit located on the Telfer mining lease, approximately 10 kilometres south of the Telfer gold mine and other key infrastructure. It is 100% owned by Newcrest. OCallaghans is one of the worlds largest tungsten resources and also contains significant zinc, copper and lead mineralisation. | |||
The OCallaghans deposit is a flat, laterally extensive skarn, approximately 1.2 kilometres long and one kilometre wide, approximately 300 metres below the surface and up to 60 metres in thickness. The skarn has distinct continuous high grade zinc and lead zones which should allow for selective mining. The initial resource estimated in August 2009 was updated in February 2010 as follows: |
WO 3 | Cu | Zn | Pb | WO 3 | Cu | Zn | Pb | |||||||||||||||||||||||||||||
Mt | (%) | (%) | (%) | (%) | (Mt) | (Mt) | (Mt) | (Mt) | ||||||||||||||||||||||||||||
Indicated
|
65 | 0.34 | 0.30 | 0.57 | 0.28 | 0.22 | 0.19 | 0.37 | 0.18 | |||||||||||||||||||||||||||
Inferred
|
13 | 0.27 | 0.25 | 0.16 | 0.07 | 0.04 | 0.03 | 0.02 | 0.01 | |||||||||||||||||||||||||||
Total
|
78 | 0.33 | 0.29 | 0.50 | 0.25 | 0.26 | 0.22 | 0.39 | 0.19 |
Source: Newcrest |
7.2 | Marsden | ||
Newcrest owns 100% of the Marsden exploration project located in central New South Wales. Mineralisation is a porphyry-style copper-gold mineralisation hosted in intrusive rocks. Marsdens Mineral Resources as at 30 June 2009 are summarised as follows: |
Indicated | Inferred | Total | ||||||||||||||||||||||||||||||||||||||||||
Au | Cu | Au | Cu | Au | Cu | Au | Cu | |||||||||||||||||||||||||||||||||||||
Mt | (g/t) | (%) | Mt | (g/t) | (%) | Mt | (g/t) | (%) | (Moz) | (Mt) | ||||||||||||||||||||||||||||||||||
Marsden
|
178 | 0.19 | 0.37 | 39 | 0.07 | 0.16 | 216 | 0.17 | 0.33 | 1.2 | 0.71 |
Source: Newcrest |
23
Lihir Gold Limited Scheme Booklet | 277 |
Variables | Multiples | |||||||||||||||||||||||||||||||||||||||
Enterprise | Cash Costs | |||||||||||||||||||||||||||||||||||||||
Value (US$ | Gold Resources | Gold Reserves | Gold Production (000s oz) | (US$ / oz) | Gold Resources | Gold Reserves | Gold Production (US$ / oz) | |||||||||||||||||||||||||||||||||
million) | (000s oz) | (000s oz) | Actual | Forecast | Actual | (US$ / oz) | (US$ / oz) | Actual | Forecast | |||||||||||||||||||||||||||||||
International Gold
Majors
|
||||||||||||||||||||||||||||||||||||||||
Barrick Gold Corporation
|
45,164 | 234,313 | 141,185 | 7,423 | 7,797 | 363 | 193 | 320 | 6,084 | 5,792 | ||||||||||||||||||||||||||||||
Goldcorp Inc
|
31,627 | 101,323 | 53,460 | 2,421 | 2,589 | 295 | 312 | 592 | 13,062 | 12,216 | ||||||||||||||||||||||||||||||
Newmont Mining Corp
|
27,741 | 91,780 | 91,780 | 5,292 | 5,394 | na | 302 | 302 | 5,242 | 5,143 | ||||||||||||||||||||||||||||||
AngloGold Ashanti Ltd
|
18,984 | 226,680 | 71,440 | 4,599 | 4,667 | 514 | 84 | 266 | 4,128 | 4,068 | ||||||||||||||||||||||||||||||
Kinross Gold Corporation
|
11,281 | 76,005 | 45,158 | 2,239 | 2,213 | 421 | 148 | 250 | 5,038 | 5,097 | ||||||||||||||||||||||||||||||
Minimum
|
84 | 250 | 4,128 | 4,068 | ||||||||||||||||||||||||||||||||||||
Maximum
|
312 | 592 | 13,062 | 12,216 | ||||||||||||||||||||||||||||||||||||
Weighted Average
|
228 | 370 | 7,300 | 6,973 | ||||||||||||||||||||||||||||||||||||
Other International Gold
Companies
|
||||||||||||||||||||||||||||||||||||||||
Gold Fields Limited
|
10,534 | 255,377 | 78,863 | 3,414 | 3,750 | 516 | 41 | 134 | 3,085 | 2,809 | ||||||||||||||||||||||||||||||
Agnico-Eagle Mines Ltd
|
9,838 | 29,795 | 18,398 | 493 | 1,057 | 347 | 330 | 535 | 19,956 | 9,305 | ||||||||||||||||||||||||||||||
Eldorado
Gold Corporation
2
|
9,188 | 25,724 | 14,567 | 553 | 600 | 337 | 357 | 631 | 16,611 | 15,313 | ||||||||||||||||||||||||||||||
OJSC Polyus Gold
|
9,024 | 110,215 | 74,082 | 1,261 | na | 391 | 82 | 122 | 7,156 | na | ||||||||||||||||||||||||||||||
Yamana Gold Inc
|
8,083 | 39,769 | 17,131 | 1,026 | 1,030 | 357 | 203 | 472 | 7,881 | 7,848 | ||||||||||||||||||||||||||||||
Randgold
Resources Limited
|
7,319 | 27,330 | 15,560 | 488 | 500 | 510 | 268 | 470 | 14,991 | 14,639 | ||||||||||||||||||||||||||||||
Red Back Mining Inc
|
6,427 | 12,250 | 7,350 | 342 | 505 | 391 | 525 | 874 | 18,788 | 12,727 | ||||||||||||||||||||||||||||||
IAMGOLD Corporation
|
6,058 | 28,741 | 14,508 | 939 | 970 | 461 | 211 | 418 | 6,452 | 6,246 | ||||||||||||||||||||||||||||||
Minimum
|
41 | 122 | 3,085 | 2,809 | ||||||||||||||||||||||||||||||||||||
Maximum
|
525 | 874 | 19,956 | 15,313 | ||||||||||||||||||||||||||||||||||||
Weighted Average
|
243 | 440 | 11,866 | 8,407 |
1 | Gold Resources and Reserves are as at last reported. Gold production is based on company forecasts. Production and cash costs forecasts are for years ending 31 December 2009 and 31 December 2010, except for Gold Fields Limited for which the forecast is for the year ending 30 June 2010. Analysis uses share prices as at [4 June] 2010. | |
2 | Historical gold production for Eldorado Gold Corporation (Eldorado Gold) assumes the acquisition of Sino Gold by Eldorado Gold was completed on 1 January 2009. The gold production actually attributed to Eldorado Gold during the year was 363,509 ounces and the cash costs per ounce represent the actual costs incurred by Eldorado Gold in producing the 363509 ounces of gold. |
1
11 Independent experts report continued | 278 |
1 | Overview | |
Despite the extensive analysis of gold companies and gold projects by analysts, valuers and other market commentators, there is little consensus on an appropriate basis for the valuation of gold assets. While the discounted cash flow (DCF) methodology is frequently applied to valuing gold companies and gold projects, there is considerable uncertainty about the extent to which the results properly explain observed market values. This uncertainty is reflected in the reliance on rules of thumb based on quantities of gold reserves and resources and the frequent use of DCF valuations as an indicator of relative rather than absolute value. This Appendix examines some difficulties inherent in using the DCF methodology to value gold companies and gold projects and examines modifications to the DCF approach to obtain more meaningful results. In particular, it sets out the theoretical background to Grant Samuels adoption of the gold futures methodology as its preferred approach to the valuation of gold assets. | ||
Grant Samuels experience is that, over a period of many years, the gold futures methodology has successfully explained share market and transaction values in the gold sector. As set out in Section 7.2 of the report to which this Appendix is attached, Grant Samuels analysis suggests that since January 2008 (apparently as a result of the global financial crisis and more recently as a result of concerns regarding European sovereign debt) there has been a market de-rating of gold equities relative to physical gold. | ||
The consequence is that the gold futures methodology now appears to have poorer explanatory power (particularly for long life projects) than previously. However, the gold futures methodology continues to have both practical and theoretical advantages relative to traditional DCF analysis in the context of gold asset valuations. | ||
2 | Limitations of the Discounted Cash Flow Methodology | |
Although the DCF methodology is widely used for valuing gold projects, it has a number of shortcomings. Most importantly, the ability of DCF valuations to explain the value of gold assets is at best limited. The value of gold assets estimated by DCF valuations is frequently substantially less than the value of the assets observable by reference to equity market values or the price at which the assets are purchased and sold. This is particularly the case with long life gold assets. DCF analysis attributes little value to the later years of production of such long life assets. | ||
Some of the difference between values estimated using the DCF methodology and market values may be explained by reference to exploration and development potential not explicitly captured by the DCF methodology. Analysts and other gold market observers frequently refer to a gold premium to explain the residual difference between DCF valuations and market values. In Grant Samuels view, this is unsatisfactory. The notion of a gold premium does not provide an intellectually rigorous and replicable technique for valuing gold assets. To the contrary, it represents no more than a confirmation that DCF valuations frequently fail to explain the observable value of gold assets. | ||
In summary, it appears that the DCF methodology as traditionally applied may be flawed for the valuation of gold assets. This view is supported by: |
§ | the diversity of assumptions made by valuers as to discount rates and future gold prices; and | ||
§ | the poor predictive power of DCF analysis when applied to the valuation of gold assets. |
2.1 | Selection of Discount Rates | ||
Discount rates are normally estimated by reference to the cost of capital of a company or the industry in which it trades. The cost of capital is usually calculated as the weighted average cost of equity and debt. The cost of equity is commonly estimated on the basis of the Capital Asset |
1
Lihir Gold Limited Scheme Booklet | 279 |
Pricing Model (CAPM). This in turn requires an estimate of the beta to apply to the valuation process. | |||
Published valuations of gold assets have made a variety of assumptions regarding the betas of gold companies. The betas used have been generally in the range 0.5 to 1.5. The range of betas reflects, amongst other factors, differing assumptions regarding the appropriate sharemarket against which to measure returns on gold stocks. Betas estimated against the Australian sharemarket are commonly in the approximate range 1.0 to 1.5. However, if it is assumed that the marginal price setting investor in a gold company is an international investor, then the appropriate sharemarket against which to measure the correlation of returns on gold stocks is an international sharemarket. Betas measured on this basis may range between 0 and 0.5. | |||
In Grant Samuels view, the available evidence is insufficient to reach any firm conclusion as to the value of betas for Australian gold companies. There is unlikely to be any single correct beta for a company. In any event, the relevant beta is not the beta measured using historical data or a particular statistical technique but rather the beta used or implicit in the pricing decisions of investors in, and acquirers of, gold assets. Betas for gold companies in which domestic investors are likely to be the price setters may broadly be in the approximate range 0.7 1.3. The beta of a gold company is likely to reduce as the perceived quality and expected life of its assets increase, the company is able to attract international investment and its shares are traded more deeply. For large gold companies or assets in which foreign investors are likely to be the price setters a beta in the range 0.0 0.5 has historically appeared reasonable. | |||
However, it appears that in recent periods of heightened global financial stress (as witnessed during the global financial crisis in 2008 and more recently during the European sovereign debt crisis), extremely risk averse investors may have reassessed the extent to which gold equities provide a proxy for physical gold and may have concluded that indirect gold (through equities) is a riskier investment than direct physical gold. This risk reassessment appears to have been reflected in an increase in gold company betas, from values approaching zero to values around or in excess of 0.5. | |||
The following table shows estimated betas for major gold companies over the last two years, by comparison with estimated betas for the two preceding years: |
June 2006 June 2008 | July 2008 June 2010 | |||||||
Barrick Gold Corporation
|
0.031 | 0.535 | ||||||
Goldcorp Inc.
|
0.352 | 0.535 | ||||||
Newmont Mining Corp.
|
0.153 | 0.723 | ||||||
AngloGold Ashanti Ltd
|
0.078 | 0.403 | ||||||
Kinross Gold Corporation
|
0.433 | 0.531 | ||||||
Minimum
|
0.061 | 0.403 | ||||||
Maximum
|
0.433 | 0.723 | ||||||
Average
|
0.215 | 0.545 |
Source: Bloomberg |
2.2 | Forecasting of Future Gold Prices | ||
Projecting future gold prices for the purpose of calculating expected revenues from gold mining operations also involves uncertainty. The gold price has historically demonstrated considerable volatility. | |||
Valuers use a wide variety of assumptions regarding future gold prices, including assumptions that: |
2
11 Independent experts report continued | 280 |
§ | the current real spot price, expressed in US$ terms, will continue for the foreseeable future. This assumption is defensible on the basis that the current spot price should incorporate market expectations regarding the future spot price. However, DCF valuations using this assumption typically undervalue gold assets by substantial margins; | ||
§ | there will be real movements in gold prices. Such assumptions amount to a belief that the valuer has a better view of the gold market than the market in general; | ||
§ | gold prices will be realised on the basis of actual gold company hedging policies. This assumption results in the use of higher gold prices for part of the output from a gold project. While it is true that actual hedge positions will add to or subtract from value, Grant Samuel is not aware of any evidence that hedging programs increase value on a prospective basis. To the contrary, there is a common market view that hedging reduces investor interest in gold stocks and destroys value; and | ||
§ | all gold will be sold at prices equal to the prices currently obtainable for future delivery of gold (futures prices). The use of futures prices may be justified on the basis that futures prices provide a reliable indicator of the value of future gold production. However, the use of futures prices is not obviously consistent with traditional DCF methodology. The DCF methodology involves the estimation of expected future cash flows. The gold futures price is not equal to the expected future spot gold price. Use of the gold futures price will result in the estimation of notional cash flows that are not equal to expected actual future cash flows. Moreover, use of the gold futures price represents an adjustment in full for gold price risk. To the extent that gold price risk is a component of non diversifiable risk, use of the gold futures price and a discount rate estimated using the conventional CAPM framework may result in an effective double-counting of some or all of the gold price risk. |
3 | Gold Futures Methodology | |
Theoretical valuation methodologies such as the DCF methodology are based on the premise that the value of an asset or project can be estimated by identifying a portfolio of financial assets of similar cash flow and risk characteristics and extrapolating the value of that portfolio. The DCF methodology assumes that the appropriate analogous asset portfolio is a portfolio of riskless bonds and increases the discount rate to adjust for the additional risks involved in real assets. | ||
It is not clear that conventional DCF methodology is the most appropriate methodology for valuing gold mining projects. There is a body of argument that suggests that the analogous asset portfolio for gold projects is a portfolio comprised of bonds and gold or bonds and futures contracts over gold. Valuation models which attempt to incorporate the value of management flexibility assume that a mining project may be viewed as a portfolio of complex options over the commodity being mined. However, such an analysis increases practical complexities substantially. This section of the Appendix discusses the valuation of gold projects on the basis that the value of gold projects may be estimated by reference to the value of asset portfolios consisting of bonds and either gold futures or physical gold. | ||
The limited usefulness of the DCF methodology for valuing gold assets may be a consequence of the fact that gold is not a commodity. Rather, it is commonly viewed as a financial asset. Through the gold futures market, it is possible to earn returns on gold commensurate with the returns on low risk financial instruments. | ||
The gold futures market also provides a precise measure of the present value of gold delivered at some time in the future. A gold futures contract is a contract to buy and sell a quantity of gold for a specified price (the futures price) to be delivered at some point in the future. The present value of the future gold delivery is given by the futures price discounted at the risk free rate for the period to delivery of the gold. | ||
Valuation of a gold project requires the subtraction of the present value of future extraction costs from the present value of future gold production. Future gold production may be represented as a series of expected gold deliveries. Expected gold deliveries are defined as the mean of all probability adjusted gold deliveries. These expected gold deliveries can be valued by reference to the relevant futures prices, discounted at the risk free rate. This does not represent an attempt to estimate actual future gold |
3
Lihir Gold Limited Scheme Booklet | 281 |
revenues. Rather, it is a means of estimating the current value of future gold production. It is argued that it is appropriate to use the risk free rate to value future production because: |
§ | all gold price risk has been taken into account through the use of futures prices; | ||
§ | development, mining and related risks have been taken into account by using expected future gold production. Expected future gold production represents risk adjusted future gold production; and | ||
§ | other risks associated with gold revenues should be fully diversifiable. Accordingly, diversified portfolio investors would require no return above the risk free rate. |
Use of the risk free rate does not suggest that the cash flows from any asset are certain or risk free. It implies only that the cash flows are not subject to any systematic risk. Therefore, given that all specific (non systematic) risks can be diversified away on a portfolio basis, it is appropriate to apply the risk free rate. | ||
Consequently, the present value of a gold mining project is given by the present value of future production less the present value of future extraction costs. This may be represented as follows: |
where |
Gold producers are frequently unable to write gold futures contracts for more than five years. For valuation purposes, however, gold futures prices can be estimated for longer periods. Gold futures prices may be estimated by compounding the current spot price at the risk free rate for the period of the futures contract. This may be represented as follows: |
where |
This simplifies the earlier present value for a gold mine to the following: |
Accordingly, gold projects maybe valued by valuing expected future gold production at the current spot gold price, without discounting, and subtracting expected future extraction costs discounted at the risk free rate. | ||
Gold producers typically achieve a contango (the premium to the current spot price) through the futures market that is somewhat less than the current spot price compounded at the risk free rate. This discount reflects counterparty or credit risk and transaction costs. As between credit risk free counterparties, the gold futures price should always be equal to the current spot price compounded at the risk free rate. If the gold futures price was less than the current spot price compounded at the risk free rate, holders of gold could lock in infinite risk free profits. They could sell their gold, invest the amount realised in risk free bonds and buy back the equivalent volume of gold in the futures market at a price less than the proceeds and accumulated interest from their bond holdings. Conversely, if the gold futures price was greater than the current spot compounded at the risk free rate, infinite risk free profits could be secured by selling |
4
11 Independent experts report continued | 282 |
bonds (or borrowing), buying gold in the spot market, delivering the gold into futures contracts and repurchasing the bonds. | ||
Gold producers are not risk free counterparties. However, for the purpose of valuing expected future gold production, it is appropriate to assume that the futures price is given by the current spot price compounded at the risk free rate. Counterparty and other diversifiable risks are taken into account through the process of estimating expected future production, which represents risk-adjusted production. | ||
The valuation of gold projects by reference to the gold futures market (gold futures methodology) does not reflect general practice. However, this approach has a strong theoretical underpinning. Its conclusions are consistent with the common market rules of thumb for valuing gold companies and gold projects on the basis of the quantity of gold in reserves and resources. | ||
Aspects of the gold futures methodology have been incorporated in a variety of valuations. Various published valuations of long life Australian mining assets have used spot gold prices compounded at the risk free rate as proxies for the expected future spot price. | ||
Although gold futures pricing is not commonly used in Australia it is indirectly supported by international market practice. United States gold analysts frequently use a zero discount rate in valuing United States gold projects. Use of a zero discount rate is equivalent to valuing future gold production at current spot prices on an undiscounted basis, although it may overstate the present value of future production costs. The market capitalisation of the majority of large, well traded gold companies is better explained by DCF analysis using a zero discount rate than by traditional DCF analysis using a discount rate representing estimates of weighted average cost of capital. |
5
Lihir Gold Limited Scheme Booklet | 283 |
1
INDEPENDENT TECHNICAL SPECIALISTS REPORT Mining activities at Lihir Island. |
Lihir Gold Limited Scheme Booklet | 285 |
AMC Consultants Pty Ltd
ABN 58 008 129 164 Ground Floor, 9 Havelock Street WEST PERTH WA 6005 T +61 8 6330 1100 F +61 8 6330 1199 E amcperth@amcconsultants.com.au |
ADELAIDE | BRISBANE | MELBOURNE | PERTH | UNITED KINGDOM | VANCOUVER | |||||
+61 8 8201 1800 | +61 7 3839 0099 | +61 3 8601 3300 | +61 8 6330 1100 | +44 1628 778 256 | +1 604 669 0044 | |||||
www.amcconsultants.com.au |
12 Independent technical specialists report continued | 286 |
| The Lihir Gold Mine in Papua New Guinea. | |
| Mt Rawdon Gold Mine in Queensland, Australia. | |
| Bonikro Gold Mine in Côte dlvoire. | |
| Exploration assets in Côte dlvoire. |
1 | As defined by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC). | |
2 | Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, The VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector. |
AMC210051-7rpt 100715 | ii |
Lihir Gold Limited Scheme Booklet | 287 |
| Executive Summary. | |
1. | Lihir Gold Mine. | |
2. | Mt Rawdon Gold Mine. | |
3. | Bonikro Gold Mine. | |
4. | Exploration Valuation. | |
5. | Qualifications. |
|
||
A M Chuk
|
L J Gillett | |
M AusIMM
|
M AusIMM (CP) | |
Principal Consultant
|
Director |
AMC210051-7rpt 100715 | iii |
12 Independent technical specialists report continued | 288 |
1 LIHIR GOLD MINE (PNG)
|
1 | |||
1.1 Location and Background
|
1 | |||
1.2 Geology
|
1 | |||
1.3 Mineral Resources and Ore Reserves
|
3 | |||
1.3.1 Mineral Resources
|
3 | |||
1.3.2 Ore Reserves
|
4 | |||
1.4 Exploration and Reserve Potential
|
5 | |||
1.5 Mining Operations
|
6 | |||
1.5.1 Mine Description
|
6 | |||
1.5.2 Mining Schedule
|
6 | |||
1.5.3 Ore Stockpiles
|
8 | |||
1.5.4 Geotechnical and Geothermal Aspects
|
8 | |||
1.5.5 Reconciliation
|
9 | |||
1.5.6 Tonnage Reconciliation
|
10 | |||
1.5.7 Grade Reconciliation
|
10 | |||
1.5.8 Contained Gold Reconciliation
|
11 | |||
1.6 Metallurgy and Processing Operations
|
11 | |||
1.6.1 Plant Description
|
11 | |||
1.6.2 Plant Performance
|
13 | |||
1.6.3 Million Ounce Plant Upgrade Project
|
14 | |||
1.7 Waste Rock and Tailings Disposal
|
15 | |||
1.8 Power
|
16 | |||
1.9 Environment, Sustainable Development and Community Issues
|
17 | |||
1.10 Capital and Operating Costs
|
19 | |||
1.10.1 Sustaining Capital Costs
|
19 | |||
1.10.2 MOPU Project Capital Costs
|
20 | |||
1.10.3 Operating Costs
|
21 | |||
1.11 AMC Modelling Scenarios
|
23 | |||
1.11.1 AMC Case 1
|
24 | |||
1.11.2 AMC Case 2
|
26 | |||
1.11.3 Reserves-Only Case
|
28 | |||
1. 12 Risks and Opportunities
|
30 | |||
2 MT RAWDON GOLD MINE (QLD)
|
31 | |||
2.1 Location and Background
|
31 | |||
2.2 Geology
|
32 | |||
2.3 Mineral Resources and Ore Reserves
|
34 | |||
2.3.1 Mineral Resources
|
34 | |||
2.3.2 Ore Reserves
|
35 | |||
2.3.3 Potential for Additional Reserves
|
36 | |||
2.4 Mining Operations
|
37 | |||
2.4.1 Mine Description
|
37 | |||
2.4.2 Mine Planning and Scheduling
|
38 | |||
2.4.3 Mine Performance
|
38 | |||
2.5 Metallurgy and Processing Operations
|
39 | |||
2.5.1 Process Description and Operating Philosophy
|
39 | |||
2.5.2 Ore Characteristics
|
40 | |||
2.5.3 Ore Treatment Rate
|
40 | |||
2.5.4 Metal Recoveries
|
41 | |||
2.5.5 Additional Plant Capacity/Upgrades
|
41 | |||
2.5.6 Metallurgical Test Work
|
41 | |||
2.6 Power, Water and Infrastructure
|
41 | |||
2.7 Environmental, Health, Safety and Community Issues
|
42 | |||
2.7.1 Environmental
|
42 | |||
2.7.2 Health and Safety
|
43 | |||
2.7.3 Community
|
43 | |||
2.8 AMC Modelling Scenarios
|
43 |
AMC210051-7rpt 100715 | iv |
Lihir Gold Limited Scheme Booklet | 289 |
2.9 Risks
|
45 | |||
3 BONIKRO GOLD MINE (COTE DlVOIRE)
|
46 | |||
3.1 Location and Background
|
46 | |||
3.2 Geology
|
47 | |||
3.3 Mineral Resources and Ore Reserves
|
48 | |||
3.3.1 Mineral Resources
|
48 | |||
3.3.2 Ore Reserves
|
49 | |||
3.3.3 Grade Control and Resource Reconciliation
|
51 | |||
3.4 Mining Operations
|
51 | |||
3.4.1 Mine Design and Geotechnical Aspects
|
51 | |||
3.4.2 Drill and Blast
|
59 | |||
3.4.3 Load and Haul
|
59 | |||
3.4.4 Life of Mine Plan
|
53 | |||
3.5 Metallurgy and Processing Operations
|
53 | |||
3.5.1 Process Description
|
53 | |||
3.5.2 Process Operation
|
54 | |||
3.6 Waste Dump and Tailings
|
56 | |||
3.6.1 Waste Rock
|
56 | |||
3.6.2 Tailings Dam
|
56 | |||
3.7 Infrastructure and Power
|
57 | |||
3.7.1 Mine Site
|
57 | |||
3.7.2 Water Supply
|
58 | |||
3.7.3 Power
|
58 | |||
3.8 Labour
|
59 | |||
3.9 Environmental and Community Issues
|
59 | |||
3.9.1 Regulatory Background
|
59 | |||
3.9.2 Impact Assessment
|
59 | |||
3.9.3 Compliance
|
60 | |||
3.9.4 Social Responsibility
|
61 | |||
3.10 Hiré Feasibility Study
|
69 | |||
3.11 AMC Modelling Scenarios
|
63 | |||
3.11.1 AMC Case 1
|
64 | |||
3.11.2 AMC Case 2
|
64 | |||
3.12 Risks and Opportunities
|
65 | |||
4 VALUATION OF LGLS EXPLORATION PROJECTS
|
66 | |||
4.1 Introduction
|
66 | |||
4.2 Exploration Valuation Methods
|
66 | |||
4.2.1 Côte rilvoire Regional Exploration Valuation
|
66 | |||
5 QUALIFICATIONS
|
70 |
Table 1.1
|
Mineral Resource Estimate August 2009 (Compared with December 2008) | 4 | ||||
Table 1 2
|
Ore Reserves Estimate June 2009 1,2,3 | 5 | ||||
Table 1.3
|
Tonnage Reconciliation Reserve Model to Actual Mined | 10 | ||||
Table 1 4
|
Gold Grade Reconciliation Reserve Model to Actual Mined | 10 | ||||
Table 1 5
|
Contained Gold Reconciliation Reserve Model to Grade Control | 11 | ||||
Table 1.6
|
Process Plant KPIs Years 2004 to 2009 | 14 | ||||
Table 1 7
|
Capital Expenditure 2004 to 2009 | 19 | ||||
Table 1 8
|
MOPU Project Capital Cost Estimate | 90 | ||||
Table 1.9
|
Interim Power Station Capital Cost Estimate | 91 | ||||
Table 1.10
|
Operating Costs 2004 to 2009 | 99 | ||||
Table 1.11
|
AMC Case 1 Production and Cost Estimates | 25 | ||||
Table 1.12
|
AMC Case 2 Production and Cost Estimates | 97 | ||||
Table 1.13
|
Reserves-Only Case Production and Cost Estimates | 99 | ||||
Table 2.1
|
LGL Mt Rawdon Operations Tenement Holdings | 39 | ||||
Table 2.2
|
Mineral Resource Estimate January 2010 | 34 | ||||
Table 2.3
|
Ore Reserve Estimate January 2010 | 35 |
AMC210051-7rpt 100715 | v |
12 Independent technical specialists report continued | 290 |
Table 2.4
|
Tenement Work Commitments | 36 | ||||
Table 2.5
|
Exploration Budget 2010 | 36 | ||||
Table 2.6
|
Crushing Plant Data | 40 | ||||
Table 2.7
|
Grinding Circuit Data | 40 | ||||
Table 2.8
|
AMC Case 1 Production and Cost Estimates | 45 | ||||
Table 3.1
|
Mineral Resource Estimate (Bonikro Gold Mine) March 2010 | 49 | ||||
Table 3.2
|
Mineral Resource Estimate (Other Deposits) August 2009 | 49 | ||||
Table 3.3
|
Ore Reserve Estimate March 2010 | 49 | ||||
Table 3.4
|
Design Parameters for Detailed Design | 52 | ||||
Table 3.5
|
Hiré Feasibility Study Mining Inventory | 63 | ||||
Table 3.6
|
Hiré Feasibility Study Production Scenarios | 63 | ||||
Table 3.7
|
AMC Case 1 Production and Cost Estimates | 64 | ||||
Table 3.8
|
AMC Case 2 Production and Cost Estimates | 65 | ||||
Table 4.1
|
LGL Mines CISA Exploration Projects Tenement Details | 67 | ||||
Table 4.2
|
LGL Exploration Projects Exploration Activities | 67 | ||||
Table 4.3
|
LGL Exploration Projects -Value per Unit Area Summary | 68 | ||||
|
||||||
|
FIGURES | |||||
|
||||||
Figure 1.1
|
Location of Lihir Gold Mine, PNG | 1 | ||||
Figure 1.2
|
Lihir Island Geology | 2 | ||||
Figure 1.3
|
Generic Model for Gold Deposition within Lihir (Ladolam) Deposit | 2 | ||||
Figure 1.4
|
Ore Zone Domains in the August 2009 Mineral Resource Update | 3 | ||||
Figure 1.5
|
Schematic of Phase Positions Current Ore Reserves | 7 | ||||
Figure 1.6
|
Grade Reconciliation Mine to Process Plant (Mill) Feed (January 2006 to April 2010) | 10 | ||||
Figure 1.7
|
Contained Gold Reconciliation Mine to Process Plant (Mill) Feed (January 2006 to April 2010) | 11 | ||||
Figure 1.8
|
MOPU Processing Flowsheet | 15 | ||||
Figure 1.9
|
Environmental Incidents 1998 to 2008 | 18 | ||||
Figure 1.10
|
AMC Case 1 Processed Tonnes and Gold Head Grade | 24 | ||||
Figure 1.11
|
AMC Case 1 Gold Production and Operating Costs | 25 | ||||
Figure 1.12
|
AMC Case 2 Processed Tonnes and Gold Head Grade | 26 | ||||
Figure 1.13
|
AMC Case 2 Gold Production and Operating Costs | 27 | ||||
Figure 1.14
|
Reserves-Only Case Milled Tonnes and Gold Head Grade | 28 | ||||
Figure 1.15
|
Reserves-Only Case Gold Production and Operating Costs | 29 | ||||
Figure 2.1
|
Location of Mt Rawdon Gold Mine | 31 | ||||
Figure 2.2
|
Generalised Cross-Section (Looking North) | 32 | ||||
Figure 2.3
|
Generalised Level Plan (52 mRL) | 33 | ||||
Figure 2.4
|
View of Pit Looking South | 38 | ||||
Figure 2.5
|
Process Plant Flowsheet | 39 | ||||
Figure 3.1
|
Location Map | 46 | ||||
Figure 3.2
|
Geology of Côte dlvoire, Location of Bonikro Gold Mine and Exploration Tenements | 47 | ||||
Figure 3.3
|
Drill and Model Section 688900N Showing Interim and Final Pits | 48 | ||||
Figure 3.4
|
Pit Optimisation Shells | 50 | ||||
Figure 3.5
|
Pushback Designs | 50 | ||||
Figure 3.6
|
Production Schedule | 53 | ||||
Figure 3.7
|
Budget and Actual Production February 2009 to March 2010 | 55 | ||||
Figure 3.8
|
Gold Recovery February 2009 to March 2010 | 56 | ||||
|
||||||
|
APPENDICES | |||||
|
||||||
APPENDIX A ABBREVIATIONS | ||||||
|
||||||
APPENDIX B QUALIFICATION OF PRINCIPAL CONTRIBUTORS |
AMC210051-7rpt 100715 | vi |
Lihir Gold Limited Scheme Booklet | 291 |
|
Measured and Indicated Resources: |
553 Mt at 2.42 g/t Au
containing 43.0 Moz Au as at August 2009. |
||
|
||||
|
Inferred Resources: |
87 Mt at 1.95 g/t Au
containing 5.5 Moz Au as at August 2009. |
||
|
||||
|
Proved and Probable Reserves: |
331 Mt at 2.71 g/t Au
containing 28.8 Moz Au as at June 2009. |
AMC210051-7rpt 100715 | vii |
12 Independent technical specialists report continued | 292 |
AMC210051-7rpt 100715 | viii |
Lihir Gold Limited Scheme Booklet | 293 |
AMC210051-7rpt 100715 | ix |
12 Independent technical specialists report continued | 294 |
AMC210051-7rpt 100715 | x |
Lihir Gold Limited Scheme Booklet | 295 |
| Total processing plant feed inventory of 368 Mt grading 2.8 g/t of gold containing 33 Moz, recovering 27 Moz of gold. | |
| Mining to conclude in 2026 with stockpile processing continuing to 2042. | |
| Reduced processing plant total gold recoveries by 1.5% relative to LGLs projections. | |
| Gold production averaging 990 koz per annum while mining continues and then around 650 koz per annum while processing stockpiles only. | |
| Capital expenditure of USS796M spent on the OPU and other current projects (from January 2010). | |
| Sustaining capital expenditure of US$2,643M. | |
| Operating costs averaging US$455/oz while mining continues, declining to around US$350/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining life of mine (LOM) cost (total operating, capital and closure) of around US$545/oz. |
| Processing of 427 Mt grading 2.7 g/t of gold containing 37 Moz, recovering 31 Moz of gold. | |
| Relative to AMC Case 1, AMC Case 2 is based on an additional mining inventory of around 5 Moz at a grade of 2.5 g/t being delineated in the areas adjacent to the planned Kapit pit. | |
| Although AMC also considers there to be further potential in the Harbour Base area, there is virtually no drilling in this area and, therefore, AMC does not consider there to be sufficient information for inclusion of further inventory into production cases for consideration by Grant Samuel. | |
| Mining to conclude in 2031, with stockpile processing continuing to 2047. | |
| Gold production averaging 940 koz per annum while mining continues and then around 655 koz per annum while processing stockpiles only. | |
| Capital expenditure of US$796M spent on the MOPU and other current projects (from January 2010). | |
| Sustaining capital expenditure of US$2,725M. | |
| Operating costs averaging US$430/oz while mining continues, declining to around US$290/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining LOM cost (total operating, capital and closure) of around US$500/oz. |
| Processing 299 Mt grading 2.8 g/t of gold containing 27 Moz, recovering 22 Moz of gold. | |
| Mining to conclude in 2025, with stockpile processing continuing to 2037. | |
| Gold production averaging 950 koz per annum while mining continues and then around 630 koz per annum while processing stockpiles only. | |
| Capital expenditure of US$775.5M spent on the MOPU and other projects (from January 2010). | |
| Sustaining capital expenditure of US$2,353M. | |
| Operating costs averaging US$460/oz while mining continues, declining to around US$370/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining LOM cost (total operating, capital and closure) of US$575/oz. |
AMC210051-7rpt 100715 | xi |
12 Independent technical specialists report continued | 296 |
|
Measured and Indicated Resources: |
51 Mt at 0.73 g/t Au and 2.3 g/t Ag
containing 1,190 koz Au, 3,710 koz Ag. |
||
|
||||
|
Proved and Probable Reserves: |
32 Mt at 0.81 g/t Au and 2.4 g/t Ag
containing 835 koz Au, 2,430 koz Ag. |
AMC210051-7rpt 100715 | xii |
Lihir Gold Limited Scheme Booklet | 297 |
| Existing reserve plus Inferred Resource, with conservative positive reconciliation factors applied to tonnes and grades. |
| Mining rate is 500,000 bcm per month until Quarter two 2013 then decreasing until end of mining in Quarter two 2016. |
| Higher grade ore is preferentially treated until the end of mining in 2016. Remaining ore stocks are processed until Quarter two 2019. |
| Production is 33.8 Mt of ore at 81 g/t Au, recovering 777 koz Au. |
| Remaining LOM cash cost (operating, capital and closure) of A$760/oz. |
| A$560M total operating costs, A$20M capital expenditure during the operations life, and A$11M of closure rehabilitation costs. |
AMC210051-7rpt 100715 | xiii |
12 Independent technical specialists report continued | 298 |
|
Indicated Resource: |
21.5 Mt at 1.3g/t Au
containing 918 koz Au. |
||
|
||||
|
Inferred Resource: |
8.4 Mt at 1.1 g/t Au
containing 306 koz Au. |
||
|
||||
|
Probable Ore Reserve: |
16.1 Mt at 1.4 g/t Au
containing 729 koz Au. |
||
|
||||
Hiré Deposits as at August 2009 | ||||
|
||||
|
Indicated Resource: |
4.0 Mt at 3.4 g/t Au
containing 442 koz Au. |
||
|
||||
|
Inferred Resource: |
5.7 Mt at 2.5 g/t Au
containing 450 koz Au. |
||
|
||||
Dougbafla East as at August 2009 | ||||
|
||||
|
Indicated Resource: |
5.1 Mt at 1.3 g/t Au
containing 217 koz Au. |
||
|
||||
|
Inferred Resource: |
0.4 Mt at 1.2 g/t Au
containing 15 koz Au. |
AMC210051-7rpt 100715 | xiv |
Lihir Gold Limited Scheme Booklet | 299 |
|
Bonikro Deeps |
6.0 Mt at 1.6 g/t Au
containing 318 koz gold. |
||
|
||||
|
Akissi So |
3.0 Mt at 3.51 g/t Au
containing 338 koz gold. |
||
|
||||
|
Asondji So |
0.8 Mt at 3.35 g/t Au
containing 88 koz gold. |
||
|
||||
|
Agbalé |
0.3 Mt at 2.91 g/t Au
containing 30 koz gold. |
||
|
||||
|
Chappelle |
1.6 Mt at 3.15 g/t Au
containing 163 koz gold. |
| Milling capacity has been expanded to 3.5 Mtpa. | |
| Additional mining inventory of 3.7 Mt at 1.44 g/t Au (173 koz contained gold) has been assumed from the Dougbafla East deposit. This deposit currently has a stated resource, which includes an Indicated Resource of 5.1 Mt, at 1.3 g/t Au (213 koz contained gold). | |
| Additional mining inventory of 4.2 Mt at 2.3 g/t Au (303 koz contained gold) from exploration targets in the Bonikro Deeps, Hiré, Dougbafla and Ditula areas. |
AMC210051-7rpt 100715 | xv |
12 Independent technical specialists report continued | 300 |
| Exploration expenditure multiplied by a time discount. | |
| Cash payments multiplied by a time discount and a probability discount/interest earned. | |
| Share values multiplied by a time discount and probability discount/interest earned. | |
| Value of royalty. |
AMC210051-7rpt 100715 | xvi |
Lihir Gold Limited Scheme Booklet | 301 |
AMC210051-7rpt 100715 | 1 |
12 Independent technical specialists report continued | 302 |
AMC210051-7rpt 100715 | 2 |
406
Lihir Gold Limited Scheme Booklet | 303 |
| The inclusion of results from an additional 52 surface diamond holes. | |
| The inclusion of a number of new gold domains as a result of the new drilling. | |
| A reinterpretation of the resource classification. | |
| A review of spatial statistics by an independent consultant. |
AMC210051-7rpt 100715 | 3 |
12 Independent technical specialists report continued | 304 |
December 2008 1, 2, 3 | August 2009 (Current) 2, 3, 4 | |||||||||||||||||||||||
Tonnes | Gold Grade | Contained Gold | Tonnes | Gold Grade | Contained Gold | |||||||||||||||||||
Classification | (Mt) | (g/t) | (Moz) | (Mt) | (g/t) | (Moz) | ||||||||||||||||||
Measured (Stockpiles)
|
59.4 | 2.48 | 4.7 | 59.4 | 2.48 | 4.7 | ||||||||||||||||||
Indicated
|
324.7 | 2.71 | 28.2 | 494 | 2.41 | 38.3 | ||||||||||||||||||
Inferred
|
46.4 | 2.30 | 3.4 | 87.3 | 1.95 | 5.5 | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
430.5 | 2.62 | 36.3 | 640.7 | 2.35 | 48.5 | ||||||||||||||||||
|
1 | Cut-off grade 1.2 g/t Au December 2008. | |
2 | Resources have been depleted by mining to 31 December 2008. | |
3 | Resources are inclusive of Ore Reserves. | |
4 | Cut-off grade 1.0 g/t Au August 2009. |
| A gold price of US$1,000/oz was used for the constraining conceptual pit shell. Inferred Resources were included in the optimisation process used to prepare the constraining pit shell. | |
| The decrease in overall grade from 2.63 g/t Au to 2.35 g/t Au is due to the inclusion of lower grade resources resulting from lowering the cut-off grade and remodeling the grade domains. | |
| The increase in resource tonnage results mainly from the identification of extensive mineralised areas adjacent to the Lienetz and Kapit pits, in the area referred to as the Link Zone (north of 4500N and east of 9100E). These areas were identified through the drilling of 52 new diamond drillholes. | |
| The identification of additional Indicated Resources below the current Minifie pit following a reinterpretation of drilling data. This has also contributed to the increase in resource tonnage. |
AMC210051-7rpt 100715 | 4 |
Lihir Gold Limited Scheme Booklet | 305 |
Tonnes | Gold Grade | Contained Gold | ||||||||||
Classification | (Mt) | (g/t) | (Moz) | |||||||||
Proved (In Situ)
|
0 | 0 | 0 | |||||||||
Probable (In Situ)
|
269.2 | 2.77 | 23.9 | |||||||||
Proved Stockpiles
|
61.6 | 2.46 | 4.9 | |||||||||
|
||||||||||||
Total
|
330.8 | 2.71 | 28.8 | |||||||||
|
1 | Reserves have been depleted by mining to 30 June 2009. | |
2 | Reserves are based on the December 2008 Resource model. | |
3 | Reserves average cut-off grade 1.36 g/t Au. |
| Additions to the resource model due to further exploration drilling resulting in an increase of 3.8 Moz in reserves. | |
| An increase in the assumed gold price from US$675/oz to US$800/oz resulting in an increase of 2.4 Moz in reserves. |
| Adjustments to cost assumptions of mining and processing costs offset by the cost benefits from the MOPU project currently under construction. | |
| A re-assessment of the capital cost required to remove and replace infrastructure in the ROM/Barge Wharf area resulted in the optimised pit expanding into this zone, resulting in an increase of 2.1 Moz in reserves. | |
| An increase in processing cost estimates, reducing the reserves by 0.8 Moz. | |
| Depletion by mining to 30 June 2009. | |
| The pit limit for the ore reserve estimate is essentially physically constrained by the caldera wall and Alaia Rock. It is relatively insensitive to gold price, with the main effect of a change in gold price being the change in contained metal above the break-even cut-off grade. | |
| Costs used in the pit optimisation process are based on LGLs financial modelling. Site operating costs and sustaining capital expenditure are applied in the pit optimisation. |
AMC210051-7rpt 100715 | 5 |
12 Independent technical specialists report continued | 306 |
AMC210051-7rpt 100715 | 6 |
Lihir Gold Limited Scheme Booklet | 307 |
AMC210051-7rpt 100715 | 7 |
12 Independent technical specialists report continued | 308 |
AMC210051-7rpt 100715 | 8 |
Lihir Gold Limited Scheme Booklet | 309 |
| Minifie 40°Cto60 °C. | |
| Lienetz 80 °C to 120 °C. | |
| Kapit up to 220 °C to 240 °C at the base of the designed pit. |
AMC210051-7rpt 100715 | 9 |
12 Independent technical specialists report continued | 310 |
January 2007 to April 2010 | ||||||||||||||||||||||||||||||||
Reserve - Tonnage | Actual Mined - Tonnage | |||||||||||||||||||||||||||||||
Item | (Mt) | (Mt) | ||||||||||||||||||||||||||||||
Ore Type | HG | MG | LG | Total | HG | MG | LG | Total | ||||||||||||||||||||||||
Tonnes (Mt)
|
12.11 | 3.69 | 25.03 | 40.83 | 14.38 | 6.01 | 21.56 | 41.96 | ||||||||||||||||||||||||
Percent Difference
|
119 | % | 163 | % | 86 | % | 103 | % |
January 2007 to April 2010 | ||||||||||||||||||||||||||||||||
Reserve - Gold Grade | Actual Mined - Gold Grade | |||||||||||||||||||||||||||||||
Item | (g/t) | (g/t) | ||||||||||||||||||||||||||||||
Ore Type | HG | MG | LG | Average | HG | MG | LG | Average | ||||||||||||||||||||||||
Gold Grade (g/t)
|
6.44 | 3.78 | 2.15 | 3.57 | 5.75 | 3.45 | 2.23 | 3.61 | ||||||||||||||||||||||||
Percent Difference
|
89 | % | 91 | % | 104 | % | 101 | % |
AMC210051-7rpt 100715 | 10 |
Lihir Gold Limited Scheme Booklet | 311 |
January 2007 to April 2010 | ||||||||||||||||||||||||||||||||
Reserve - Contained Gold | Actual Mined - Contained Gold | |||||||||||||||||||||||||||||||
Item | (Moz) | (Moz) | ||||||||||||||||||||||||||||||
Ore Type | HG | MG | LG | Total | HG | MG | LG | Total | ||||||||||||||||||||||||
Contained Gold (Moz)
|
2.51 | 0.45 | 1.73 | 4.69 | 2.66 | 0.67 | 1.55 | 4.87 | ||||||||||||||||||||||||
Percent Difference
|
106 | % | 149 | % | 90 | % | 104 | % |
AMC210051-7rpt 100715 | 11 |
12 Independent technical specialists report continued | 312 |
Lihir Gold Limited Scheme Booklet | 313 |
| Burned lime is imported in shipping containers. | |
| Cyanide is imported as sodium cyanide briquettes in 1t bulk bags, dissolved in water and distributed to the CIL circuit and the carbon elution circuit. | |
| Grinding balls are imported in sea containers and stored in simple bunkers. | |
| Oxygen is produced from three on-site production plants. | |
| Flocculant for the thickeners is imported in bags and mixed in a standard Jet Wet mixing system. | |
| Two flotation reagents (PAX and MIBC) are procured in liquid form ready for distribution. | |
| Borax is the main smelting reagent and is imported as needed in small bags. |
12 Independent technical specialists report continued | 314 |
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||
KPI | Units | Actual | Actual | Actual | Actual | Actual | Actual | |||||||||||||||||||||
Ore Crushed
|
Mt | 4.16 | 3.73 | | | 6.12 | 6.50 | |||||||||||||||||||||
Overall Crusher Operating Time
|
% | | 55.3 | | | 67.7 | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
HGO Processed
|
Mt | 4.16 | 3.48 | 4.34 | 3.79 | 3.60 | 3.45 | |||||||||||||||||||||
HGO Feed Grade; S
|
% | | 6.36 | | | 5.45 | 5.57 | |||||||||||||||||||||
HGO Feed Grade; Au
|
g/t | 5.11 | 5.98 | 5.14 | 5.40 | 5.03 | 5.52 | |||||||||||||||||||||
HGO Contained Au
|
koz | 683 | 669 | 717 | 658 | 582 | 613 | |||||||||||||||||||||
Overall HGO Operating Time
|
% | | 70.4 | 83 | 81.0 | 81.0 | 74.2 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
FGO Processed
|
Mt | | | | 1.03 | 2.55 | 3.06 | |||||||||||||||||||||
FGO Feed Grade; S
|
% | | | | | 4.37 | 4.11 | |||||||||||||||||||||
FGO Feed Grade; Au
|
g/t | | | | 4.68 | 4.39 | 4.40 | |||||||||||||||||||||
FGO Contained Au
|
koz | | | | 155 | 360 | 432 | |||||||||||||||||||||
Overall FGO Operating Time
|
% | | | | | 80.9 | 79.9 | |||||||||||||||||||||
Concentrate Produced
|
kt | | | | | 734.0 | 1,022 | |||||||||||||||||||||
FGO Concentrate Grade; S
|
% | | | | | 11.2 | 10.1 | |||||||||||||||||||||
FGO Concentrate Grade; Au
|
g/t | | | | | 10.9 | 10.0 | |||||||||||||||||||||
FGO Recovery to Cone.; Mass
|
% | | | | | 35 | 38 | |||||||||||||||||||||
FGO Recovery to Concentrate; S
|
% | | | | | 93.5 | 94.5 | |||||||||||||||||||||
FGO Recovery to Cone.; Au
|
% | | | | | 87.8 | 87.1 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Feed to Autoclaves
|
Mt | 4.16 | 3.48 | 4.34 | 4.60 | 4.80 | 4.84 | |||||||||||||||||||||
Autoclaves Feed Grade; S
|
% | | 6.36 | | | 6.28 | 6.44 | |||||||||||||||||||||
Autoclaves S Contained
|
tpd | | | | 703 | 927 | 996 | |||||||||||||||||||||
Autoclaves Feed Grade; Au
|
g/t | 5.11 | 5.98 | 5.14 | 5.51 | 5.86 | 6.41 | |||||||||||||||||||||
Autoclaves Feed Contained Au
|
oz | 683 | 669 | 717 | 815 | 904 | 998 | |||||||||||||||||||||
Autoclaves Operating Time
|
% | 86 | 76.7 | 91 | 87.0 | 88.9 | 85.7 | |||||||||||||||||||||
Sulphur Oxidation
|
% | | | | | | | |||||||||||||||||||||
Autoclave (AC) Throughput Rate
|
tph/AC | 175 | 174 | 185 | 198 | 215 | 215 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
CIL Gold Recovery
|
% | | | | | 86.0 | 85.2 | |||||||||||||||||||||
Overall Gold Recovery
|
% | 88.5 | 89.7 | 90.2 | 86.0 | 82.5 | 81.3 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Gold Produced
|
koz | 599 | 596 | 651 | 700 | 772 | 853 |
| A second primary dual jaw crushing circuit and an increase the crushed ore stockpile size. | |
| A third grinding circuit with pebble crushing. | |
| A fourth autoclave (with the capacity of more than two of the existing autoclaves). | |
| Two more pre-oxidation tanks. | |
| A second leach circuit with increased capacity. | |
| Extra thickeners for washing and neutralisation. | |
| A fourth oxygen plant. | |
| Increase power plant capacity. | |
| A second tailings outfall installation. |
Lihir Gold Limited Scheme Booklet | 315 |
| An additional weir for raw water supply from an alternate catchment. |
12 Independent technical specialists report continued | 316 |
Lihir Gold Limited Scheme Booklet | 317 |
| Category 1: Little or no environment impact; e.g. contained spill, late submission of report. | |
| Category 2: Single onsite event causing minor harm e.g. contained spill or minor contamination. | |
| Category 3: Onsite event causing harm that is immediately recoverable or an onsite event with potential to migrate offsite. | |
| Category 4: An offsite event that can cause harm but is recoverable or can be mitigated or an onsite event that can cause severe harm and is not immediately recoverable. | |
| Category 5: An offsite event that causes wide spread and long-term harm and is not recoverable or an onsite event that is irreversible or has potential to migrate offsite. |
12 Independent technical specialists report continued | 318 |
| LGL released a corporate Sustainable Development Policy in 2008 which is based on the ten principles of sustainable development performance advocated by the International Council on Mining and Metals. | |
| LGL signed a revised Integrated Benefits Package Agreement (IBP) in 2007, which was negotiated with the Lihir Mining Area Landowners Association and the Nimamar Rural Local-Level Government (NRLLG). The main objectives of the revised IBP are to ensure that development in Lihir occurs in parallel with mining, is balanced across the island, is sustainable and is stable. The revised IBP sets out a framework for: |
| Financial commitments by LGL over five years, totalling K107M. | ||
| Commitments to assist the Lihir people to establish commercial ventures on Lihir Island, including participation in mining. | ||
| Developing the capability and capacity of the Lihir people to manage their own affairs. | ||
| Implementing all incomplete projects agreed to under the original IBP. | ||
| Compensation associated with land affected by mining and related operations. |
Lihir Gold Limited Scheme Booklet | 319 |
| Requirements associated with rehabilitation and mine closure. |
| The Lihir Sustainable Development Plan was designed to ensure the objectives set out in the revised IBP are achieved. It is the long-term (twenty year) economic development plan aimed at providing economic alternatives to mining and related activities during and after the life time of the mine. The plan, prepared by NRLLG and approved by LGL in 2007, has four stages of development: |
| Holistic human development. | ||
| Economic development for Lihir communities. | ||
| Business and entrepreneurial development. | ||
| Self reliance and financial independence. |
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||
Units | Actual | Actual | Actual | Actual | Actual | Actual | ||||||
US$M | 87.2 | 99.8 | 180.8 | 150.8 | 100.8 | 449 |
12 Independent technical specialists report continued | 320 |
Costs | ||||
Cost Category | (US$M) | |||
Direct Costs
|
||||
1300 - Pipe Racks
|
5.08 | |||
1325 - Ore Reclaim
|
12.10 | |||
1326 - Grinding and Classification
|
41.02 | |||
1341 - Grinding Thickener
|
25.02 | |||
1342 - Pre-oxidation
|
8.46 | |||
1343 - Pressure Oxidation
|
67.07 | |||
1348 - Concentrate Thickener Area
|
1.43 | |||
1351 - Cyanidation and Absorption
|
33.10 | |||
1410 - Reagent Handling
|
2.88 | |||
1420 - Lime Production
|
3.96 | |||
1560 - Oxygen Plant
|
73.89 | |||
1826 - Wurtol Pipeline
|
18.79 | |||
Other Perm Equip and Materials
|
150.56 | |||
|
||||
Direct Costs Subtotal
|
443.36 | |||
|
||||
Indirect Costs
|
||||
5000 - Construction Management
|
48.21 | |||
5100 - Operations Management
|
4.85 | |||
5200 - Project Management
|
49.81 | |||
5300 - Design
|
26.58 | |||
6000 - Spares Insurance/Capital
|
19.70 | |||
6100 - Freight and Duty
|
40.06 | |||
6500 - CPI and Escalation
|
87.20 | |||
7000 - Contingency
|
63.26 | |||
|
||||
Indirect Costs Subtotal
|
339.67 | |||
|
||||
Total
|
783.00 | |||
|
Lihir Gold Limited Scheme Booklet | 321 |
Amount | ||||
Area/Facility Number | (US$M) | |||
1113 - Landolam 2nd stage site preparation
|
1.34 | |||
1714 - Interim HFO Power station
|
87.12 | |||
1721 - 11 kV Substation
|
0.00 | |||
1840 - Sea Water Intake
|
0.00 | |||
1850 - Raw Water Distribution
|
0.08 | |||
1810 - Potable Water Distribution
|
0.07 | |||
1855 - Fire Water System
|
0.60 | |||
1860 - Sewer
|
0.13 | |||
1921 - HFO Transfer and Storage
|
0.66 | |||
1950 - Stage 2 HFO Transfer and Storage
|
11.12 | |||
1970 - Waste Materials Management
|
1.73 | |||
2000 - Marine Facilities
|
1.03 | |||
2050 - Power Barge Wharf
|
2.30 | |||
Subtotal
|
106.18 | |||
|
||||
5000 - Construction Overheads
|
8.16 | |||
5100 - Operations Management
|
1.22 | |||
5200 - Project Management
|
10.79 | |||
5300 - Design and Engineering
|
7.25 | |||
6000 - Warehouse/Inventory/Spares
|
2.38 | |||
6100 - Freight and Duty
|
11.21 | |||
Subtotal
|
41.00 | |||
|
||||
Contingency
|
11.77 | |||
|
||||
Total
|
158.94 | |||
|
||||
Total Escalated Cost
|
163.50 | |||
|
12 Independent technical specialists report continued | 322 |
2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||
Cost Centre | Units | Actual | Actual | Actual | Actual | Actual | Actual | |||||||||||||||||||||
Material Moved
|
Mt | 46.8 | 41.6 | 56.2 | 58.3 | 50.7 | 59.3 | |||||||||||||||||||||
Ore Crushed
|
Mt | 4.16 | 3.73 | 4.34 | 4.82 | 6.12 | 6.50 | |||||||||||||||||||||
Gold Produced
|
koz | 599 | 596 | 651 | 700 | 772 | 853 | |||||||||||||||||||||
Annual Costs
|
||||||||||||||||||||||||||||
Mining
|
US$M | 86.1 | 92.6 | 106.3 | 131.2 | 172.7 | 162.7 | |||||||||||||||||||||
Processing
|
US$M | 67.9 | 67.1 | 74.0 | 87.9 | 129.5 | 122.1 | |||||||||||||||||||||
G&A
|
US$M | 59.7 | 53.3 | 74.3 | 87.0 | 115.1 | 146.7 | |||||||||||||||||||||
Project Studies/Other Corp Costs
|
US$M | | 5.9 | 6.9 | | 2.6 | | |||||||||||||||||||||
Exploration
|
US$M | 5.1 | 6.0 | 5.9 | 5.9 | 5.8 | 0.3 | |||||||||||||||||||||
Technical Services
|
US$M | | 1.0 | 1.9 | | 7.8 | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Gross Total Operating Costs
|
US$M | 218.8 | 230.8 | 269.3 | 312.0 | 428.8 | 431.8 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Unit Costs Per Tonne Ore Treated
|
||||||||||||||||||||||||||||
Mining (per t mined)
|
us$/t | 1.84 | 2.23 | 1.89 | 2.25 | 3.41 | 3.59 | |||||||||||||||||||||
Processing
|
us$/t | 16.32 | 17.99 | 17.05 | 18.24 | 21.16 | 18.76 | |||||||||||||||||||||
G&A
|
us$/t | 14.35 | 14.29 | 17.13 | 18.05 | 18.80 | 22.57 | |||||||||||||||||||||
Project Studies
|
us$/t | | 1.58 | 1.59 | 0.00 | 0.42 | | |||||||||||||||||||||
Exploration
|
Us$/t | 1.23 | 1.61 | 1.36 | 1.22 | 0.95 | 0.05 | |||||||||||||||||||||
Technical Services
|
Us$ | | 0.27 | 0.43 | | 1.28 | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Gross Total Operating Costs
|
Us$/t | 52.60 | 61.88 | 62.05 | 64.73 | 70.07 | 66.43 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Unit Costs Per Oz Gold Produced
|
||||||||||||||||||||||||||||
Mining
|
US$/oz | 144 | 155 | 163 | 187 | 224 | 191 | |||||||||||||||||||||
Processing
|
US$/oz | 113 | 113 | 114 | 126 | 168 | 143 | |||||||||||||||||||||
G&A
|
US$/oz | 100 | 89 | 114 | 124 | 149 | 172 | |||||||||||||||||||||
Project Studies
|
US$/oz | | 10 | 11 | | 3 | | |||||||||||||||||||||
Exploration
|
US$/oz | 9 | 10 | 9 | 8 | 8 | | |||||||||||||||||||||
Technical Services
|
US$ | | 2 | 3 | | 10 | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Gross Total Operating Costs
|
US$/oz | 365 | 387 | 414 | 446 | 555 | 506 | |||||||||||||||||||||
|
NB: | Actuals from December year end monthly operating reports. |
Lihir Gold Limited Scheme Booklet | 323 |
| AMC Case 1 Adopted the LGLs Target case physicals on the basis that access to the Coastal resource is likely to be negotiated. | |
| AMC Case 2 In addition to AMC Case 1, assumed production inventory will be sourced from the areas adjacent to Kapit based on reasonably likely further exploration success in those areas. |
| AMC Case 1 |
| Assumed LGLs Conservative case power supply scenario (30 MW from geothermal) with capital and operating costs increased accordingly. | ||
| Increased mining operating costs by 15% and processing operating costs by 10% relative to LGLs projections. | ||
| Increased G&A operating costs by around US$10M per annum after mining has finished and when processing plant feed is entirely from stockpiles. | ||
| Reduced processing plant total gold recoveries by 1.5% relative to LGLs Target case. |
| AMC Case 2 |
| Assumed LGLs Target case power supply scenario (56 MW from geothermal) with capital and operating costs increased accordingly. | ||
| Increased mining operating costs by 10% relative to LGLs projections. | ||
| Not increased processing or G&A operating costs. | ||
| Increased exploration costs by US$17.5M for exploration of the areas adjacent to Kapit. | ||
| Retained processing plant total gold recoveries per LGLs Target case. |
12 Independent technical specialists report continued | 324 |
| Total processing plant feed inventory of 368 Mt grading 2.8 g/t of gold containing 33 Moz, recovering 27 Moz of gold. | |
| Mining to conclude in 2026 with stockpile processing continuing to 2042. | |
| Gold production averaging 990 koz per annum while mining continues and then around 650 koz per annum while processing stockpiles only. | |
| The processing plant feed inventory will be derived from the ore reserves as at 1 January 2010 plus 68 Mt grading 2.5 g/t (5.6 Moz contained) that can be expected to be sourced from the Coastal resource or equivalent at a strip ratio of 2.6 to 1. This equates to a total mining inventory of 304 Mt grading 2.8 g/t of gold, containing 28 Moz of gold pus stockpiles of 63 Mt grading 2.4 g/t of gold, containing 4.8 Moz of gold. | |
| Capital expenditure of US$796M spent on the MOPU and other current projects (from January 2010). | |
| Sustaining capital expenditure of US$2,643M. | |
| Operating costs with an average of around US$455/oz while mining continues, declining to around US$350/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining LOM cost (total operating, capital and closure) of around US$545/oz. |
Lihir Gold Limited Scheme Booklet | 325 |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (US$M) | (US$M) | (US$M) | ||||||||||||||||||
2010
|
6,278 | 4.93 | 823 | 411 | 740 | | ||||||||||||||||||
2011
|
6,777 | 4.63 | 857 | 440 | 450 | | ||||||||||||||||||
2012
|
12,040 | 3.94 | 1,299 | 510 | 294 | | ||||||||||||||||||
2013
|
11,652 | 3.33 | 1,028 | 519 | 84 | | ||||||||||||||||||
2014
|
10,543 | 3.64 | 1,020 | 489 | 149 | | ||||||||||||||||||
2015
|
11,416 | 3.98 | 1,243 | 489 | 353 | | ||||||||||||||||||
2016
|
11,381 | 3.84 | 1,201 | 451 | 68 | | ||||||||||||||||||
2017
|
11,729 | 3.95 | 1,258 | 462 | 69 | | ||||||||||||||||||
2018
|
8,772 | 6.55 | 1,597 | 448 | 160 | | ||||||||||||||||||
2019
|
9,370 | 3.84 | 968 | 448 | 57 | | ||||||||||||||||||
2020
|
11,513 | 3.43 | 1,047 | 459 | 57 | | ||||||||||||||||||
2021 to 2025
|
58,203 | 2.30 | 3,468 | 2,140 | 262 | | ||||||||||||||||||
2026 to 2030
|
58,929 | 2.15 | 3,268 | 1,173 | 246 | 55 | ||||||||||||||||||
2031 to 2035
|
59,140 | 2.15 | 3,278 | 1,139 | 246 | | ||||||||||||||||||
2036 to 2040
|
58,729 | 2.15 | 3,253 | 1,133 | 171 | | ||||||||||||||||||
2041 to 2045
|
21 ,076 | 2.17 | 1,181 | 436 | 32 | 45 | ||||||||||||||||||
2046 to 2050
|
| | | | | | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
367,549 | 2.76 | 26,788 | 11,148 | 3,439 | 100 | ||||||||||||||||||
|
12 Independent technical specialists report continued | 326 |
| Processing of 427 Mt grading 2.7 g/t of gold containing 37.4 Moz, recovering 31.2 Moz of gold. | |
| In addition to the AMC Case 1 mining inventory, AMC Case 2 is based on an additional mining inventory of around 5 Moz at a grade of 2.5 g/t being delineated in the areas adjacent to the planned Kapit pit. | |
| Mining to conclude in 2031, with stockpile processing continuing to 2047. | |
| Gold production averaging 940 koz per annum while mining continues and then around 655 koz per annum while processing stockpiles only. | |
| The processing plant feed inventory will be derived from a total mining inventory of 364 Mt grading 2.8 g/t of gold, containing 32.7 Moz of gold plus stockpiles of 63 Mt grading 2.5 g/t of gold, containing 4.8 Moz of gold. | |
| Although AMC also considers there to be further potential in the Harbour Base area, there is virtually no drilling in this area and, therefore, AMC does not consider there to be sufficient information for inclusion of further inventory into production cases for consideration by Grant Samuel. | |
| Capital expenditure of US$796M spent on the MOPU and other current projects (from January 2010). | |
| Sustaining capital expenditure of US$2,725M. | |
| Operating costs with an average of around US$430/oz while mining continues, declining to around US$290/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining LOM cost (total operating, capital and closure) of around US$500/oz. |
Lihir Gold Limited Scheme Booklet | 327 |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (US$M) | (US$M) | (US$M) | ||||||||||||||||||
2010
|
6,278 | 4.93 | 837 | 411 | 740 | | ||||||||||||||||||
2011
|
6,777 | 4.63 | 872 | 431 | 450 | | ||||||||||||||||||
2012
|
12,040 | 3.94 | 1,322 | 465 | 294 | | ||||||||||||||||||
2013
|
11,652 | 3.33 | 1,047 | 473 | 84 | | ||||||||||||||||||
2014
|
10,543 | 3.64 | 1,038 | 445 | 149 | | ||||||||||||||||||
2015
|
11,416 | 3.98 | 1,265 | 445 | 279 | | ||||||||||||||||||
2016
|
11,381 | 3.84 | 1,222 | 420 | 64 | | ||||||||||||||||||
2017
|
11,729 | 3.95 | 1,280 | 430 | 64 | | ||||||||||||||||||
2018
|
8,772 | 6.55 | 1,625 | 418 | 156 | | ||||||||||||||||||
2019
|
9,370 | 3.84 | 985 | 417 | 53 | | ||||||||||||||||||
2020
|
11,513 | 3.43 | 1,067 | 435 | 53 | | ||||||||||||||||||
2021 to 2025
|
58,385 | 2.59 | 3,995 | 1,940 | 271 | | ||||||||||||||||||
2026 to 2030
|
58,818 | 2.22 | 3,426 | 1,981 | 240 | | ||||||||||||||||||
2031 to 2035
|
58,929 | 2.15 | 3,329 | 1,035 | 225 | 55 | ||||||||||||||||||
2036 to 2040
|
59,140 | 2.15 | 3,340 | 977 | 225 | | ||||||||||||||||||
2041 to 2045
|
58,729 | 2.15 | 3,314 | 968 | 150 | | ||||||||||||||||||
2046 to 2050
|
21,076 | 2.17 | 1,203 | 370 | 23 | 45 | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
426,549 | 2.73 | 31,167 | 12,063 | 3,521 | 100 | ||||||||||||||||||
|
12 Independent technical specialists report continued | 328 |
| Processing 299 Mt grading 2.8 g/t of gold containing 27.1 Moz, recovering 22.1 Moz of gold. | |
| Mining to conclude in 2025, with stockpile processing continuing to 2037. | |
| Gold production averaging 950 koz per annum while mining continues and then around 630 koz per annum while processing stockpiles only. | |
| A mining inventory equivalent to the ore reserves as at 1 January 2010. Total mining inventory of 236 Mt grading 2.94 g/t of gold, containing 22.3 Moz of gold pus stockpiles of 63 Mt grading 2.4 g/t of gold, containing 4.8 Moz of gold. | |
| Capital expenditure of US$775.5M spent on the MOPU and other projects. | |
| Sustaining capital expenditure of US$2,353M. | |
| Operating costs with an average of aroundUS$460/oz while mining continues, declining to around US$370/oz after mining is complete and processing plant feed is entirely from stockpiles. | |
| Closure costs of US$100M. | |
| Remaining LOM cost (total operating, capital and closure) of US$575/oz. |
Lihir Gold Limited Scheme Booklet | 329 |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (US$M) | (US$M) | (US$M) | ||||||||||||||||||
2010
|
6,746 | 4.67 | 860 | 440 | 450 | | ||||||||||||||||||
2011
|
11,594 | 3.53 | 1,115 | 509 | 294 | | ||||||||||||||||||
2012
|
11,837 | 3.33 | 1,049 | 510 | 84 | | ||||||||||||||||||
2013
|
11,016 | 2.69 | 747 | 491 | 147 | | ||||||||||||||||||
2014
|
10,938 | 3.59 | 1,051 | 485 | 347 | | ||||||||||||||||||
2015
|
11,319 | 4.44 | 1,369 | 456 | 81 | | ||||||||||||||||||
2016
|
8,871 | 7.10 | 1,757 | 450 | 69 | | ||||||||||||||||||
2017
|
9,815 | 3.41 | 898 | 441 | 151 | | ||||||||||||||||||
2018
|
10,231 | 4.03 | 1,111 | 446 | 66 | | ||||||||||||||||||
2019
|
11,258 | 3.42 | 1,047 | 459 | 52 | | ||||||||||||||||||
2020
|
11,853 | 2.81 | 892 | 451 | 56 | | ||||||||||||||||||
2021 to 2025
|
58,522 | 2.09 | 3,104 | 1,718 | 245 | 55 | ||||||||||||||||||
2026 to 2030
|
59,146 | 2.10 | 3,146 | 1,139 | 236 | | ||||||||||||||||||
2031 to 2035
|
59,018 | 2.10 | 3,143 | 1,135 | 129 | | ||||||||||||||||||
2036 to 2040
|
706 | 1.05 | 38 | 106 | | 45 | ||||||||||||||||||
2041 to 2045
|
| | | | | | ||||||||||||||||||
2046 to 2050
|
| | | | | | ||||||||||||||||||
|
||||||||||||||||||||||||
Total
|
367,549 | 2.76 | 26,788 | 1,1148 | 3,439 | 100 | ||||||||||||||||||
|
12 Independent technical specialists report continued | 330 |
| Delay in completion of MOPU. | |
| Environmental aspects such as maintenance of extraction and discharge permits. | |
| Marine waste rock and tailings disposal operations. | |
| Geothermal power sustainability and expansion. | |
| Maintenance of community support for operations. | |
| Geothermal depressurisation of the Kapit pit. | |
| Slope design for Kapit pit, given that significant areas of stage or final walls for this pit are yet to be developed. | |
| The long-term integrity of the coffer dam is required for mining of Kapit pit below sea level. Delay in completion of the dam would have an impact on the mining schedule but major leaks or instability of the wall would have a major adverse impact on the LOMP. | |
| Potential denial of access to the Alaia Rock area of the Coastal Zone, therefore not allowing the pit limit to extend eastwards into the modelled Coastal zone mineralisation. If this eventuated, then it would affect AMC Case 1 and AMC Case 2 models, both of which include the Coastal Zone. Mitigating this risk is the additional production that AMC expects will eventuate from the areas primarily to the east of Kapit (4.7 Moz of contained gold). That additional production is included in AMC Case 2 but not AMC Case 1. | |
| Although AMC considers that MOPU gold recoveries are achievable and therefore has built them into AMC Case 1 and AMC Case 2, there is a possibility that actual recoveries may be lower. Accordingly, AMC recommends that the sensitivity of LGLs valuation to recoveries that are 3% lower than those modeled be assessed by Grant Samuel. |
| The Harbour Base area is geologically prospective but there is virtually no exploration drilling in this area. Therefore, AMC has not included in its models any provision for exploration success in the Harbour Base area, but there is a possibility of significant additions to production inventories from this zone. | |
| The pit design and longer term mine scheduling has, to date, focused on gold grade whereas, in future, it is planned to take into account the gold/sulphur ratio as well. This will enable a greater degree of optimisation of the plan and, consequently, the operations performance. | |
| Mining and processing operating unit costs and total power supply costs per LGLs business planning models are lower than AMC has built into its models. Realisation of LGLs lower cost projections would naturally improve the operations economics. |
Lihir Gold Limited Scheme Booklet | 331 |
12 Independent technical specialists report continued | 332 |
Area | Rent | |||||||||||||
Tenement No. | Name | Expiry Date | (ha) | (A$) | ||||||||||
Mt Perry
|
||||||||||||||
ML 1258
|
Mt Perry | 31/03/2014 | 42.84 | 2,068.30 | ||||||||||
ML 50029
|
Perry 2 | 31/08/2014 | 6.90 | 336.70 | ||||||||||
ML 50068
|
Perry 3 | 31/08/2014 | 1.68 | 96.20 | ||||||||||
|
||||||||||||||
Mt Rawdon
|
||||||||||||||
EPM 10566
|
Outer Rawdon | 31/12/2011 | 25,280 | 10,459.60 | ||||||||||
EPM 9563
|
Mt Shamrock | 02/11/2011 | 92,880 | 2,250.80 | ||||||||||
ML 1192
|
Hopeful | 31/05/2013 | 1.80 | 67.30 | ||||||||||
ML 1203
|
West Ridge | 31/01/2020 | 0.40 | 33.65 | ||||||||||
ML 1204
|
Mt Rawdon | 31/01/2020 | 2.00 | 67.30 | ||||||||||
ML 1206
|
Swindon | 30/09/2022 | 41.88 | 1,413.45 | ||||||||||
ML 1210
|
Hut | 30/04/2023 | 16.09 | 572.10 | ||||||||||
ML 1231
|
Overflow II | 31/08/2022 | 8.00 | 269.20 | ||||||||||
ML 1259
|
Rawdon | 31/05/2013 | 593.70 | 19,990.35 | ||||||||||
ML 50119
|
Rawdon Extend | 31/01/2014 | 485.50 | 16,355.75 | ||||||||||
ML 80095
|
Rawdon Extend II | 31/05/2013 | 817.79 | 29,144.20 | ||||||||||
|
||||||||||||||
Palmer
|
||||||||||||||
MDL 265
|
Palmer | 01/10/2014 | 172.36 | 3,927.10 | ||||||||||
|
||||||||||||||
Paradise East
|
||||||||||||||
EPM 17455
|
Paradise East 2 | 02/07/2013 | 15,040 | 6,222.80 | ||||||||||
|
||||||||||||||
South Burnett
|
||||||||||||||
EPM 18173
|
South Burnett | 18/02/2015 | 17,280 | 7,149.60 | ||||||||||
|
||||||||||||||
Yeatman
|
||||||||||||||
EPM 17302
|
Yeatman 2 | 22/05/2013 | 76,800 | 3,177.60 | ||||||||||
|
||||||||||||||
Total
|
103,602.00 | |||||||||||||
TRAC = Trachyandesite FDAC = Fragmental Dacite |
Lihir Gold Limited Scheme Booklet | 333 |
TRAC = Trachyandesite FDAC = Fragmental Dacite |
12 Independent technical specialists report continued | 334 |
Tonnes | Gold Grade | Contained Gold | Silver Grade | Contained Silver | ||||||||||||||||
Classification | (Mt) | (g/t) | (koz) | (g/t) | (koz) | |||||||||||||||
Measured
|
2.3 | 0.75 | 60 | 2.21 | 160 | |||||||||||||||
Indicated
|
48.4 | 0.73 | 1,140 | 2.28 | 3,550 | |||||||||||||||
Inferred
|
7.1 | 0.61 | 140 | 1.94 | 440 | |||||||||||||||
Total
|
57.8 | 0.72 | 1,340 | 2.23 | 4,150 | |||||||||||||||
Lihir Gold Limited Scheme Booklet | 335 |
| Smearing of lower grade material slightly beyond the ore/waste boundary. | |
| A significant increase in grade control sampling has greatly assisted identifying ore-waste boundaries in the pit and has resulted in material previously thought to be ore being reclassified as waste. | |
| A previously unrecognised andesite unit was excluded from the mining inventory during 2009. Approximately 700,000t of andesite was reclassified and dug as waste during this period. |
Contained | ||||||||||||||||||||
Tonnes | Gold Grade | Gold | Silver Grade | Contained Silver | ||||||||||||||||
Classification | (Mt) | (g/t) | (koz) | (g/t) | (koz) | |||||||||||||||
Proved
|
1.5 | 0.82 | 38 | 2.26 | 105 | |||||||||||||||
Probable
|
30.1 | 0.81 | 786 | 2.37 | 2,292 | |||||||||||||||
Subtotal
|
31.6 | 0.81 | 825 | 2.36 | 2,398 | |||||||||||||||
Stockpile (Proved)
|
0.4 | 0.79 | 10 | 2.79 | 36 | |||||||||||||||
Total
|
32.0 | 0.81 | 835 | 2.37 | 2.433 | |||||||||||||||
12 Independent technical specialists report continued | 336 |
Requested | Proposed 2010 Programme | |||||||||||||||||||||
Commitment | Budget | Geochemical | ||||||||||||||||||||
Project | (A$000) | (A$000) | Samples | Geophysics | Drilling | |||||||||||||||||
Mt Shamrock
|
EPM 9563 | 136 | 225 | 0 | | 1,1200m RC 580m DD | ||||||||||||||||
Outer Rawdon
|
EPM 10566 | 211 | 141 | 1,930 | | 800m RC | ||||||||||||||||
Yeatman 2
|
EPM 17302 | 65 | 110 | 1,800 | | 300m RC | ||||||||||||||||
South Burnett
|
EPM 18173 | 59 | 87 | 1,000 | | 300m RC | ||||||||||||||||
Paradise East 2
|
EPM 17455 | 65 | 110 | 1,070 | | 600m RC | ||||||||||||||||
Total
|
536 | 673 | 5,800 | | 2,670m RC 580m DD | |||||||||||||||||
Expenditure | Percent | |||||||
Item | (A$) | (%) | ||||||
Mine Exploration
|
651,800 | 45 | ||||||
Near Mine Projects
|
671,700 | 46 | ||||||
Mt Perry Joint Venture
|
130,000 | 9 | ||||||
Total
|
1,453,500 | 100 | ||||||
Lihir Gold Limited Scheme Booklet | 337 |
| 2 x HD 465 haul trucks (Komatsu). | |
| 9 x HD 785 haul trucks (Komatsu). | |
| 2 x 1200E excavators (Hitachi). | |
| 1 x 1900 excavator (Hitachi). | |
| 1 x 275 dozer (Komatsu). | |
| 3 x 375 dozers (Komatsu). | |
| 1 x 14G grader (Caterpillar). | |
| 1 x 16G grader (Caterpillar). | |
| 1 x water truck (Mercedes Benz). | |
| 1 x service truck (Volvo). | |
| 4 x blasthole drill rigs. |
12 Independent technical specialists report continued | 338 |
Lihir Gold Limited Scheme Booklet | 339 |
12 Independent technical specialists report continued | 340 |
Crushing | Units | 2005-2006 | 2006-2007 | 2007-2008 | 2008-Dec | 2009 | ||||||||||||||||||||
Dry Tonnes
|
Actual | (kt) | 3,501 | 3,221 | 3,228 | 1,628 | 3,379 | |||||||||||||||||||
Budget | (kt) | 3,259 | 3,422 | 3,431 | 1,743 | 3,458 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Operating Hours
|
Actual | (hr) | 6,879 | 6,682 | 6,437 | 2,958 | 6,498 | |||||||||||||||||||
Budget | (hr) | 4,380 | 4,380 | 4,392 | 2,208 | 4,380 | ||||||||||||||||||||
Utilisation
|
Actual | (%) | 78.5 | 76.3 | 73.3 | 67.0 | 74.2 | |||||||||||||||||||
Budget | (%) | 50.0 | 50.0 | 50.0 | 50.0 | 50.0 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Average Dry
|
Actual | (tph) | 509.0 | 482.1 | 501.5 | 550.4 | 520.0 | |||||||||||||||||||
Budget | (tph) | 744.0 | 781.2 | 781.2 | 789.6 | 789.6 |
Grinding | Units | 2005-2006 | 2006-2007 | 2007-2008 | 2008-Dec | 2009 | ||||||||||||||||||||
Dry Tonnes
|
Actual | (kt) | 3,487 | 3,408 | 3,510 | 1,701 | 3,355 | |||||||||||||||||||
Budget | (kt) | 3,259 | 3,422 | 3,431 | 1,743 | 3,458 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Availability
|
Actual | (%) | 95.1 | 96.2 | 95.8 | 93.9 | 94.8 | |||||||||||||||||||
Budget | (%) | 93.0 | 93.0 | 93.0 | 94.0 | 94.0 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Average Dry
|
Actual | (tph) | 418.4 | 404.4 | 417.3 | 410.3 | 404.1 | |||||||||||||||||||
Budget | (tph) | 400.0 | 420.0 | 420.0 | 420.0 | 420.0 |
Lihir Gold Limited Scheme Booklet | 341 |
| The SAG mill girth gear and pinion were replaced in February 2010, giving a small reduction in power transfer losses in the SAG mill drive train, and hence increased power into the mill. | |
| The planned replacement of the main site transformer. | |
| Mill ball trajectory and density optimisation. | |
| Minimisation of throughput fluctuations through maintenance planning changes resulting in reduced variability of mill feed size. | |
| Blast fragmentation optimisation and an increasing proportion of dacite relative to the harder volcanoclastic ore. | |
| Minor debottlenecking work within the grinding circuit. | |
| Investigations into opportunities to coarsen the grind. |
12 Independent technical specialists report continued | 342 |
Lihir Gold Limited Scheme Booklet | 343 |
12 Independent technical specialists report continued | 344 |
| Conservative Case |
| Mining inventory comprises existing ore reserve with inferred material added. | ||
| Mining rate 500,000 bcm per month until Quarter two 2013, then decreasing until end of mining in Quarter two 2016. | ||
| Remaining ore stocks are processed until Q2 2019. | ||
| Crusher to be relocated by Quarter one 2012 to permit planned pit deepening. | ||
| Mill availability maintained at 95.5%. | ||
| Throughput 412 tph increasing to 417 tph by October 2009. |
| Target Case |
| Mining inventory is the same as the Conservative case with reconciliation factors of a 4.5% and 2.0% applied to increase grade and tonnage respectively on pit benches 20m RL and below -70m RL. | ||
| Mining rate as per Conservative case. | ||
| Remaining ore stocks are processed until Quarter one 2019. | ||
| Crusher to be relocated by Quarter one 2012. | ||
| Mill availability maintained at 95.5%. | ||
| Throughput 412 tph, increasing to 436 tph by July 2010. |
| Optimistic Case |
| Mining inventory includes reserves and resources as used in the Conservative case, plus additional mineralisation not currently classified as resource, but believes to be reasonably likely to be upgraded to reserves by future exploration drilling. Reconciliation factors of 4.5% and 2.0% have been applied to increase grade and tonnage respectively on all pit benches. | ||
| Mining rate as per Conservative case. | ||
| Remaining ore stocks are processed until Quarter two 2019. | ||
| Crusher to be relocated by Quarter one 2012. | ||
| Mine haulage costs decreased after 2012; based on shorter haul distances to proposed Southern waste dump. | ||
| Mill availability 95.5% increasing slightly to 96% by December 2011, despite aging plant. | ||
| Throughput 412 tph, increasing to 436 tph by July 2010. |
| As the Mt Rawdon Gold Mine is a relatively small component of the overall LGL assets. | |
| Variations between the three LGL cases are relatively small. | |
| There is believed to be little or no upside in terms of significant additional resource discoveries. | |
| The operation has a well-established operating history, and technical downside risks are small. |
Lihir Gold Limited Scheme Booklet | 345 |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (A$M) | (A$M) | (A$M) | ||||||||||||||||||
2010
|
3,470 | 0.89 | 87.8 | 77.1 | 7.6 | | ||||||||||||||||||
2011
|
3,640 | 0.95 | 98.0 | 79.2 | 3.8 | | ||||||||||||||||||
2012
|
3,650 | 0.80 | 82.8 | 79.4 | 3.8 | | ||||||||||||||||||
2013
|
3,650 | 1.05 | 110.1 | 74.1 | 1.3 | | ||||||||||||||||||
2014
|
3,650 | 1.23 | 130.5 | 64.7 | 1.3 | | ||||||||||||||||||
2015
|
3,660 | 0.90 | 94.2 | 56.9 | 1.2 | | ||||||||||||||||||
2016
|
3,650 | 0.76 | 77.4 | 44.9 | 1.1 | | ||||||||||||||||||
2017
|
3,650 | 0.43 | 42.9 | 33.7 | | | ||||||||||||||||||
2018
|
3,650 | 0.41 | 40.5 | 33.7 | | | ||||||||||||||||||
2019
|
1,120 | 0.41 | 12.4 | 15.9 | | 5.5 | ||||||||||||||||||
2020
|
| | | | | 5.5 | ||||||||||||||||||
Total
|
33,790 | 0.81 | 776.6 | 559.5 | 19.8 | 11.0 | ||||||||||||||||||
| AMC has retained the tonnes mined, tonnes and grades milled, and recoveries, and hence the gold production profile, prepared by LGL. AMC has made some minor adjustments to correct some inconsistencies in LGLs plan. | |
| Based on advice from LGL, AMC added A$2.25M to administration costs in 2019 to allow for redundancy payments to LGL employees when the mine closes. | |
| AMC has reduced the capital expenditure estimate by A$2.5M in 2011 and A$12.5M in 2012 as LGL now expect to simply relocate the primary crusher tipping point, rather than relocate the entire crusher as originally envisaged. | |
| Exploration costs totalling A$1.9M are shown in Target case spreadsheet model, but are not included in tables in the supporting documents. AMC has included these costs in its modelling scenario. | |
| No rehabilitation costs were included in the Target case. AMC has included A$11M in as rehabilitation costs, split over 2019 and 2020. |
12 Independent technical specialists report continued | 346 |
3 | BONIKRO GOLD MINE (COTE DIVOIRE) |
Lihir Gold Limited Scheme Booklet | 347 |
12 Independent technical specialists report continued | 348 |
|
||||
Lihir Gold Limited Scheme Booklet
|
349 |
Tonnes | Gold Grade | Contained Gold | ||||||||||
Classification | (Mt) | (g/t) | (koz) | |||||||||
Measured
|
| | | |||||||||
Indicated
|
21.5 | 1.33 | 918 | |||||||||
Inferred
|
8.4 | 1.13 | 306 | |||||||||
Total
|
29.9 | 1.27 | 1,224 | |||||||||
Tonnes | Gold Grade | Contained Gold | ||||||||||
Classification | (kt) | (g/t) | (koz) | |||||||||
Akissi So
|
||||||||||||
Indicated
|
3,245 | 3.4 | 352 | |||||||||
Inferred
|
512 | 3.1 | 50 | |||||||||
Assondji So
|
||||||||||||
Indicated
|
797 | 3.5 | 90 | |||||||||
Inferred
|
219 | 3.2 | 22 | |||||||||
Chappelle
|
||||||||||||
Inferred
|
3,636 | 2.2 | 263 | |||||||||
Agbale
|
||||||||||||
Inferred
|
1,324 | 2.7 | 115 | |||||||||
Dougbafla East
|
||||||||||||
Indicated
|
5,148 | 1.3 | 217 | |||||||||
Inferred
|
407 | 1.2 | 15 | |||||||||
Total
|
15,288 | 2.9 | 1,124 | |||||||||
Tonnes | Gold Grade | Contained Gold | ||||||||||
Classification | (Mt) | (g/t) | (koz) | |||||||||
Proved
|
| | | |||||||||
Probable
|
16.1 | 1.41 | 729 | |||||||||
Subtotal
|
16.1 | 1.41 | 729 | |||||||||
Stockpile (Proved)
|
1.1 | 0.86 | 31 | |||||||||
Total
|
17.2 | 1.38 | 760 | |||||||||
12 Independent technical specialists report continued | 350 |
Lihir Gold Limited Scheme Booklet | 351 |
| Orientated diamond drillholes. | |
| Rock property testing on samples from the major lithologies. | |
| An assessment of rock mass conditions from core photographs and pit mapping. | |
| Geological data from the resource model. | |
| Modelled weathering surfaces, geological structures, and lithologies. |
3 | AMC 2010 Bonikro Gold Project Rockmass Characterisation and Slope Parameter Assessment. Unpublished AMC Consultants Ltd report to Lihir Gold Limited, 409015/509105 March. |
12 Independent technical specialists report continued | 352 |
Batter | Geotechnical | |||||||||||||||||||||||||||||||||||
Angle | Batter | IRA | Berm Width | |||||||||||||||||||||||||||||||||
Depth | (BFA) | Height (H) | Berm (B) 1 | IRA | Height | (Rw) 1 | OSA | Depth | ||||||||||||||||||||||||||||
Zone | (mRL) | (º) | m) | (m) | (º) | (m) | (m) | (º) | (m) | |||||||||||||||||||||||||||
1 Weathered
|
>160 mRL | 45 | 10 | 6 | 34.6 | 40 | | 45.9 | 270 | |||||||||||||||||||||||||||
1 Fresh
|
<160 mRL | 75.3 | 1 | 20 | 10 | 55.4 | 120 | 25 | ||||||||||||||||||||||||||||
2 Weathered
|
>170 mRL | 45 | 10 | 6 | 34.6 | 40 | | 44.7 | 260 | |||||||||||||||||||||||||||
2 Fresh
|
<170 mRL | 75.3 | 1 | 20 | 12 | 52.7 | 120 | 25 | ||||||||||||||||||||||||||||
3 Weathered
|
>170 mRL | 45 | 10 | 6 | 34.6 | 40 | | 44.1 | 260 | |||||||||||||||||||||||||||
3 Fresh
|
<170 mRL | 75.3 | 1 | 20 | 12 | 52.7 | 120 | 25 | ||||||||||||||||||||||||||||
4 Weathered
|
>180 mRL | 45 | 10 | 6 | 35.5 | 30 | | 44.2 | 270 | |||||||||||||||||||||||||||
4 Fresh
|
<180 mRL | 75.3 | 1 | 20 | 13 | 51.2 | 120 | 25 |
1 | Two 10m height flitch at 78º plus 1m berm. |
| Water pressure driven circular (rotational) failures, particularly along the east wall, in completely to moderately weathered material. | |
| Structurally controlled failures, particularly on the south and west walls, in moderately weathered and fresh material. |
4 | AMC 2010 Geotechnical and Hydrogeological Site Visit Report September 2009, Equigold Mines Côte DIvoire SA, Unpublished AMC Consultants Ltd report to Lihir Gold Limited, 409020 January 2010. |
Lihir Gold Limited Scheme Booklet | 353 |
12 Independent technical specialists report continued | 354 |
Lihir Gold Limited Scheme Booklet | 355 |
12 Independent technical specialists report continued | 356 |
Lihir Gold Limited Scheme Booklet | 357 |
12 Independent technical specialists report continued | 358 |
| Catchment of rainfall within the tailings storage facility, with the option to dam a second valley further east. The mine site lies to the north of a significant catchment area, which is reported to receive an average of 1200 mm precipitation per annum. | |
| Use of groundwater accessed via boreholes in the vicinity of the pit and mine site access road. | |
| A pipeline from the Bandama River whose nearest bank is 16 km from the mine site. |
5 | GM Mudd Resource Consumption Intensity and the Sustainability of Gold Mining, Second. Int. Conf. on Sustainability Eng. & Science, February 2007. | |
6 | CIE website. |
Lihir Gold Limited Scheme Booklet | 359 |
12 Independent technical specialists report continued | 360 |
Lihir Gold Limited Scheme Booklet | 361 |
12 Independent technical specialists report continued | 362 |
Lihir Gold Limited Scheme Booklet
|
363 |
Mining Inventory | Waste | Gold Grade | Contained Gold | |||||||||||||
Deposit | (Mt) | (Mbcm) | (g/t) | (koz) | ||||||||||||
Akissi So
|
2.99 | 22.5 | 3.51 | 338 | ||||||||||||
Chappelle
|
1.61 | 14.89 | 3.15 | 163 | ||||||||||||
Assondji So
|
0.81 | 7.11 | 3.35 | 88 | ||||||||||||
Agbalé
|
0.32 | 3.17 | 2.91 | 30 | ||||||||||||
Total
|
5.74 | 47.71 | 3.35 | 619 | ||||||||||||
Mining Inventory | Waste | Gold Grade | Contained Gold | |||||||||||||
Production Scenario | (Mt) | (Mbcm) | (g/t) | (koz) | ||||||||||||
Bonikro 1 and 2
|
10.02 | 10.51 | 1.87 | 603 | ||||||||||||
Bonikro 1, 2 and Deeps
|
15.42 | 31.05 | 1.92 | 951 | ||||||||||||
Bonikro 1, 2 and Hiré
|
15.77 | 58.22 | 2.41 | 1,222 | ||||||||||||
Bonikro 1, 2, Deeps and Hiré
|
21.17 | 78.76 | 2.31 | 1,570 |
| The haul road to the Bonikro Gold Mine, which will have to cross a national road. | |
| The current power supply, which is likely to be sufficient for the expansion. | |
| The water supply, which is considered to be adequate, although the impact of dewatering on Hiré township supply has yet to be established. |
12 Independent technical specialists report continued | 364 |
|
Bonikro Deeps | 6.0 Mt grading 1.6 g/t Au containing 318 koz gold. | ||
|
||||
|
Akissi So | 3.0 Mt grading 3.51 g/t Au containing 338 koz gold. | ||
|
||||
|
Asondji So | 0.8 Mt grading 3.35 g/t Au containing 88 koz gold. | ||
|
||||
|
Agbalé | 0.3 Mt grading 2.91 g/t Au containing 30 koz gold. | ||
|
||||
|
Chappelle | 1.6 Mt grading 3.15 g/t Au containing 163 koz gold. |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (US$M) | (US$M) | (US$M) | ||||||||||||||||||
2010
|
2,018 | 2.19 | 134 | 64.3 | 20.0 | | ||||||||||||||||||
2011
|
2,163 | 2.15 | 140 | 61.8 | 15.8 | | ||||||||||||||||||
2012
|
2,163 | 2.14 | 140 | 56.8 | 10.0 | | ||||||||||||||||||
2013
|
2,163 | 1.00 | 66 | 54.8 | 5.2 | | ||||||||||||||||||
2014
|
2,211 | 1.80 | 120 | 54.7 | 1.5 | | ||||||||||||||||||
2015
|
2,250 | 1.75 | 119 | 55.1 | 1.5 | | ||||||||||||||||||
2016
|
2,300 | 1.90 | 132 | 51.2 | 1.0 | | ||||||||||||||||||
2017
|
2,300 | 1.96 | 138 | 75.3 | 1.0 | | ||||||||||||||||||
2018
|
2,400 | 1.98 | 147 | 90.8 | 1.0 | | ||||||||||||||||||
2019
|
2,400 | 2.00 | 148 | 50.4 | 0.5 | | ||||||||||||||||||
2020
|
2,400 | 2.00 | 148 | 32.6 | 0.1 | | ||||||||||||||||||
2021
|
2,400 | 2.00 | 148 | 35.3 | | 10.0 | ||||||||||||||||||
Total
|
27,167 | 1.91 | 1,580 | 683.1 | 57.6 | 10.0 | ||||||||||||||||||
| Milling capacity has been expanded to 3.5 Mtpa in line with the Hiré feasibility study. | |
| Additional mining inventory of 3.7 Mt, grading 1.44 g/t Au (173 koz contained gold) has been assumed from the Dougbafla East deposit. This deposit currently has a stated resource, which includes an Indicated Resource of 5.1 Mt, grading 1.3 g/t Au (213 koz contained gold). | |
| Additional mining inventory of 4.2 Mt, grading 2.3 g/t Au (303 koz contained gold) from exploration targets in the Bonikro Deeps, Hiré, Dougbafla and Ditula areas. |
Lihir Gold Limited Scheme Booklet | 365 |
Ore Processed | Gold | Operating | Closure and | |||||||||||||||||||||
Tonnes | Gold Grade | Produced | Cost | Capital Cost | Rehabilitation | |||||||||||||||||||
Year | (kt) | (g/t) | (koz) | (US$M) | (US$M) | (US$M) | ||||||||||||||||||
2010
|
2,018 | 1.58 | 96 | 64.3 | 25.0 | | ||||||||||||||||||
2011
|
2,496 | 1.20 | 91 | 69.5 | 45.0 | | ||||||||||||||||||
2012
|
2,591 | 2.12 | 170 | 81.8 | 57.8 | | ||||||||||||||||||
2013
|
3,329 | 2.52 | 259 | 89.3 | 17.1 | | ||||||||||||||||||
2014
|
3,493 | 1.83 | 195 | 86.0 | 5.8 | | ||||||||||||||||||
2015
|
3,480 | 2.00 | 213 | 87.9 | 7.0 | | ||||||||||||||||||
2016
|
3,564 | 2.10 | 229 | 83.4 | 5.5 | | ||||||||||||||||||
2017
|
3,588 | 1.86 | 206 | 83.3 | 4.3 | | ||||||||||||||||||
2018
|
3,515 | 1.98 | 215 | 76.8 | 0.1 | | ||||||||||||||||||
2019
|
3,502 | 1.75 | 189 | 72.8 | 0.1 | | ||||||||||||||||||
2020
|
3,502 | 1.70 | 184 | 39.6 | | 10.0 | ||||||||||||||||||
2021
|
| | | 1.0 | | 10.0 | ||||||||||||||||||
Total
|
35,078 | 1.90 | 2,046 | 835.6 | 167.7 | 20.0 | ||||||||||||||||||
| Complex National and Local Issues, which present opportunities and threats to the operations. | |
| Handling an evacuation in a country wide emergency event. | |
| Change in government policies affecting operations and future investment. |
12 Independent technical specialists report continued | 366 |
a) | The Past Expenditure method: A Prospectivity Enhancement Multiplier (PEM), generally between 0.5 and 3.0, is applied to past direct expenditure, which AMC judges to be effective in regard to future prospectivity. Planned future expenditure, whether or not committed, is not included in the base expenditure to which a PEM is applied, but may be taken into consideration in the assessment of prospectivity through the PEM range selected. | |
b) | The Yardstick Value method: A value per unit of product, or yardstick value, is assigned to an actual resource or to AMCs estimate of a resource reasonably likely to be delineated by further work. The yardstick values used are based on AMCs assessment of transactions in recent years, the likely complexity of mining and processing and AMCs assessment of the relative quality of the deposit. | |
c) | Actual or Comparable Transaction method: A value is determined by reference to either actual transactions for the property in question or, more commonly, to recent transactions in the same general geological environment for properties deemed to be at a similar level of exploration and prospectivity. As many such transactions are of a farm-in nature AMC assesses a cash equivalent value for them by assessing from the terms the deemed expenditure on the property at the time of the deal, discounted by a time and probability factor for the likelihood that the farm-in will be completed. The resulting value is then adjusted for any other terms of the joint venture and/or for the results of work carried out since the commencement of the farm-in. | |
A derivation of this method assigns values per unit area of tenement derived from comparable transactions. Values per unit area usually decrease with increase in the size of the tenement package. | ||
d) | Expected Value method: Expected values are estimated where it is reasonable to target the range of economic parameters of a project, which may result from ongoing exploration. The parameters are used to generate a range of Net Present Values (NPVs) which are adjusted, usually with allowance for the costs of that ongoing exploration, and with a probability/risk factor for the chances of that exploration being successful. The factor also takes account of the risks associated with project development, and generally range from 0.1 to 0.5 but sometimes higher. |
Lihir Gold Limited Scheme Booklet | 367 |
Expenditure to | ||||||||||||||||
Tenement | Area | LGL Interest | March 2009 | |||||||||||||
Project | Prospects | Title | (km 2 ) | (%) | (A$000) | |||||||||||
Bassawa
|
EL | 306 | 100 | 2,713 | ||||||||||||
Bouafle
|
EL | 988 | 100 | |||||||||||||
Bouake
|
EL | 642 | 100 | |||||||||||||
Didievi
|
EL | 245 | 100 | 1,559 | ||||||||||||
Guitry-Fresco
|
EL | 411 | 100 | 868 | ||||||||||||
Guitry-Tiassale
|
EL | 436 | 100 | 724 | ||||||||||||
|
||||||||||||||||
Hiré
|
Agbale | EL | 395 | 94 | 4,147 | |||||||||||
|
Assonji So
|
|||||||||||||||
|
Central
|
|||||||||||||||
|
Chappelle
|
|||||||||||||||
|
Doudouza
|
|||||||||||||||
|
Gui
|
|||||||||||||||
|
Ditula
|
|||||||||||||||
|
HSA001
|
|||||||||||||||
|
HSA002 | |||||||||||||||
|
||||||||||||||||
Oumé
|
Boniko West | EL/ML | 264 | 84 | 10,877 | |||||||||||
|
Bandama
|
|||||||||||||||
|
Dougbafla
|
|||||||||||||||
|
(E,N,C,S,W) | |||||||||||||||
|
||||||||||||||||
Sassandra
|
EL | 951 | 100 | 21 | ||||||||||||
Tehini
|
EL | 976 | 100 | 0 | ||||||||||||
Tehini West
|
EL | 998 | 100 | 0 | ||||||||||||
Timbe
|
EL | 528 | 100 | 1,529 |
Geochemical | Geophysical | RAB/ | ||||||||||||||
Project | Prospects | Surveys | Surveys | ACORE 2 | RC/DD 2 | Resource | ||||||||||
Bassawa
|
Completed | Completed | 4,457 | 6,133 | ||||||||||||
Bouafle
|
Completed | |||||||||||||||
Bouake
|
Completed | |||||||||||||||
Didievi
|
Completed | Completed | 4,040 | 1,142 | ||||||||||||
Guitry-Fresco
|
Completed | Completed | 121 | |||||||||||||
Guitry-Tiassale
|
Completed | Completed | 110 | |||||||||||||
|
||||||||||||||||
Hiré
|
Agbale | Completed | Completed | 10 | 129/1 | Yes | ||||||||||
|
Akissi So | Completed | Completed | 147/3 | 243/49 | Yes | ||||||||||
|
Assonji So | Completed | Completed | 63 | 93/8 | Yes | ||||||||||
|
Central | Completed | Completed | 16 | 6 | |||||||||||
|
Chappelle | Completed | Completed | 245 | 108 | Yes | ||||||||||
|
Doudouza | Completed | Completed | 2 | ||||||||||||
|
Gui 1 | |||||||||||||||
|
Ditula 1 | |||||||||||||||
|
HSA001 1 | |||||||||||||||
|
HSA002 1 | |||||||||||||||
|
||||||||||||||||
Oumé
|
Boniko West | Completed | Completed | 15 | ||||||||||||
|
Bandama | Completed | Completed | 48 | 4 | |||||||||||
|
Dougbafla E | Completed | Completed | 142/179 | 230/2 | Yes | ||||||||||
|
Dougbafla N | Completed | Completed | 136 | 32 | |||||||||||
|
Dougbafla C | Completed | Completed | 135/86 | 8 | |||||||||||
|
Dougbafla S | Completed | Completed | 0/153 | ||||||||||||
|
Dougbafla W | Completed | Completed | 0/90 | ||||||||||||
|
||||||||||||||||
Sassandra
|
Completed | 6,550 | ||||||||||||||
Tehini
|
Completed | |||||||||||||||
Tehini West
|
Completed | |||||||||||||||
Timbe
|
Completed | 23,792 | 7,699 |
1 | Exploration information not available. | |
2 | RAB (Rotary airblast drilling), ACORE (Air core drilling), RC (Reverse circulation drilling) DD (Diamond drilling). |
12 Independent technical specialists report continued | 368 |
| Exploration expenditure multiplied by a time discount. | |
| Cash payments multiplied by a time discount and a probability discount/interest earned. | |
| Share values multiplied by a time discount and probability discount/interest earned. | |
| Value of royalty. |
Total PV | Value per km 2 | |||||||||||||||||||
Area | (US$M) | (US$) | ||||||||||||||||||
Transaction | (km 2 ) | Low | High | Low | High | |||||||||||||||
Anwia South, January 2006
1
|
80 | 2.27 | 2.27 | 28,400 | 28,400 | |||||||||||||||
Phoenix Resources, June 2006
2
|
680 | 0.03 | 0.03 | 40 | 40 | |||||||||||||||
Dadwen, January 2005
3
|
N/A | 0.62 | 0.70 | | | |||||||||||||||
Japa, February 2005
|
30 | 0.06 | 0.06 | 1,880 | 1,880 | |||||||||||||||
Edum Banso, Hotopo, August 2008
|
162 | 0.06 | 0.08 | 360 | 470 | |||||||||||||||
Nyinahin, November 2008
|
150 | 0.91 | 1.02 | 6,070 | 6,800 | |||||||||||||||
Julie, Collette, Josephine, February 2009
|
300 | 1.34 | 1.57 | 4,450 | 5,250 | |||||||||||||||
Banfora, August 2005
|
1,150 | 0.97 | 1.11 | 840 | 970 |
1 | Excluded anomalously high valuation. | |
2 | Excluded anomalously low valuation. | |
3 | Not considered due to no tenement area provided. |
Lihir Gold Limited Scheme Booklet | 369 |
12 Independent technical specialists report continued | 370 |
|
||
A M Chuk
|
L J Gillett | |
M AusIMM
|
M AusIMM (CP) | |
Principal Consultant
|
Director |
Lihir Gold Limited Scheme Booklet | 371 |
GENERAL | ||
A$
|
Australian dollar | |
US$
|
United States dollar | |
%
|
percent | |
AARL
|
Anglo American Research Laboratories | |
AMC
|
AMC Consultants Pty Ltd | |
CCD
|
Counter-current-decantation | |
CER
|
Certified Emission Reductions | |
CIE
|
Compagnie Ivoirienne dElectricite | |
CIL
|
Carbon-in-leach | |
CO
2
|
Carbon Dioxide | |
CT
|
Comparable Transaction | |
DEC
|
Department of Environment and Conservation | |
EA
|
Environmental Authority | |
EIA
|
Environmental Impact Assessment | |
EIS
|
Environmental Impact Statement | |
EMMP
|
Environmental Management and Monitoring Program | |
EPA
|
Environmental Protection Authority | |
FGO
|
Lower Grade Material | |
Grant
Samuel |
Grant Samuel & Associates Pty Ltd | |
G&A
|
General and Administration | |
HGO
|
High Grade Material | |
HFO
|
Heavy Fuel Oil | |
IBP
|
Integrated Benefits Package Agreement | |
K
|
Papua New Guinea Kina | |
LGL
|
Lihir Gold Limited | |
LOM
|
Life of Mine | |
LOMP
|
Life of Mine Plan | |
LPG
|
Liquid petroleum gas | |
ML
|
Mining Lease | |
MOPU
|
Million Ounce Project Upgrade | |
Newcrest
|
Newcrest Mining Limited | |
NPV
|
Net Present Value | |
NRLLG
|
Nimamar Rural Local-Level Government | |
0
2
|
Oxygen | |
PE
|
Past Expenditure | |
PEM
|
Prospectivity Enhancement Multiplier | |
PNG
|
Papua New Guinea | |
QLD
|
Queensland | |
RC
|
Reverse circulation | |
ROM
|
Run of Mine | |
SAG
|
Semi-autogenous grinding | |
METALS & MINERALS | ||
Ag
|
Silver | |
Au
|
Gold | |
Co
|
Cobalt | |
Cu
|
Copper | |
Ni
|
Nickel | |
Pb
|
Lead | |
S
|
Sulphur | |
U
|
Uranium | |
Zn
|
Zinc | |
UNITS OF MEASUREMENT | ||
°C
|
degrees celsius | |
bcm
|
bank cubic metres | |
g
|
grams | |
g/L
|
grams per litre | |
g/t
|
grams per tonne | |
ha
|
hectares | |
Hz
|
Hertz | |
kbcm
|
kilo bank cubic metres | |
kL/tonne
|
Kilolitre per tonne | |
km
|
kilometres | |
km
2
|
square kilometres | |
koz
|
thousand ounces | |
kPa
|
kilopascal | |
kt
|
kilotonne | |
ktpa
|
kilotonnes per annum | |
kW
|
kilowatt | |
kWh
|
kilowatt hours | |
kWh/t
|
kilowatt hours per tonne | |
kV
|
kilovolts | |
M
|
million | |
Mm
3
|
million cubic metres | |
m
|
metre | |
m
2
|
square metre | |
m
3
|
cubic metre | |
m
3
/s
|
cubic metres per second | |
Ma
|
mega annum (millions of years) | |
Mbcm
|
million bank cubic metres | |
Mm
|
millimetres | |
Moz
|
million ounces | |
mRL
|
reduced level | |
Mt
|
million tonnes | |
Mtpa
|
million tonnes per annum | |
MVA
|
megavolt-ampere | |
MW
|
megawatt | |
MWh
|
megawatt hours | |
oz
|
ounce | |
pH
|
measure of acidity or alkalinity | |
ppm
|
parts per million | |
t
|
tonnes | |
t/m
3
|
tonnes per cubic metre | |
tpa
|
tonnes per annum | |
tph
|
tonnes per hour | |
µm
|
microns | |
OTHER
|
||
JORC Code
|
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC). | |
AMC Modelling Scenarios
|
Prospective production and capital and operating cost as valuation inputs | |
VALMIN
Code
|
Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, The VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector. |
12 Independent technical specialists report continued | 372 |
Name | Qualifications | Affiliation | Involvement | |||
Andrew Chuk
|
BEng (Mining) (Hons) B Economics | AMC Principal Consultant | Project Leader. | |||
|
||||||
Michael Thomas
|
Higher National Diploma of Mining Engineering | AMC Director/Principal Mining Consultant | Peer review. | |||
|
||||||
Pat Stephenson
|
BSc (Hons) (Geology) | AMC Director/Principal Geologist | Peer review. |
Name | Qualifications | Affiliation | Involvement | |||
Lawrie Gillett
|
BEng (Mining), DipGeosc | AMC Director/Principal Mining Engineer | Mining aspects of Lihir Gold Mine. | |||
|
||||||
Brad Watson
|
BEng (Hons) (Mining Engineering), BComm (Finance) | AMC Mining Engineer | Mining aspects and AMC scenario modelling. | |||
|
||||||
Mark Sweeney
|
BSc (Applied Mining Geostatistics), BSc (Hon) Applied Geology, Diploma of Statistics & Geostatistics | AMC Principal Geologist | Review of geology and resources for Lihir Gold Mine. | |||
|
||||||
Chris John
|
B Sc (Agric) (Hons), Ph D, | Subconsultant Environment | Environment aspects of Lihir Gold Mine. | |||
|
||||||
Rolly Nice
|
BSc(Metallurgical Engineering) | Subconsultant Metallurgy | Mineral processing aspects of Lihir Gold Mine. |
Name | Qualifications | Affiliation | Involvement | |||
Brian Hall
|
BEng (Mining) (Hons), BCom MAusIMM, MIMMM(CEng) | AMC Principal Mining Engineer | Mining aspects. | |||
|
||||||
Mal Dorricott
|
M App Sc, BEng (Mining), Grad Cert (Tertiary Teaching) | AMC Principal Mining Engineer | Coordinator and Mining aspects of Mt Rawdon Gold Mine. | |||
|
||||||
Mark Sweeney
|
BSc (Applied Mining Geostatistics), BSc (Hon) Applied Geology, Diploma of Statistics & Geostatistics | AMC Principal Geologist | Review of geology and resources for Mt Rawdon Gold Mine. |
Name | Qualifications | Affiliation | Involvement | |||
Martin Staples
|
BSc (Geology) (Hons) | AMC Principal Geologist | Mining aspects. | |||
|
||||||
Brad Watson
|
BEng (Hons) (Mining Engineering), BComm (Finance) | AMC Mining Engineer | Mining aspects and AMC scenario modelling. | |||
|
||||||
Chris Arnold
|
MSc (Natural Resource Management), BSc Geology (Hons), DipEd | AMC Principal Geologist | Geology and resources. | |||
|
||||||
Dr Chris Gilchrist
|
C.Eng BSc (Min Eng) PhD (Mech Eng) FIMMM | Subconsultant Metallurgy | Mineral processing aspects of Bonikro Gold Mine. |
Name | Qualifications | Affiliation | Involvement | |||
Chris Arnold
|
MSc (Natural Resource Management), BSc Geology (Hons), DipEd | AMC Principal Geologist | Exploration valuation. |
INVESTIGATING ACCOUNTANTS REPORT |
An aerial view of Bonikros open pit in Côte dlvoire. |
13 Investigating accountants report continued | 374 |
|
PricewaterhouseCoopers
Securities Ltd ACN 003 311 617 ABN 54 003 311 617 Holder of Australian Financial Services Licence No 244572 |
|
|
||
The Directors
Lihir Gold Limited Level 7, Pacific Place Cnr. Champion Parade & Musgrave Street Port Moresby PAPUA NEW GUINEA |
Riverside Centre
123 Eagle Street BRISBANE QLD 4000 GPO Box 150 BRISBANE QLD 4001 DX 77 Brisbane Australia Telephone +61 7 3257 5000 Facsimile +61 7 3257 5999 |
(a) | LGLs consolidated statements of financial position as at 31 December 2009 and 31 December 2008, as set out in section 7.9 of the Scheme Booklet; | ||
(b) | LGLs summarised consolidated statements of comprehensive income for the years ended 31 December 2009 and 31 December 2008, as set out in section 7.9 of the Scheme Booklet; and |
Lihir Gold Limited Scheme Booklet | 375 |
(c) | LGLs consolidated statements of cashflows for the years ended 31 December 2009 and 31 December 2008, as set out in section 7.9 of the Scheme Booklet, (collectively, the LGL Financial Information ). |
(a) | Newcrests consolidated balance sheets as at 31 December 2009, 30 June 2009 and 30 June 2008 (presented in Australian Dollars and US Dollars) as set out in section 8.10 of the Scheme Booklet); | ||
(b) | Newcrests summarised consolidated income statements for the half year ended 31 December 2009 and the years ended 30 June 2009 and 30 June 2008 (presented in Australian Dollars and US Dollars) as set out in section 8.10 of the Scheme Booklet); and | ||
(c) | Newcrests consolidated cashflow statements for the half-year ended 31 December 2009 and the years ended 30 June 2009 and 30 June 2008 (presented in Australian Dollars and US Dollars) as set out in section 8.10 of the Scheme Booklet), | ||
(collectively, the Newcrest Financial Information ). |
(a) | unaudited pro forma consolidated balance sheet of the Merged Group which has been prepared based on the unaudited consolidated balance sheet of Newcrest as at 31 December 2009 (as set out in section 8.10 of the Scheme Booklet) and the audited consolidated statement of financial position of LGL as at 31 December 2009 (as set out in section 7.9 of the Scheme Booklet), including pro forma adjustments to account for the acquisition of LGL by Newcrest (together the Pro Forma Adjustments ) as though it had occurred on 31 December 2009, as set out in section 9.4 of the Scheme Booklet, | ||
(the Merged Group Pro Forma Financial Information ). |
(2)
13 Investigating accountants report continued | 376 |
(a) | Confirmed that the LGL Financial Information is properly extracted from the relevant source documentation, as follows: |
(i) | LGLs audited consolidated statements of financial position as at 31 December 2009 and 31 December 2008; | ||
(ii) | LGLs audited consolidated statements of comprehensive income for the years ended 31 December 2009 and 31 December 2008; and | ||
(iii) | LGLs audited consolidated statements of cashflows for the years ended 31 December 2009 and 31 December 2008; and |
(b) | Confirmed that the LGL Financial Information is arithmetically correct. |
| We confirmed that the LGL Financial Information has been properly extracted from the relevant source documentation. No exceptions were noted; and | ||
| We confirmed that the LGL Financial Information is arithmetically correct. No exceptions were noted. |
(3)
Lihir Gold Limited Scheme Booklet | 377 |
(a) | Confirmed that the Newcrest Financial Information, presented in AUD, is properly extracted from the relevant source documentation, as follows: |
(i) | Newcrests reviewed consolidated balance sheet as at 31 December 2009 and audited consolidated balance sheets as at 30 June 2009 and 30 June 2008; | ||
(ii) | Newcrests reviewed consolidated income statement for the half-year ended 31 December 2009 and audited consolidated income statements for the years ended 30 June 2009 and 30 June 2008; and | ||
(iii) | Newcrests reviewed consolidated cashflow statement for the half-year ended 31 December 2009 and audited consolidated cashflow statements for the years ended 30 June 2009 and 30 June 2008, and |
(b) | Confirmed that the Newcrest Financial Information, presented in AUD, is arithmetically correct. |
| Assets and liabilities at closing rates at each balance sheet date; and | ||
| Income, expenses and cashflows at the date of transactions (with monthly average rates used for groups of transactions within each period for practical reasons). |
(4)
13 Investigating accountants report continued | 378 |
(a) | Retranslated each line item contained within the Newcrest Financial Information, presented in AUD, to USD by applying exchange rates as issued by the Reserve Bank of Australia (the RBA rates ). For the income statement and statement of cashflows, average 6-month RBA rates were applied to line items in reviewed financial statements at 31 December 2007, 2008 and 2009 and average 6-month RBA rates were applied to line items in audited financial statements at 30 June 2008 and 2009 (after deducting the results for half years 31 December 2007 and 2008). For the balance sheet, closing RBA rates for 30 June 2008 and 2009 and 31 December 2009 were applied; and | ||
(b) | Confirmed whether the results of (b)(i) above are within US$17 million of the Newcrest Financial Information, presented in USD, as set out in section 8.10 of the Scheme Booklet (where US$17 million represents a level of precision consistent with approximately 5% of the Newcrest Profit before income tax for the 12 months ended 30 June 2009, presented in USD, as set out in section 8.10 of the Scheme Booklet); and | ||
(c) | Where the results of (b)(i) above were outside US$17 million of the Newcrest Financial Information, presented in USD, as set out in section 8.10 of the Scheme Booklet, as was the case for the following line items: |
| Issued capital; | ||
| Payments to suppliers and employees; | ||
| Acquisition of interest in joint venture; | ||
| Repayment of borrowings; | ||
| Proceeds from equity issue net of costs; | ||
| Purchase of gold to close out gold forward contracts, |
we performed the following: |
(1) | Obtained from Newcrest detailed translation calculations for those line items (the Newcrest Translation Calculations ); and | ||
(2) | Reperformed the Newcrest Translation Calculations by applying RBA rates for the dates or periods set out in those detailed calculations; and | ||
(3) | Confirmed whether the results of (b)(iii)(2) above are within US$17 million of the Newcrest Translation Calculations. |
(d) | Confirmed that the Newcrest Financial Information, presented in USD, is arithmetically correct. |
(5)
Lihir Gold Limited Scheme Booklet | 379 |
| We confirmed that the Newcrest Financial Information, presented in AUD, has been properly extracted from the relevant source documentation. No exceptions were noted; and | ||
| We confirmed that the Newcrest Financial Information, presented in AUD, is arithmetically correct. No exceptions were noted. |
| We retranslated each line item contained within the Newcrest Financial Information, presented in AUD, to USD by applying average 6-month RBA rates for the periods ended 31 December 2007, 2008 and 2009 and 30 June 2008 and 2009 and closing RBA rates for 30 June 2008 and 2009 and 31 December 2009, and for the following line items: |
o | Issued capital; | ||
o | Payments to suppliers and employees; | ||
o | Acquisition of interest in joint venture; | ||
o | Repayment of borrowings; | ||
o | Proceeds from equity issue net of costs; | ||
o | Purchase of gold to close out gold forward contracts; |
we reperformed the Newcrest Translation Calculations by applying the RBA rates for the dates or periods set out in those detailed calculations; and confirmed the results were within US$17 million of the Newcrest Financial Information, presented in USD, as set out in section 8.10 of the Scheme Booklet or within US$17 million of the Newcrest Translation Calculations. No exceptions were noted. | |||
| We confirmed that the Newcrest Financial Information, presented in USD, is arithmetically correct. No exceptions were noted. |
(6)
13 Investigating accountants report continued | 380 |
| the pro forma consolidated balance sheet of the Merged Group as at 31 December 2009 has not been properly or accurately compiled on the basis of the: |
o | LGL Financial Information | ||
o | Newcrest Financial Information | ||
o | Pro Forma Adjustments described in section 9.4 of the Scheme Booklet |
| the Pro Forma Adjustments described in section 9.4 of the Scheme Booklet do not form a reasonable basis for the Merged Group Pro Forma Financial Information, and are not in accordance with the measurement and recognition principles prescribed in the International Financial Reporting Standards as if the merger had occurred on 31 December 2009, as set out in section 9.4 of the Scheme Booklet. |
| considering work papers aggregating the LGL Financial Information and Newcrest Financial Information, Pro Forma Adjustments, and where relevant, comparing the information to publicly available historical audited or reviewed financial information; | ||
| a review of the adjustments made to the Merged Group Pro Forma Financial Information; | ||
| a review of the assumptions (which include the Pro Forma Adjustments) used to compile the Merged Group Pro Forma Financial Information; and | ||
| enquiry of LGL and Newcrest management. |
(7)
Lihir Gold Limited Scheme Booklet | 381 |
| the pro forma consolidated balance sheet for the Merged Group as at 31 December 2009 has not been properly compiled on the basis of the: |
o | LGL Financial Information | ||
o | Newcrest Financial Information | ||
o | Pro Forma Adjustments described in section 9.4 of the Scheme Booklet |
| the Pro Forma Adjustments described in section 9.4 of the Scheme Booklet do not form a reasonable basis for the Merged Group Pro Forma Financial Information, and are not in accordance with the measurement and recognition principles prescribed in the International Financial Reporting Standards as if the merger had occurred on 31 December 2009, as set out in section 9.4 of the Scheme Booklet. |
(8)
13 Investigating accountants report continued | 382 |
(9)
Lihir Gold Limited Scheme Booklet | 383 |
|
PricewaterhouseCoopers | |
|
Securities Ltd | |
|
ACN 003 311 617 | |
|
ABN 54 003 311 617 | |
|
Holder of Australian Financial | |
|
Services Licence No 244572 | |
|
||
|
Riverside Centre | |
|
123 Eagle Street | |
|
BRISBANE QLD 4000 | |
|
GPO Box 150 | |
Appendix A Financial Services Guide
|
BRISBANE QLD 4001 | |
|
DX 77 Brisbane | |
|
Australia | |
|
Telephone +61 7 3257 5000 | |
|
Facsimile +61 7 3257 5999 |
1. | About us | |
PricewaterhouseCoopers Securities Ltd (ABN 54 003 311 617, Australian Financial Services Licence no 244572) (PwC Securities) has been engaged by Lihir Gold Limited (LGL or the Company) to provide a report in the form of an Investigating Accountants Report (the Report) in relation to certain financial information included in the Scheme Booklet, dated on or around 22 July 2010, to be issued by the Company relating to the acquisition of LGL in its entirety by Newcrest Mining Limited (Newcrest) through a cash and scrip offer of Newcrest ordinary shares (the Scheme " ). You have not engaged us directly but have been provided with a copy of the Report as a retail client because of your connection to the matters set out in the Report. | ||
2. | This Financial Services Guide | |
This Financial Services Guide (FSG) is designed to assist retail clients in their use of any general financial product advice contained in the Report. This FSG contains information about PwC Securities generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the Report, and how complaints against us will be dealt with. | ||
3. | Financial services we are licensed to provide | |
Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities, interests in managed investment schemes, derivatives, superannuation products, foreign exchange contracts, insurance products, life products, managed investment schemes, government debentures, stocks or bonds, and deposit products. |
13 Investigating accountants report continued | 384 |
4. | General financial product advice | |
The Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. | ||
You should consider your own objectives, financial situation and needs when assessing the suitability of the Report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment. | ||
5. | Fees, commissions and other benefits we may receive | |
PwC Securities charges fees to produce reports, including this Report. These fees are negotiated and agreed with the entity who engages PwC Securities to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this Report our fees are charged on an hourly basis and as at the date of this Report amount to US$250,000. Directors or employees of PwC Securities, PricewaterhouseCoopers, or other associated entities, may receive partnership distributions, salary or wages from PricewaterhouseCoopers. | ||
6. | Associations with issuers of financial products | |
PwC Securities and its authorised representatives, employees and associates may from time to time have relationships with the issuers of financial products. For example, PricewaterhouseCoopers may be the auditor of, or provide financial services to, the issuer of a financial product and PwC Securities may provide financial services to the issuer of a financial product in the ordinary course of its business. The Papua New Guinea firm of PricewaterhouseCoopers is currently the Companys auditors. | ||
7. | Complaints | |
If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. In addition, a copy of our internal complaints handling procedure is available upon request. | ||
If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Ombudsman Service (FOS), an external complaints resolution service. FOS can be contacted by calling 1300 780 808. You will not be charged for using the FOS service. | ||
8. | Contact Details | |
PwC Securities can be contacted by sending a letter to the following address: |
IMPLeMentAtIon 385 oF tHe ScHeMe 14 Shovel loading a haul truck at Lihir Island. |
14 Implementation of the Scheme continued | 386 |
(a) | On 4 May 2010, LGL and Newcrest entered into the Merger Implementation Agreement under which LGL agreed to propose the Scheme to LGL Shareholders. | |
(b) | On 20 July 2010, Newcrest executed the Deed Poll pursuant to which Newcrest agreed, subject to the Scheme becoming Effective, to provide to each Scheme Participant the Scheme Consideration to which such Scheme Participant is entitled under the terms of the Scheme. A copy of the Deed Poll is included in Attachment D to this Scheme Booklet. | |
(c) | On 22 July 2010, the Court ordered that LGL hold the Scheme Meeting at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port Moresby, Papua New Guinea on 23 August 2010 commencing at 11.00am, for the purpose of considering the Scheme. | |
(d) | Each LGL Shareholder who is registered on the LGL Register as at 7.00pm on 21 August 2010 is entitled to attend and vote at the Scheme Meeting. | |
(e) | If the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting, LGL will apply to the Court at the Second Court Hearing for an order approving the Scheme. The Court has a discretion as to whether to grant the orders approving the Scheme, even if the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting. | |
(f) | If the Court order approving the Scheme is obtained, then LGL will lodge with the PNG Registrar of Companies the Court order under section 250(4) of the PNG Companies Act. | |
(g) | LGL Shares will be suspended from trading on ASX, POMSoX and NASDAQ on the Effective Date.This will usually be the first Business Day following the Second Court Hearing. | |
(h) | Once the Scheme becomes Effective, LGL and Newcrest will become bound to implement the Scheme in accordance with its terms. | |
(i) | No dealings in LGL Shares will be permitted after the Effective Date, although the process to register dealings that took place on or before the Effective Date will continue until the Record Date. However, assuming the New Newcrest Shares are admitted to the official list of ASX and POMSoX, Scheme Participants will be entitled to trade their New Newcrest Shares on ASX and POMSoX initially on a deferred settlement basis from the first Business Day after the Effective Date (expected to be 30 August 2010). | |
(j) | Once the Scheme becomes Effective, LGL will give notice of that event to ASX, POMSoX and NASDAQ. | |
(k) | If the Scheme becomes Effective, then on the Implementation Date: |
(i) | all of the Scheme Shares will be transferred to Newcrest; and | ||
(ii) | in consideration, Newcrest will provide the Scheme Consideration to the Scheme Participants in accordance with the Scheme. |
(l) | The Scheme will not be implemented if the Merger Implementation Agreement is terminated or if the conditions precedent to the Scheme, outlined in section 15.20, are not satisfied (or waived, where permitted). | |
(m) | If the Scheme is implemented, and assuming the New Newcrest Shares are admitted to the official list of ASX and POMSoX, the New Newcrest Shares will commence trading on a normal basis following despatch of confirmations of issue for the New Newcrest Shares (which must occur within five Business Days after the implementation of the Scheme). | |
(n) | Each Scheme Participant, without the need for any further act, irrevocably appoints LGL and all of the LGL Directors and officers (jointly and severally) as its attorney and agent for the purpose of executing any document necessary to give effect to the Scheme including, if required, a proper instrument of transfer of its Scheme Shares. |
Lihir Gold Limited Scheme Booklet | 387 |
14 Implementation of the Scheme continued | 388 |
(a) | tax file numbers and tax file number exemption disclosures; and | |
(b) | elections under Newcrests dividend reinvestment plan, |
(i) | that they will not receive the Newcrest Shares which they would otherwise receive under the Scheme; and | |
(ii) | instead, a nominee will be appointed by Newcrest to sell the relevant Newcrest Shares on or after the Implementation Date and the gross proceeds of the sale will be remitted to those shareholders without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions of tax required by law or any revenue authority). |
Lihir Gold Limited Scheme Booklet | 389 |
(i) | Newcrest is not a reporting issuer in Canada at the date of the resale; and | |
(ii) | at the Implementation Date residents of Canada do own directly or indirectly 10% or more of the outstanding Newcrest Shares and did not represent in number more than 10% of the total owners of Newcrest Shares, both after having given effect to the Scheme. |
14 Implementation of the Scheme continued | 390 |
Lihir Gold Limited Scheme Booklet | 391 |
(i) | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in shares; | |
(ii) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000 European euros; and (3) an annual net turnover of more than 50,000,000 European euros, as shown in its last annual or consolidated accounts; | |
(iii) | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or | |
(iv) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
14 Implementation of the Scheme continued | 392 |
(i) | setting out the reasons why they believe New Newcrest Shares may be lawfully issued to them under the Scheme, and any conditions or requirements that Newcrest (or any other person) will need to satisfy or comply with in order to do so; and | |
(ii) | attaching a signed declaration certifying that they are a person to whom New Newcrest Shares may be lawfully issued under the Scheme, together with appropriate legal advice from a qualified legal adviser in their country of residence confirming the matters stated in the application and certified in the declaration. |
Lihir Gold Limited Scheme Booklet | 393 |
additional The Bonikro process plant |
Lihir Gold Limited Scheme Booklet | 395 |
NUMBER OF LGL SHARES OVER WHICH | ||||||
NAME | POSITION | A RELEVANT INTEREST IS HELD | ||||
Ross Garnaut
|
Non-executive Chairman | 167,148 | 1 | |||
Bruce Brook
|
Non-executive Director | 67,730 | 1 | |||
Peter Cassidy
|
Non-executive Director | 46,074 | 1 | |||
Michael Etheridge
|
Non-executive Director | 73,501 | 1 | |||
Graeme Hunt
|
CEO and Managing Director | 0 | 2 | |||
Winifred kamit
|
Non-executive Director | 2,667 | 1 | |||
Geoff Loudon
|
Non-executive Director | 143,840 | ||||
Alister Maitland
|
Non-executive Director | 82,637 | 1 |
Notes | ||
1 | Indicates an indirect Relevant Interest. | |
2 | Graeme Hunt holds 1,072,020 share rights granted under the LGL Executive Share Plan. Details of the treatment of participants in the LGL Executive Share Plan and LGL Employee Share Ownership Plan under the Scheme are set out in section 15.7. Graeme Hunts share rights will vest pro rata. If this transaction is completed, for example, by 13 September, Graeme Hunt will be entitled to 250,399 LGL Shares. |
(a) | vote in favour of the Scheme; or | |
(b) | dispose of any LGL Shares, |
15 Additional information continued | 396 |
NUMBER OF NEWCREST SECURITIES OVER | ||||||
NAME | POSITION | WHICH A RELEVANT INTEREST IS HELD | ||||
Donald Mercer
|
Chairman | 15,546 | 1 | |||
Ian Smith
2
|
Managing Director and CEO | 4,235 | ||||
Gregory Robinson
3
|
Executive Director | 4,235 | ||||
Timothy Poole
|
Non-executive Director | 4,235 | 1 | |||
John Spark
|
Non-executive Director | 18,695 | 1 | |||
Richard knight
|
Non-executive Director | 20,000 | 1 | |||
Richard Lee
|
Non-executive Director | 20,000 | 1 | |||
Vince Gauci
|
Non-executive Director | 3,400 | 1 |
Notes | ||
1 | Indicates an indirect Relevant Interest. | |
2 | Ian Smith holds 423,570 share rights (some unvested) under certain Newcrest incentive plans. | |
3 | Gregory Robinson holds 112,041 share rights (some unvested) under certain Newcrest incentive plans. |
Lihir Gold Limited Scheme Booklet | 397 |
NUMBER OF LGL SECURITIES OVER | ||||||
NAME | POSITION | WHICH A RELEVANT INTEREST IS HELD | ||||
Richard Lee
|
Non-executive Director | 20,000 | 1 |
Note | ||
1 | Indicates an indirect Relevant Interest. |
15 Additional information continued | 398 |
| directly attributable to the transaction; | |
| expected to have a continuing impact on the entity; and | |
| factually supportable. |
Lihir Gold Limited Scheme Booklet | 399 |
15 Additional information continued | 400 |
(a) | enter into, continue or participate in any negotiation, discussion, arrangement or understanding in connection with a possible Competing Proposal, other material asset disposal or spin-off or other restructuring; or | |
(b) | permit any third party to receive any non-public information in respect of any LGL Group member which may lead to that third party formulating, developing or finalising a Competing Proposal, other material asset disposal or spin-off or other restructuring. |
(a) | the LGL Board or any LGL Director: |
(i) | changes, qualifies or withdraws the unanimous recommendation contained in the Announcement that LGL Shareholders approve the Scheme and elect to receive either the Mixed Consideration or the Maximum Share Consideration or the statement contained in the Announcement that each LGL Director will vote the voting rights attached to all LGL Shares over which he or she has control in favour of the Scheme (in the absence of a Superior Proposal and subject to the Independent Expert opining that the Scheme is in the best interests of LGL Shareholders); or | ||
(ii) | makes any public statement that is fundamentally inconsistent with the statement and recommendation referred to in paragraph 15.17(a)(i) above, |
in either case other than where, in the Independent Experts Report, the Independent Expert opines that the Scheme is not in the best interests of LGL Shareholders (provided that the reasons for the Independent Experts conclusions do not include the existence of a Competing Proposal); | ||
(b) | a Superior Proposal is announced and recommended or supported by the LGL Board or any LGL Director; | |
(c) | a Competing Proposal is announced before the End Date and, as contemplated by that Competing Proposal, a third party acquires voting power (within the meaning of section 610 of the Australian Corporations Act) of 50% or more of LGL before the first anniversary of the date of the Merger Implementation Agreement; or | |
(d) | the Merger Implementation Agreement is terminated by Newcrest pursuant to: |
(i) | a material breach of the Merger Implementation Agreement by LGL (other than for a breach of LGLs obligation to use reasonable endeavours to ensure that all information provided by LGL and its representatives to Newcrest and its representatives on or after the date of the Merger Implementation Agreement is accurate and not misleading or where there is no material detriment for Newcrest, LGL or the Scheme), at any time before 8.00am on the Second Court Date; or | ||
(ii) | the occurrence of an LGL Regulated Event. |
Lihir Gold Limited Scheme Booklet | 401 |
(a) | if a condition precedent in the Merger Implementation Agreement for the benefit of that party is not satisfied (or waived where permitted) by 5.00pm on the day before the Second Court Date (subject to any appeal process pursuant to the Courts failure to approve the Scheme in accordance with section 250 of the PNG Securities Act); or | |
(b) | if the other party breaches any term of the Merger Implementation Agreement at any time before 8.00am on the Second Court Date and that breach is material in the context of the Scheme as a whole (provided that, if such breach is reasonably capable of remedy, notice of the material breach is given by the party not in breach and the material breach has not been remedied within five business days of that notice). |
(a) | there is an LGL Regulated Event or an LGL Material Adverse Change (provided that notice of the relevant circumstances are provided to LGL and the relevant circumstances continue to exist for a period of five business days from the time such notice is given); or | |
(b) | an LGL Director publicly changes, qualifies or withdraws their statement that the Scheme is in the best interests of LGL Shareholders or their recommendation that LGL Shareholders approve the Scheme, or publicly recommends, promotes or endorses a Competing Proposal. |
(c) | there is a Newcrest Regulated Event or a Newcrest Material Adverse Change (provided that notice of the relevant circumstances are provided to Newcrest and the relevant circumstances continue to exist for a period of five business days from the time such notice is given); or | |
(d) | the break fee of US$60 million is payable by LGL and has been paid in full to Newcrest (see section 15.17 above for further information). |
(a) | LGL Board recommendation The LGL Board unanimously recommends that LGL Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal, or the Independent Expert opining that the Scheme is not in the best interests of LGL Shareholders, and does not withdraw or vary that recommendation. | |
(b) | Independent Experts Report The Independent Expert providing an opinion that the Scheme is in the best interests of LGL Shareholders. | |
(c) | LGL Shareholder approval The Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting. | |
(d) | Court approval The Scheme is approved by the Court in accordance with section 250 of the PNG Companies Act (subject to any conditions ordered by the Court and approved in writing by LGL and Newcrest). | |
(e) | No LGL Material Adverse Change or LGL Regulated Event No LGL Regulated Event nor LGL Material Adverse Change occurring between the date of the Merger Implementation Agreement and 8.00am on the Second Court Date. | |
(f) | No Newcrest Material Adverse Change or Newcrest Regulated Event No Newcrest Regulated Event nor Newcrest Material Adverse Change occurring between the date of the Merger Implementation Agreement and 8.00am on the Second Court Date. | |
(g) | Regulatory approvals Before 8.00am on the Second Court Date, all Regulatory Approvals required to implement the Scheme are obtained and not withdrawn. | |
(h) | ASx quotation ASX approving the quotation of the New Newcrest Shares. |
15 Additional information continued | 402 |
(i) | Key Material Contracts To the extent that implementation of the Scheme would require consent or trigger any right of termination or other material right in favour of a person (other than a member of the LGL Group) or any material liability owed by a member of the LGL Group under a key Material Contract, each required consent, waiver of each such right, and release of each such liability, is obtained (including in favour of the Merged Group on terms no more onerous than those applying to LGL) and not withdrawn (and, where given conditionally, subject to conditions acceptable to Newcrest). | |
(j) | No Superior Proposal As at 8.00am on the Second Court Date, LGL has not entered into any agreement with a third party in relation to a Superior Proposal that has been announced and recommended by the LGL Board. | |
(k) | Warranties Each representation and warranty given by LGL and Newcrest under the Merger Implementation Agreement is true and correct in all material respects as at the date of the Merger Implementation Agreement and as at 8.00am on the Second Court Date. | |
(l) | No person to acquire 25% of LGL Shares No person (other than a Newcrest Group member or an existing institutional or portfolio investor in LGL) acquires a relevant interest (within the meaning of sections 608 and 609 of the Australian Corporations Act) in 25% or more of LGL Shares. | |
(m) | No restraint No order or legislative restraint, whether permanent or temporary, being issued by a Governmental Agency that restricts the implementation of the Scheme. | |
(n) | Tax rulings Newcrest and LGL obtain any income tax or other tax rulings agreed by LGL and Newcrest to be reasonably necessary to implement the Scheme. |
AUSTRALIA | PNG | |||
Source of corporate
regulation
|
Corporations are regulated principally by the Australian Corporations Act, and by Australian general law. | Corporations are regulated by the PNG Companies Act, the issue of any dealings in securities of corporations are regulated by the PNG Securities Act, and both companies and the issue of and dealing in securities are regulated by the underlying law of PNG. | ||
|
||||
Regulatory
supervision of corporations |
The relevant regulatory agency in Australia is ASIC, which administers the Australian Corporations Act and has broad supervisory powers over corporations and dealings in securities. | The relevant regulatory agency in PNG is the PNG Registrar of Companies (which administers the PNG Companies Act) and the PNG Securities Commission (which administers the PNG Securities Act). |
Lihir Gold Limited Scheme Booklet | 403 |
AUSTRALIA | PNG | |||
Calling shareholder
meetings |
Shareholders with at least 5% voting
rights may call a meeting or request the
directors of a company to call a
meeting. The request may also be made by
at least 100 shareholders entitled to
vote on a resolution.
The required notice period to shareholders to call a general meeting is 28 days. |
Shareholders with at least 5% voting rights
may require the board to call a special
meeting.
The required notice period to shareholders to call a general meeting is 14 days. |
||
|
||||
Voting requirements
|
Unless required by the Australian
Corporations Act or a companys
constitution, resolutions of a company
generally require a simple majority of
votes cast on the resolution. The
Australian Corporations Act requires
certain matters to be resolved by
special resolution, (which requires 75%
of the votes cast on the resolution),
including:
amendment or repeal of the
constitution;
a selective capital reduction or a
selective buy-back of shares (unless
agreed to by all ordinary shareholders
at a general meeting);
change of company name;
the giving of financial assistance by
the company for the acquisition of its
shares (unless agreed to by all ordinary
shareholders at a general meeting); and
voluntary winding up.
|
As a general rule, the PNG Companies Act
provides that power reserved to shareholders
is to be exercised by ordinary resolution,
which is a simple majority of those
shareholders entitled to vote. For certain
matters voting on the question is by special
resolution (which is a majority of 75% of
votes cast on the resolution unless a
companys constitution requires a higher
majority) including:
the adoption, alteration or revocation of
a companys constitution;
a Major Transaction (see below);
change of company name;
an amalgamation of a company under the PNG
Companies Act (other than by scheme of
arrangement); and
the placement of a company into
liquidation.
|
||
|
||||
|
Where the company directors have exceeded their powers in the conduct of the companys affairs, the shareholders may resolve to approve the conduct (approval by ordinary resolution is required in less serious circumstances and unanimous assent of all shareholders is required in more serious circumstances). | |||
|
||||
Major transactions
|
Shareholders are not required to vote on a major transaction entered into by the company unless, if the company is listed, there is a significant change to the nature or scale of that companys activities or the transaction is with a person of influence (in which case, approval by ordinary resolution of shareholders may be required under the Listing Rules) or if the significant change involves the company disposing of its main undertaking (in which case, approval by ordinary resolution of shareholders is required). | Shareholders are required to vote on Major Transactions (which are broadly defined under the PNG Companies Act to include an acquisition, disposal or other transaction with a value that is more than half the value of the assets of the company), which require approval by special resolution of shareholders. |
15 Additional information continued | 404 |
AUSTRALIA | PNG | |||
Minority
shareholder buy-out rights |
Minority shareholders do not have a right to request the company to buy-out their shares (other than in certain circumstances in a takeovers context). However, the Australian Corporations Act permits a company to be ordered to buy-out minority shareholders shares if the company is being conducted oppressively or in an unfairly prejudicial way. | Minority shareholders voting against a resolution to approve a Major Transaction, an alteration of the companys constitution which imposes or removes a restriction on the activities of the company, or an amalgamation under the PNG Companies Act (other than by scheme of arrangement) which is approved by shareholders have a right to be bought out by the company at a fair and reasonable value. | ||
|
||||
Shareholder
proceedings |
Shareholders of a company may bring an
action in cases where the conduct of the
companys affairs, an act or a resolution,
is contrary to the interests of shareholders
as a whole, or oppressive to, unfairly
prejudicial to, or unfairly discriminatory
against, any shareholder or shareholders,
whether in their capacity as a shareholder
or any other capacity.
Shareholders or former shareholders may also bring an action on behalf of the company if permission is given by the court. Such permission is likely to be granted where the court is satisfied that:
the company will not itself bring the
proceedings or properly take responsibility
for such actions;
the applicant is acting in good faith;
it is in the best interests of the company
that the applicant be granted leave or given
permission;
there is a serious question to be tried;
and
either at least 14 days before making
application, the applicant gave notice to
the company of its intention to apply for
leave and of its reasons, or it is
appropriate to grant leave.
|
Shareholders or former shareholders may bring an
action against a director for breach of a duty
owed to that person as a shareholder, but may
not recover any loss relating to the value of
shares by reason only of a loss suffered or a
gain forgone by the company.
Shareholders or former shareholders of a company may also bring an action if they consider the affairs of the company have been, or are being, or are likely to be, conducted in a manner that is, or is likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to them as shareholders or in any other capacity. A shareholder or director of a company may bring an action on behalf of the company or may intervene in action to which the company is a party for the purposes of continuing, defending or discontinuing the proceedings if leave is granted by the court. In determining whether to grant leave, the court must have regard to:
the likelihood of the proceedings succeeding;
the costs of the proceedings in relation to
the relief likely to be obtained;
any action already taken by the company to
obtain the relief; and
the interests of the company in the
proceedings.
Leave may be granted only where the court is satisfied that either:
the company does not intend to bring,
diligently continue or defend, or discontinue
the proceedings; or
it is in the interests of the company that the
conduct of the proceedings should not be left to
the directors or to the determination of
shareholders as a whole.
|
Lihir Gold Limited Scheme Booklet | 405 |
AUSTRALIA | PNG | |||
Inspection of
company books
|
Shareholders of a company have statutory
rights to inspect and obtain copies of the
register (of members, optionholders or
debenture holders), the constitution, and
non-confidential documents of that company
lodged with ASIC.
Shareholders may inspect the books of a company under a court order which may be granted where the court is satisfied that the applicant is acting in good faith and the inspection is to be made for a proper purpose. |
Shareholders may
inspect certain
records of a
company (including
its members
register and
minutes of meetings
of shareholders),
for payment of a
prescribed fee.
Shareholders may inspect and make copies of the records of the company under a court order which may be granted where the court is satisfied the shareholder is acting in good faith and the inspection is proposed to be made for proper purpose, and the person appointed to make the inspection is registered as a registered company auditor. |
||
|
||||
Dividends
|
The board of directors of a company may determine that a dividend is payable and fix the amount, time and method of payment. Dividends may only be paid out of profits of the company and directors need to be satisfied that they have not breached their duty to prevent insolvent trading by the company following the making of dividends or any other distributions. | The board of directors of a company must authorise the making of all dividends and other distributions to shareholders. Directors need to be satisfied that the company is solvent immediately following the making of dividends or distributions. | ||
|
||||
Directors duties
|
Broadly, under the Australian Corporations
Act and general law, directors and officers
of the company are subject to duties to:
act in the good faith in the best interest
of the company;
act for proper purpose;
not fetter their discretion (directors
only);
exercise care, skill and diligence;
avoid conflicts of interests;
not use their position to their or someone
elses advantage; and
not misappropriate company property.
|
Under the PNG Companies Act and the underlying law of PNG, directors of the company are subject to equivalent duties to those under Australian law. | ||
|
||||
Remuneration of
directors and
officers
|
Under the Listing Rules of ASX, the maximum
amount to be paid to directors for their
services as directors (other than the salary
of an executive director) is not to exceed
the amount approved by shareholders at a
general meeting.
Shareholders of listed companies have the right under the Australian Corporations Act to participate in a non-binding vote, to be held at an annual general meeting, on the adoption of the remuneration report of a company. The remuneration report is included in the directors report and is required to contain a discussion of the board of directors policy in relation to remuneration of key management personnel of the company. |
The POMSoX Listing
Rules contain the
same restrictions
on payments to
directors as the
ASX Listing Rules.
Under the PNG Companies Act, shareholders have a general right to pass a resolution at a meeting relating to the management of the company, which would extend to the remuneration of directors and officers. That resolution is not binding on the board of the company unless the companys constitution provides otherwise. |
15 Additional information continued | 406 |
AUSTRALIA | PNG | |||
Retirement benefits
|
Following the Corporations Amendment (Accountability on Termination Payments) Act 2009 (Australia) coming into effect, the Australian Corporations Act was amended to significantly reduce retirement or termination benefits that can be paid to company directors, senior executives and key management personnel without shareholder approval. That threshold was previously up to seven times the directors or officers total remuneration, but that has now been reduced to the equivalent of one years base salary. benefits above that limit can only be paid with shareholder approval. | The PNG Companies Act does not prescribe limits on retirement or termination benefits. | ||
|
||||
Directors
declarations of
interest
|
A director who has a material personal interest in a matter that relates to the affairs of the company may be required under the Australian Corporations Act to give the other directors notice of that interest. That director must not be present at a meeting where the matter is being considered or vote on the matter unless the other directors or ASIC approve, or the matter is not one which requires disclosure under the Australian Corporations Act. The failure of a director to disclose a material personal interest, or voting despite a material personal interest, does not affect the validity of any act in which the director has an interest. | A director of a company is interested in a transaction to which the company is a party if that director may derive a material financial benefit from the transaction, has a material financial interest in, or is a director, officer or trustee of a party to the transaction, is the parent, child or spouse of another party to the transaction, or is otherwise directly or indirectly materially interested in that transaction. The director must give notice of the interest to the company and the other directors, but may vote on the transaction if permitted by the constitution. The failure of a director to disclose their interest in a transaction does not affect the validity of a transaction entered into by the company or the director. The transaction may be avoided by the company within three months of disclosure to shareholders unless the company derives fair value from the transaction. |
Lihir Gold Limited Scheme Booklet | 407 |
AUSTRALIA | PNG | |||
Related party
transactions |
A public company is prohibited under the Australian Corporations Act from giving a related party (which includes any entity which controls that company, a director of that company, directors of any entity which controls that company and, in each case, spouses and certain relatives of such persons) a financial benefit unless it obtains the approval of shareholders and gives the benefit within 15 months after approval, or, the financial benefit is exempt. Exempt financial benefits include indemnities, insurance premiums and payments for legal costs which are not otherwise prohibited by the Australian Corporations Act and benefits given on arms length terms. |
The PNG Companies Act
does not contain such
restrictions, except
to the extent
contained in the
interested director
provisions described
above. The POMSoX
Listing Rules contain
the same restrictions
on related party
transactions as the
ASX Listing Rules.
However, in the event of liquidation, there is specific provision which allows the liquidator to recover an amount from a related company or party to the extent that the company has paid an excessive amount for or disposed of for, an inadequate amount, any business property or services, within five years before the commencement of the liquidation. |
||
|
||||
|
The Listing Rules of ASX prohibit a listed company from acquiring a substantial asset (an asset the value of or consideration for which is 5% or more of the entitys equity interests) from, or disposing of a substantial asset to, certain related parties of the company, unless it obtains the approval of shareholders. The related parties include a director, a person who has or has had in the prior six month period an interest in 10% or more of the shares in the company and, in each case, any of their associates. The provisions apply even where the transaction may be on arms length terms. | |||
|
||||
|
The Listing Rules of ASX also prohibit a listed company from issuing, or agreeing to issue, shares to a director or a related party unless it obtains the approval of shareholders or the share issue is exempt. Exempt share issues include issues made pro rata to all shareholders, under an underwriting agreement, under a dividend or distribution plan, or under an approved employee incentive plan. |
15 Additional information continued | 408 |
AUSTRALIA | PNG | |||
Issue of new shares
|
Subject to specified exceptions (for pro rata issues, etc), the Listing Rules of ASX apply to restrict a listed company from issuing, or agreeing to issue, more ordinary shares than the number calculated as follows in any 12 month period unless shareholder approval is provided: | The POMSoX Listing Rules contain the same restrictions as the ASX Listing Rules. | ||
|
15% of the total of: | |||
|
||||
|
the number of
fully paid ordinary
shares on issue 12
months before the
date of the issue or
agreement; plus
|
|||
|
||||
|
the number of
fully paid ordinary
shares issued in the
12 months under a
specified exception;
plus
|
|||
|
||||
|
the number of
partly paid ordinary
shares that became
fully paid in the 12
months; plus
|
|||
|
||||
|
the number of
fully paid ordinary
shares issued in the
12 months with
shareholder approval;
less
|
|||
|
||||
|
the number of
fully paid ordinary
shares cancelled in
the 12 months,
|
|||
|
||||
|
less the number of ordinary shares issued or agreed to be issued in the 12 months before the date of issue or agreement to issue, but not under a specified exception or with shareholder approval. | |||
|
||||
Limits on the
acquisition of shares
|
Broadly, there are
two relevant share
ownership thresholds:
20% below this
threshold, shares can
be acquired without
restriction (other
than certain
substantial
shareholder notice
requirements). At or
above this threshold,
acquisitions are
prohibited (subject
to certain
exceptions, including
an acquisition
approved by other
shareholders) unless
a takeover offer is
made (except that
creeping acquisitions
of 3% in any period
of six months can be
made at any time
where the shareholder
has held at least 19%
for the six months
prior to the
acquisition); and
90% at or above
this threshold, the
remaining minority
shares can be
compulsorily
acquired.
|
Broadly, there are
three share ownership
thresholds relevant
to the bidder:
20% below this
threshold, shares can
be acquired without
restriction. At or
above this threshold,
acquisitions are
prohibited (subject
to certain
exceptions, including
an acquisition
approved by other
shareholders) unless
a takeover offer is
made;
50% above this,
creeping acquisitions
of 5% in any period
of 12 months can be
made; and
90% at or above
this threshold, the
remaining minority
shares can be
compulsorily
acquired.
|
||
|
||||
On-market takeover
bids |
A bidder may make an on-market offer for a companys shares if the offer is for cash consideration and is unconditional. The market offer must be for all securities of the relevant class. | A bidder is not permitted to make an on-market takeover bid. |
Lihir Gold Limited Scheme Booklet | 409 |
AUSTRALIA | PNG | |||
Partial bids
|
A bidder may make a partial off-market bid (a bid to acquire a proportion of the companys shareholdings), subject to the offer being an offer for a set proportion of each offerees holding. | A bidder may make a partial bid if the offer is conditional on the bidder acquiring more than 50% of the shares in the company, unless the company agrees to a lesser percentage by resolution in a general meeting. | ||
|
||||
Takeover offer
period |
The takeover offer period is at least one month, and not more than 12 months. | As a general rule, the takeover offer period is between 30 and 90 days. However, where the offer is a full offer (i.e., for all of the shares not held by the bidder), and there are no conditions in the offer requiring a minimum level of acceptances, or any such conditions have been satisfied, then the offer period may be extended beyond the maximum period of 90 days by up to a further 60 days. | ||
|
||||
Extension of
takeover offer
period
|
An on-market takeover offer period can be extended by the bidder at any time at least five trading days before the end of the offer period or during the last five trading days if a competitor makes or announces a competing offer for the same class of shares. | An offer may be extended at any time up to 14 days before the end of the offer period, and must remain open for at least 14 days after the variation notice has been sent. The offer period must still be within the limits set out above. | ||
|
||||
|
An off-market takeover offer period can be extended: | |||
|
||||
|
at any time before the end of the offer period
(but not where the bid is subject to a condition,
which if not satisfied renders the takeover bid
unsuccessful, and the required notice is given,
and there is no competing offer for the same class
of shares); or
|
|||
|
||||
|
if within the last seven days of the offer
period, the offer is varied to improve the
consideration offered (in which case, the offer
period is extended by 14 days after the event).
|
|||
|
||||
|
In either on-market or off-market takeovers, the takeover period automatically extends if within the last seven days, the bidders voting power in the target increases to more than 50% (in which case, the offer period is extended by 14 days after the event). | |||
|
||||
Frustrating action
in the context of a
takeover bid
|
If the company undertakes defensive measures which
frustrate the opportunity for its shareholders to
decide on the merits of an offer, such actions may
breach the fiduciary and other duties of the
directors of that company under general law and
the Australian Corporations Act.
Actions which trigger defeating conditions of the takeover bid must, as a general rule, be subject to target company shareholder approval (by ordinary resolution). |
Defensive measures of this kind may breach the fiduciary duties and other duties of the directors of the company under general law and the PNG Companies Act. There is a specific prohibition under the Takeovers Code 1998 (PNG) on a company frustrating the opportunity for its shareholders to decide on the merits of an offer, except where the relevant action has been approved by shareholders or the PNG Securities Commission. |
15 Additional information continued | 410 |
AUSTRALIA | PNG | |||
Scheme
voting thresholds |
Where a merger is effected by a scheme of arrangement under Part 5.1 of the Australian Corporations Act, the relevant shareholder approval majorities are 75% of the votes cast on the resolution and, unless the Australian court orders otherwise, a majority in number of the members present and voting on the resolution in person or by proxy. | The majority required to approve a scheme of arrangement under the PNG Companies Act is determined by the Court, and is normally 75% of shareholders present and voting on the resolution. | ||
|
||||
Regulation
of schemes of arrangement |
ASIC must be provided with a copy of the scheme booklet at least 14 days prior to the court hearing of an application for a scheme of arrangement under the Australian Corporations Act, and can review or examine the terms of the scheme or the scheme booklet. ASIC may make submissions to the court in relation to the scheme and the scheme booklet. | There is no equivalent of the Australian requirement for filing of the scheme booklet with the PNG Securities Commission. The Court will examine the scheme booklet and make an order as to the appropriateness of its contents. | ||
|
||||
Takeover disputes
|
The Takeovers Panel is the primary forum for resolving disputes about a takeover offer until the offer period has ended. The Takeovers Panel is an independent peer review body established by law, with part-time members appointed from the active members of Australias takeovers and business communities. No consent or approval from ASIC is required to apply to the Takeovers Panel. | Disputes in relation to takeovers may be heard by the Court if the PNG Securities Commission gives its consent to the making of an application or does not respond within 10 days of a request to consent to an application. The PNG Securities Commission is empowered to make restraining orders (having a duration of no more than 21 days) where it considers that a person may not have acted in compliance with the PNG Takeovers Cod e 1998 (PNG). | ||
|
||||
Winding up
|
Under the Australian
Corporations Act, an
insolvent company may
be wound up by a
liquidator appointed
by either creditors
or the court.
Directors cannot use
their powers after a
liquidator has been
appointed. If there
are funds left over
after payment of the
costs of the
liquidation, and
payment to other
priority creditors,
including employees,
the liquidator will
pay these to
unsecured creditors
as a dividend. The
shareholders rank
behind the creditors
and are, therefore,
unlikely to receive
any dividend in an
insolvent
liquidation.
Under the Australian Corporations Act, shareholders of a solvent company may decide to wind up the company if the directors are able to form the view that the company will be able to pay its debts in full within 12 months after the commencement of the winding up. A meeting at which a decision is made to wind up a solvent company requires at least 75% of votes cast by the shareholders present and voting. |
Under the PNG
Companies Act, a
company may be put
into liquidation by
appointing a person
as liquidator.
A liquidator may be appointed by a special resolution of shareholders, on the occurrence of an event specified in the constitution, or by the Court on application of the company, a director or shareholder, a creditor or the PNG Registrar of Companies. The Court has a discretion to appoint a liquidator where it is satisfied that:
the company is
unable to pay its
debts when they fall
due;
the company or the
board has
persistently or
seriously failed to
comply with the PNG
Companies Act; or
it is just and
equitable that the
company be put in
liquidation.
The PNG Companies Act contains provisions equivalent to those in the Australian Corporations Act regarding payment of creditors claims and returns of any surplus to shareholders. |
Lihir Gold Limited Scheme Booklet | 411 |
| Parts 6D.2 and 6D.3 in respect of the issue of New Newcrest Shares to Scheme Participants as Scheme Consideration; | |
| the secondary on-sale restrictions in subsections 707(3) and (4) with respect to the on-sale of New Newcrest Shares issued to Scheme Participants in Australia without disclosure under Part 6D.2 in connection with the Scheme; | |
| subsection 707(3) in relation to the proposed Sale Agent share sale process under the Scheme; | |
| the requirements of Division 5A in Part 7.9 in relation to offers to purchase LGL Shares from Scheme Participants in connection with the Scheme; | |
| the requirement of subsection 911A to obtain an Australian Financial Services Licence pursuant to section 911A in respect of any statement in this Scheme Booklet which may constitute general advice; and | |
| section 601ED and Divisions 2 to 5 of Part 7.9 of the Corporations Act, and provisions of the Corporations Act relating to the requirement to hold a financial services licence, in relation to the proposed Sale Agent share sale process under the Scheme. |
| the Scheme Booklet being provided to ASIC and ASIC being given at least 14 days for its review; | |
| LGL including a statement in the Scheme Booklet to the effect that it contains all information material to the making of a decision by an LGL Shareholder whether or not to agree to the Scheme (being information that is within the knowledge of its directors and has not previously been disclosed to LGL Shareholders) (this statement appears at section 15.19); and | |
| the Scheme is approved by a resolution of LGL Shareholders passed by 75% of the votes cast on the resolution. |
(a) | relief from section 53 and related provisions of the PNG Securities Act, in respect of the secondary sale restrictions applicable to New Newcrest Shares issued to Scheme Participants, the Sale Agent and any other person who makes an offer of New Newcrest Shares for sale; and | |
(b) | relief from rule 4 and related provisions of the Takeovers Code 1998 (PNG), in relation to Newcrest acquiring more than 20% of LGL without making a takeover bid under the Takeovers Code. |
15 Additional information continued | 412 |
(i) | the formation or promotion of Newcrest; | |
(ii) | any property acquired or proposed to be acquired by Newcrest in connection with its formation or promotion or the offer for allotment of the New Newcrest Shares; or | |
(iii) | the offer for allotment of New Newcrest Shares. |
(i) | Blake Dawson as legal adviser in relation to Australian and PNG law; | |
(ii) | Sullivan & Cromwell, Melbourne office, as legal adviser in relation to United States law; | |
(iii) | Stikeman Elliott as legal adviser in relation to Canadian law; | |
(iv) | Greenhill Caliburn Pty Ltd as corporate adviser to LGL; | |
(v) | Macquarie Capital Advisers Limited as corporate adviser to LGL; | |
(vi) | Grant Samuel & Associates Pty Limited as the author of the Independent Experts Report; | |
(vii) | AMC Consultants Pty Ltd as the author of the Independent Technical Specialists Report; and | |
(viii) | PricewaterhouseCoopers Securities Ltd as the author of the Investigating Accountants Report. |
| to be named in this Scheme Booklet in the form and context in which they are named; and | |
| if applicable, to the inclusion of each statement it has made (if any) in the form and context in which the statements appear in this Scheme Booklet, |
(a) | Blake Dawson as Australian and PNG legal counsel to LGL and to inclusion of the information in section 10; | |
(b) | Sullivan & Cromwell as US legal counsel to LGL; | |
(c) | Stikeman Elliott as Canadian legal counsel to LGL; | |
(d) | Greenhill Caliburn Pty Ltd as corporate adviser to LGL; | |
(e) | Macquarie Capital Advisers Limited as corporate adviser to LGL; | |
(f) | PricewaterhouseCoopers Securities Ltd as auditors of LGL; | |
(g) | Ernst & young as auditors of Newcrest; |
Lihir Gold Limited Scheme Booklet | 413 |
(h) | Grant Samuel & Associates Pty Limited as Independent Expert and to inclusion of the Independent Experts Report set out in section 11; | |
(i) | AMC Consultants Pty Ltd as Independent Technical Specialist and to inclusion of the Independent Technical Specialists Report set out in section 12; | |
(j) | PricewaterhouseCoopers Securities Ltd as Investigating Accountant and to inclusion of the Investigating Accountants Report set out in section 13; | |
(k) | Computershare Investor Services Pty Limited as the LGL Registry; | |
(l) | Colin Moorhead as Competent Person in relation to the compilation of Newcrests exploration results (see section 8); and | |
(m) | Roy kidd, Nicholas Spicer and David Grigg as Competent Persons in relation to the compilation of LGLs Mineral Resources, Ore Reserves and Exploration Results (as the case may be) (see section 7.4). |
| has not authorised or caused the issue of this Scheme Booklet; | |
| does not make, or purport to make, any statement in this Scheme Booklet or any statement on which a statement in this Scheme Booklet is based, other than in respect of the portions of the information in section 10, Independent Experts Report, Independent Technical Specialists Report, Investigating Accountants Report, or reserves and resources information (as the case may be) prepared by them; and | |
| to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this Scheme Booklet other than a reference to its name and the statement (if any) included in this Scheme Booklet with the consent of that party. |
15 Additional information continued | 414 |
(a) | a material statement in this Scheme Booklet is false or misleading; | |
(b) | a material omission from this Scheme Booklet; | |
(c) | a significant change affecting a matter included in this Scheme Booklet; or | |
(d) | a significant new matter has arisen and it would have been required to be included in this Scheme Booklet if it had arisen before the date of this Scheme Booklet. |
(e) | placing an advertisement in a prominently published newspaper that is circulated in PNG and Australia; | |
(f) | posting the supplementary document on LGLs website; | |
(g) | making an announcement to ASX; or | |
(h) | issuing a supplementary explanatory statement. |
glossary The mt rawdon open pit in queensland. |
16 Glossary continued | 416 |
Definitions
|
||
|
||
ADR
|
American Depositary Receipt. | |
|
||
ADS
|
American Depositary Share. | |
|
||
Announcement
|
the announcement released by LGL and Newcrest on the Announcement Date titled Newcrest and Lihir enter into Merger Implementation Agreement. | |
|
||
Announcement Date
|
4 May 2010, the date on which LGL and Newcrest announced to ASX that they had entered into the Merger Implementation Agreement. | |
|
||
ASIC
|
the Australian Securities and Investments Commission. | |
|
||
ASTC
|
ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532), the body that administers CHESS. | |
|
||
ASTC Settlement
Rules |
the operating rules of the licensed CS facility (as that term is defined in section 761A of the Australian Corporations Act) operated by ASTC. | |
|
||
ASx
|
ASX Limited (ABN 98 008 624 691) or, as the context requires, the Australian Securities Exchange. | |
|
||
ASx Trading Day
|
has the meaning given to the term Trading Day in the Listing Rules of ASX. | |
|
||
ATO
|
the Australian Taxation Office. | |
|
||
Australian
Corporations Act |
the Corporations Act 2001 (Australia). | |
|
||
Australian
Government |
the government of the Commonwealth of Australia. | |
|
||
Business Day
|
Monday to Friday inclusive, except New years Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX or POMSoX declares is not a business day. | |
|
||
Cash Consideration
|
the cash component of the Scheme Consideration, ascertained in accordance with clause 4 of the Scheme. | |
|
||
Cash Consideration
Cap |
A$1 billion. | |
|
||
Cash Out Facility
|
the facility available to Electing Unmarketable Parcel Shareholders to have the New Newcrest Shares they would otherwise receive in the Scheme sold by the Sale Agent as described in section 5.15. | |
|
||
CHESS
|
the clearing house electronic subregister system of share transfers operated by ASTC. | |
|
||
CIM
|
the Canadian Institute of Mining, Metallurgy and Petroleum. | |
|
||
CIM Council
|
the governing body of the CIM. | |
|
||
Competing Proposal
|
any expression of interest, proposal, offer, transaction or arrangement which, if either entered into or completed, would result: | |
|
||
|
(a) in a third party (other than as nominee, custodian or bare trustee) acquiring an interest of 10% or more of the shares in any LGL Group
member, acquiring a direct or indirect economic interest in all or a substantial part of the assets or business of any LGL Group member,
acquiring control (within the meaning of section 50AA of the Australian Corporations Act) of any LGL Group member, or acquiring or assuming
or otherwise holding a significant beneficial, economic or other interest in any LGL Group member or a substantial part of their respective
business or assets, by whatever means; or
|
|
|
||
|
(b) in LGL being required to abandon or otherwise not proceed with the Scheme, by whatever means.
|
Lihir Gold Limited Scheme Booklet | 417 |
Court
|
National Court of PNG. | |
|
||
Deed Poll
|
the Deed Poll made by Newcrest in favour of Scheme Participants under which Newcrest agrees to procure the provision of the Scheme Consideration to the Scheme Participants, a copy of which is included in Attachment D to this Scheme Booklet. | |
|
||
Effective
|
when used in relation to the Scheme, means the coming into effect, pursuant to section 250 of the PNG Companies Act, of the orders of the Court under section 250(1) of the PNG Companies Act approving the Scheme. | |
|
||
Effective Date
|
the date that the Scheme becomes Effective, as specified in the order made by the Court under section 250(1) of the PNG Companies Act. | |
|
||
Electing
Unmarketable Parcel Shareholder |
a Scheme Participant who makes an Unmarketable Parcel Election and, but for making that Unmarketable Parcel Election, would receive in aggregate 14 New Newcrest Shares or less under the Scheme (taking into account their Scheme Consideration election (if any) and any scale-back of their Scheme Consideration). | |
|
||
Election Form
|
the personalised election form accompanying this Scheme Booklet by which Scheme Participants may make an election for Mixed Consideration, Maximum Cash Consideration or Maximum Share Consideration. | |
|
||
End Date
|
31 December 2010, or such later date as agreed between LGL and Newcrest. | |
|
||
Exclusivity Period
|
the period commencing on 8 June 2010 and ending on the earlier of the date of termination of the Merger Implementation Agreement, the Implementation Date and the End Date. | |
|
||
Exploration Results
|
has the meaning given to that term in the JORC Code. | |
|
||
FATA
|
Foreign Acquisitions and Takeovers Act 1975 (Australia). | |
|
||
FIRB
|
the Australian Foreign Investment Review Board. | |
|
||
Gold-Equivalent
|
when used to describe reserves or resources, the total value of all metals expressed in gold-ounce units derived by dividing the total value of all metals included in such reserves or resources by a nominal gold price. | |
|
||
Governmental Agency
|
any government or representative of a government or any governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, tribunal, agency or similar entity or organisation, or securities exchange. | |
|
||
GST
|
the same as in the GST Law;
|
|
|
||
|
any other goods and services tax, or any tax applying to the performance of any obligations under the Scheme
in a similar way under the laws of Australia, PNG or any other country; and
|
|
|
||
|
any additional tax, penalty tax, fine, interest or other charge under a law for such a tax.
|
|
|
||
GST Law
|
has the meaning given to the term GST law in the A New Tax System (Goods and Services Tax) Act 1999 (Australia). | |
|
||
IFRS
|
International Financial Reporting Standards as issued by the International Accounting Standards Board. | |
|
||
Implementation Date
|
the date that is five Business Days after the Record Date, or such other date agreed in writing by LGL and Newcrest or required by a Governmental Agency. | |
|
||
Independent Expert
|
Grant Samuel & Associates Pty Limited (ABN 28 050 036 372). |
16 Glossary continued | 418 |
Independent Experts Report
|
the report prepared by the Independent Expert, a copy of which is set out in section 11. | |
|
||
Independent Technical Specialist
|
AMC Consultants Pty Ltd (ABN 58 008 129 164). | |
|
||
Independent Technical Specialists Report
|
the report prepared by the Independent Technical Specialist, a copy of which is set out in section 12. | |
|
||
Indicated Mineral Resource
|
has the meaning given to that term in the JORC Code. | |
|
||
Ineligible Overseas Shareholder
|
a Scheme Participant whose address as shown in the LGL Register is located in a jurisdiction other than PNG, Australia (and its external territories), the United States, the United kingdom (certain LGL Shareholders only see section 14.14(a)), Canada, Singapore, Hong kong, New Zealand, the Peoples Republic of China, Indonesia, France, Japan, Ireland or Switzerland, (unless Newcrest is satisfied that it is permitted to allot and issue New Newcrest Shares to that Scheme Participant pursuant to the Scheme by the laws of that place including as disclosed in this Scheme Booklet), or an LGL Group member. | |
|
||
Inferred Mineral Resource
|
has the meaning given to that term in the JORC Code. | |
|
||
Investigating Accountant
|
PricewaterhouseCoopers Securities Ltd. | |
|
||
Investigating Accountants Report
|
the report prepared by the Investigating Accountant, a copy of which is set out in section 13. | |
|
||
JORC Code
|
the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, as amended, which is available at www.jorc.org. | |
|
||
k ounces
or
koz
|
thousand ounces. | |
|
||
k tonnes
or
kt
|
thousand metric tonnes. | |
|
||
Key Material Contract
|
has the meaning given to that term in the Merger Implementation Agreement. | |
|
||
LGL
|
Lihir Gold Limited (ARBN 069 803 998) and, where the context requires, includes its wholly owned subsidiaries. | |
|
||
LGL ADS Deposit Agreement
|
the Deposit Agreement among LGL, the LGL ADS Depositary and owners and holders of American Depositary Shares issued thereunder, dated as of 5 October 1995, as amended and restated as of 3 October 2006, as further amended and restated as of 26 December 2007. | |
|
||
LGL ADS Depositary
|
The Bank of New york Mellon. | |
|
||
LGL Board
|
the Board of Directors of LGL. | |
|
||
LGL Constitution
|
the Constitution of LGL dated 23 May 2000, as amended from time to time. | |
|
||
LGL Control Transaction
|
any expression of interest, proposal, offer, transaction or arrangement by or with any person which, if either entered into or completed, would result in a third party acquiring a relevant interest (as defined in the PNG Companies Act) in 50% or more of the LGL Shares. | |
|
||
LGL Directors
|
the directors of LGL in office as at the date of this Scheme Booklet, or in office from time to time, as the context requires. | |
|
||
LGL Employee Share Ownership Plan
|
the Lihir Employee Share Ownership Plan. |
Lihir Gold Limited Scheme Booklet | 419 |
LGL Executive Share Plan
|
the Lihir Executive Share Plan. | |
|
||
LGL Group
|
LGL and its Related Bodies Corporate. | |
|
||
LGL Material Adverse Change
|
has the meaning given to the term Lihir Material Adverse Change in the Merger Implementation Agreement. | |
|
||
LGL Register
|
the register of LGL Shareholders maintained in accordance with section 67 of the PNG Companies Act by the LGL Registry. | |
|
||
LGL Registry
|
Computershare Investor Services Pty Limited (ABN 48 078 279 277). | |
|
||
LGL Regulated Event
|
has the meaning given to the term Lihir Regulated Event in the Merger Implementation Agreement. | |
|
||
LGL Scheme Information
|
all of the information contained in this Scheme Booklet, other than the Newcrest Scheme Information, the information in section 10, the Independent Experts Report, the Investigating Accountants Report and the Independent Technical Specialists Report. | |
|
||
LGL Share
|
a fully paid ordinary share in the capital of LGL. | |
|
||
LGL Shareholder
|
a person who is registered in the LGL Register as a holder of LGL Shares. | |
|
||
Listing Rules
|
the Listing Rules of ASX, POMSoX or NASDAq (as applicable). | |
|
||
M ounces
or
Moz
|
million ounces. | |
|
||
M tonnes
or
Mt
|
million metric tonnes. | |
|
||
Maximum Cash Consideration
|
an election alternative under the limited mix and match facility to receive the Scheme Consideration as 100% cash subject to scale-back, as described in section 5.4. | |
|
||
Maximum Share Consideration
|
an election alternative under the limited mix and match facility to receive the Scheme Consideration as 100% New Newcrest Shares subject to scale-back, as described in section 5.4. | |
|
||
Measured Mineral Resource
|
has the meaning given to that term in the JORC Code. | |
|
||
Merged Group
|
Newcrest and its Subsidiaries (including LGL and its Subsidiaries) once the Scheme has been implemented. | |
|
||
Merger Implementation
Agreement |
the Merger Implementation Agreement between LGL and Newcrest dated 4 May 2010, a copy of which is included in Attachment B to this Scheme Booklet. | |
|
||
Million Ounce Plant Upgrade
|
the project titled Million Ounce Plant Upgrade undertaken to upgrade the operations of LGL on Lihir Island, PNG. | |
|
||
Mineral Resource
|
has the meaning given to that term in the JORC Code. | |
|
||
Minerals Resource Rent Tax
|
refers to the proposed Minerals Resource Rent Tax, as announced by the Australian Government on 2 July 2010. The details of this tax have not been finalised, nor has any legislation been enacted by the Australian Parliament as at the date of this Scheme Booklet. | |
|
||
Mixed Consideration
|
one New Newcrest Share for every 8.43 LGL Shares and A$0.225 cash per LGL Share (less any dividend recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date). | |
|
||
Mtpa
|
million metric tonnes per annum. |
16 Glossary continued | 420 |
NASDAQ
|
The NASDAq OMX Group, Inc., or as the context requires, the NASDAq Stock Market. | |
|
||
New Newcrest Shares
|
the Newcrest Shares to be issued under the terms of the Scheme as Share Consideration. | |
|
||
Newcrest
|
Newcrest Mining Limited (ABN 20 005 683 625) and, where the context requires, includes its wholly owned subsidiaries. | |
|
||
Newcrest Board
|
the Board of Directors of Newcrest. | |
|
||
Newcrest Constitution
|
the constitution of Newcrest dated 30 October 2008, as amended from time to time. | |
|
||
Newcrest Daily VWAP
|
in relation to an ASX Trading Day, the VWAP of Newcrest Shares which are sold on ASX on that day (excluding any and all special crossings, crossings prior to the commencement of normal trading, crossings during the closing phase or the after hours adjust phase, overseas trades, trades pursuant to the exercise of options over Newcrest Shares and overnight crossings, and any other trades that Newcrest and LGL reasonably agree to exclude on the basis that they are not representative of the general price at which Newcrest Shares are trading on ASX in the context of trading in Newcrest Shares on that day). This will be calculated using the IRESS Market System. | |
|
||
Newcrest Directors
|
the directors of Newcrest in office as at the date of this Scheme Booklet, or in office from time to time, as the context requires. | |
|
||
Newcrest Financial Year
|
a year ended or ending on 30 June. | |
|
||
Newcrest Group
|
Newcrest and its Related Bodies Corporate. | |
|
||
Newcrest Material Adverse
Change |
has the meaning given to that term in the Merger Implementation Agreement. | |
|
||
Newcrest Regulated Event
|
has the meaning given to that term in the Merger Implementation Agreement. | |
|
||
Newcrest Scheme Information
|
all of the information contained in this Scheme Booklet prepared by or on behalf of Newcrest, including all information in relation to Newcrest, the Merged Group (including the prospects and risks of the Merged Group), the Scheme Consideration, the limited mix and match facility, the New Newcrest Shares, the Additional Information as it relates to Newcrest, the letter from the Newcrest Chairman and sections 3.8, 6.1(d), 8, 9, 15.5, 15.9, 15.10, 15.11, 15.12, 15.21 and 15.22, except in each case to the extent that information is based on information provided or prepared by or on behalf of LGL. | |
|
||
Newcrest Share
|
a fully paid ordinary share in the capital of Newcrest. | |
|
||
Newcrest Shareholder
|
a person who is registered as a holder of Newcrest Shares. | |
|
||
Newcrest VWAP
|
the arithmetic average of the Newcrest Daily VWAPs over the five ASX Trading Days up to and including the Record Date, rounded to two decimal places. 1 | |
|
||
NI 43-101
|
refers to the national instrument concerning standards of disclosure for mineral projects implemented by the Canadian Securities Administrators. | |
|
||
NI 45-106
|
refers to the national instrument concerning prospectus and registration exemptions implemented by the Canadian Securities Administrators. | |
|
||
Notice of Scheme Meeting
|
The Notice of Scheme Meeting set out in Attachment A to this Scheme Booklet. |
Note | ||
1 | Newcrest and LGL agreed by side letter dated 28 June 2010 to amend this definition from the definition included in the Merger Implementation Agreement. |
Lihir Gold Limited Scheme Booklet | 421 |
Ore Reserve
|
has the meaning given to that term in the JORC Code. | |
|
||
PNG
or
Papua New Guinea |
the Independent State of Papua New Guinea. | |
|
||
PNG Companies Act PNG Government
|
the Companies Act 1997 (PNG). the National Government of PNG. | |
|
||
PNG Registrar of Companies
|
the Registrar of Companies appointed under section 394(1) of the PNG Companies Act. | |
|
||
PNG Securities Act
|
the Securities Act 1997 (PNG). | |
|
||
PNG Securities Commission
|
the Securities Commission of PNG. | |
|
||
PNG Securities Regulation
|
the Securities Regulation 1999 (PNG). | |
|
||
POMSox
|
Port Moresby Stock Exchange Limited or, as the context requires, the stock market operated by it. | |
|
||
POMSox Trading Day
|
has the meaning given to the term business day in the Listing Rules of POMSoX. | |
|
||
Proxy Form
|
the personalised proxy form accompanying this Scheme Booklet, by which LGL Shareholders may appoint a proxy to attend and vote at the Scheme Meeting on their behalf. | |
|
||
PTNHM
|
PT Nusa Halmahera Minerals, an 82.5% owned subsidiary of Newcrest. | |
|
||
Record Date
|
7.00pm on the date that is five Business Days after the Effective Date. | |
|
||
Regulatory Approval
|
any approval, consent, authorisation, registration, filing, lodgement, permit, franchise, agreement, notarisation, certificate, permission, licence, direction, declaration, authority, waiver, modification or exemption from, by or with a Governmental Agency or anything that would be fully or partly prohibited or restricted by law if a Governmental Agency intervened or acted in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action. | |
|
||
Related Body Corporate
|
has the meaning given to that term in the Australian Corporations Act. | |
|
||
Relevant Interest
|
has the meaning given in sections 112 and 113 of the PNG Securities Act. | |
|
||
Required Majority
|
means at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by LGL Shareholders voting in person, by proxy, by attorney or, in the case of corporate LGL Shareholders, by a corporate representative. | |
|
||
Resolution
|
the resolution to approve the Scheme, the text of which is included in the Notice of Scheme Meeting and set out in Attachment A. | |
|
||
Resource Super Profits Tax
|
refers to the previously proposed Resource Super Profits Tax, as announced by the Australian Government on 2 May 2010 and subsequently withdrawn on 2 July 2010. | |
|
||
Sale Agent
|
means a nominee holding an Australian Financial Services Licence appointed by Newcrest, to undertake the sale process described in section 5.15. | |
|
||
Scheme
|
the scheme of arrangement under Part XVI of the PNG Companies Act between LGL and the Scheme Participants, a copy of which is included in Attachment C to this Scheme Booklet. | |
|
||
Scheme Booklet
|
this document prepared pursuant to an order of the Court under section 250(2)(a) of the PNG Companies Act, its Attachments, the Notice of Meeting, the Election Form and the Proxy Form. |
16 Glossary continued | 422 |
Scheme Consideration
|
the consideration to be provided to Scheme Participants under the terms of the Scheme, as described in section 5. | |
|
||
Scheme Meeting
|
the meeting of LGL Shareholders convened by Court order pursuant to section 250(1) of the PNG Companies Act at which LGL Shareholders are to consider whether to approve the Scheme, including any adjournment of that meeting. | |
|
||
Scheme Participant
|
each LGL Shareholder as at the Record Date. | |
|
||
Scheme Shares
|
LGL Shares on issue as at the Record Date. | |
|
||
SEC
|
the US Securities and Exchange Commission. | |
|
||
Second Court Date
|
the first day of the Second Court Hearing or, if the Second Court Hearing of such application is adjourned for any reason, the first day of the adjourned Second Court Hearing. | |
|
||
Second Court Hearing
|
the hearing of the application by LGL for orders pursuant to section 250(1) of the PNG Companies Act including for the approval of the Scheme. | |
|
||
SEDAR
|
the System for Electronic Document Analysis and Retrieval, a filing system developed for the Canadian Securities Administrators. | |
|
||
Share Consideration
|
the New Newcrest Share component of the Scheme Consideration, ascertained in accordance with clause 4 of the Scheme. | |
|
||
Share Consideration
Cap |
280,988,130 New Newcrest Shares (provided that this number may be increased to take account of the issue of any new LGL Shares under the LGL Executive Share Plan or the LGL Employee Share Ownership Plan). | |
|
||
Subsidiary
|
has the meaning given to that term in the Australian Corporations Act. | |
|
||
Superior Proposal
|
has the meaning given to that term in the Merger Implementation Agreement. | |
|
||
TSx
|
TMX Group Inc., or as the context requires, the Toronto Stock Exchange. | |
|
||
United Kingdom
or
UK
|
the United kingdom of Great Britain and Northern Ireland. | |
|
||
United States
or
US
|
the United States of America. | |
|
||
Unmarketable Parcel
Election |
means a valid election by an LGL Shareholder that, if they would otherwise receive 14 New Newcrest Shares or less under the Scheme (taking into account their Scheme Consideration election (if any) and any scale-back of their Scheme Consideration), those New Newcrest Shares instead be issued to the Sale Agent to be sold in accordance with the process described in section 5.15. | |
|
||
US Exchange Act
|
Securities Exchange Act of 1934, as amended (US). | |
|
||
US Securities Act
|
Securities Act of 1933, as amended (US). | |
|
||
VWAP
|
volume weighted average share price. |
NOTICE OF MEETING |
A Notice of Meeting continued | 424 |
210533159_1 | 1 |
Lihir Gold Limited Scheme Booklet | 425 |
| Required Majority The Resolution must be approved by at least 75 per cent of the total number of votes cast at the Scheme Meeting (in person, by proxy, attorney or corporate representative). | |
| Quorum The LGL Constitution provides that the quorum for a meeting of LGL Shareholders is 3 LGL Shareholders, in person, by proxy, by attorney or, in the case of a shareholder which is a body corporate, by a representative appointed in respect of the meeting under Rule 13.11 of the LGL Constitution. | |
| Court Approval In accordance with section 250(1) of the Companies Act 1997 (PNG) , the Scheme must be approved by order of the Court. If the Resolution is passed (with or without modification) in accordance with the Required Majority set out above and the conditions precedent to the Scheme referred to in the Scheme Booklet are satisfied (or waived, where permitted), LGL intends to apply to the Court for the necessary orders to give effect to the Scheme. | |
| Voting by poll Voting at the meeting on the Resolution will occur by poll only. | |
| Voting Entitlement Only LGL Shareholders who are registered on the LGL Register as at 7.00pm on 21 August 2010 are entitled to vote at the Scheme Meeting. | |
| How to Vote LGL Shareholders can vote at the Scheme Meeting in one of the following ways: |
o | by attending the Scheme Meeting and voting in person; | ||
o | by appointing an attorney to attend and vote on their behalf; | ||
o | in the case of corporations, by appointing an authorised corporate representative to attend and vote on their behalf; and | ||
o | by appointing a proxy to attend and vote on their behalf, using the Proxy Form accompanying the Scheme Booklet or a corresponding additional or replacement form obtained from the LGL Registry. |
| Voting in person or by authorised corporate representative LGL Shareholders or their authorised corporate representatives who plan to attend the Scheme Meeting are asked to bring with them their Proxy Form enclosed with the Scheme Booklet and to arrive at the venue, allowing sufficient time to enable shareholdings to be checked against the LGL Register and attendances noted. In order to vote in person at the Scheme Meeting, a corporation that is an LGL Shareholder may appoint an individual to act as its representative. The appointment must comply with the requirements of Rule 13.11 of the LGL Constitution. The representative should bring to the Scheme Meeting evidence of their appointment, including any authority under which it is signed. | |
| Voting by attorney Attorneys must provide to LGL the original or certified copy of the power of attorney under which they have been authorised to attend and vote at the Scheme Meeting. The power of attorney appointing the attorney must be duly executed and must specify the name of the LGL Shareholder and the attorney, and also specify the meetings at which the appointment may be used. The appointment may be a standing one. The original or certified copy of the power of attorney must be provided to LGL in the same manner as Proxy Forms and must be received by the LGL Registry by 11.00am on 21 August 2010. | |
| Voting by proxy An LGL Shareholder entitled to attend and vote may appoint not more than two proxies to attend and vote instead of the LGL Shareholder. Where two proxies are appointed, each proxy may be appointed to represent a specified proportion or number of the LGL Shareholders voting rights. If proportions or numbers are not specified, each proxy may exercise half the LGL Shareholders votes. A proxy need not be an LGL Shareholder. For the appointment of a proxy to be effective, the Proxy Form accompanying the Scheme Booklet or a corresponding additional or replacement form obtained from the LGL Registry (together with any power of attorney or other |
210533159_1 | 2 |
A Notice of Meeting continued | 426 |
authority under which the Proxy Form is signed or a copy of that power of attorney certified as a true copy by statutory declaration) must be completed and received by the LGL Registry by 11.00am on 21 August 2010. Proxy Forms received after this time will be invalid. A Proxy Form can be returned by posting it in the envelope provided (reply paid in Australia only) or by posting or faxing it to: |
210533159_1 | 3 |
MERGER IMPLEMENTATION AGREEMENT |
B Merger Implementation Agreement continued | 428 |
Lihir Gold Limited Scheme Booklet | 429 |
1. | Background | |
1.1 | Lihir and Newcrest have entered into a Confidentiality Deed dated 23 March 2010. | |
1.2 | Newcrest has proposed to acquire Lihir by scheme of arrangement. | |
1.3 | Subject to the satisfaction of the conditions precedent below, Lihir will propose a scheme of arrangement under Part XVI of the PNG Companies Act between Lihir and Lihir Shareholders pursuant to which Newcrest will acquire Lihir (Scheme) as set out in this agreement. | |
1.4 | Lihir and Newcrest have agreed to implement the Scheme upon the terms and conditions of this agreement. | |
1.5 | Capitalised terms in this agreement have the meaning given to them in clause 18, and the interpretation rules in clause 19 apply to this agreement. | |
1.6 | This agreement constitutes binding, enforceable legal obligations. | |
2. | Agreement to propose Scheme | |
Subject to and upon the terms and conditions of this agreement, Lihir will propose the Scheme in such form as the parties agree in writing under which all of the Lihir Shares held by Participants will be cancelled (or if that is not possible, transferred to Newcrest or its nominee, being a wholly owned subsidiary of Newcrest) and Newcrest will provide the Scheme Consideration to the Participants. | ||
3. | Scheme Structure | |
3.1 | Lihir and Newcrest will implement the Scheme in the most commercially effective manner possible. | |
3.2 | Subject to clause 2 and to the Scheme becoming Effective, as part of implementation of the Scheme: |
(a) | all existing Lihir Shares at the Record Date will be cancelled (or if that is not possible, transferred to Newcrest or its nominee, being a wholly owned subsidiary of Newcrest); and | ||
(b) | in exchange, each Participant will receive the Scheme Consideration. |
3.3 | Each Participant will be given the opportunity to elect to receive the Scheme Consideration in the following proportions of cash and Newcrest Shares: |
(a) | the Mixed Consideration - under which the Participant will receive the Share Consideration and the Cash Consideration; | ||
(b) | the Maximum Cash Consideration - under which the Participant elects to receive 100% cash for each Lihir Share (calculated and subject to scale-back as set out below); or | ||
(c) | the Maximum Share Consideration - under which the Participant elects to receive 100% Newcrest Shares for each Lihir Share (calculated and subject to scale-back as set out below). |
If a valid election is not made by a Participant, then that Participant will receive the Maximum Share Consideration. |
Page 2 |
B Merger Implementation Agreement continued | 430 |
Participants electing Maximum Cash Consideration or Maximum Share Consideration may be subject to scale-back such that the total amount of cash under the Scheme Consideration does not exceed the Cash Consideration Cap and the total number of New Newcrest Shares under the Scheme Consideration does not exceed the Share Consideration Cap (subject in either case only to the effects of rounding). | ||
For the purposes of determining the amount of cash and number of New Newcrest Shares that a Participant will receive above the Mixed Consideration, the Newcrest Share price will equal the Newcrest VWAP. | ||
4. | Allotment and issue of New Newcrest Shares and Payment of Cash | |
4.1 | Subject to the Scheme becoming Effective, Newcrest must: |
(a) | allot and issue the New Newcrest Shares to Participants in accordance with the Scheme on terms such that each New Newcrest Share will rank equally in all respects with each existing Newcrest Share; | ||
(b) | pay the cash component of the Scheme Consideration to the Participants in accordance with the Scheme; | ||
(c) | do everything reasonably necessary to ensure that the New Newcrest Shares are approved for official quotation on ASX and that trading in the New Newcrest Shares commences by the first Business Day after the Implementation Date. In addition, Newcrests current intention is to seek approval for official quotation of Newcrest Shares on POMSoX and to consider whether to seek approval for official quotation of Newcrest Shares on an appropriate North American exchange; and | ||
(d) | ensure that on issue, each New Newcrest Share will be fully paid and free from any mortgage, charge, lien, encumbrance or other security interest. |
4.2 | Unless Newcrest is satisfied that the laws of an Ineligible Lihir Shareholders country of residence (as shown in the register of Lihir Shareholders) permit the issue of New Newcrest Shares to the Ineligible Lihir Shareholder either unconditionally or after compliance with terms which Newcrest reasonably regards as acceptable and practical, Newcrest will not issue any New Newcrest Shares to Ineligible Lihir Shareholders, and instead will issue the New Newcrest Shares that would otherwise have been issued to the Ineligible Lihir Shareholders to a nominee appointed by Newcrest. Newcrest will procure that the nominee sell those New Newcrest Shares on-market and remit the proceeds from that sale (after deducting any selling costs and taxes) to Newcrest. Newcrest will then remit the proceeds it receives to the Ineligible Lihir Shareholders in accordance with their entitlement. | |
4.3 | Any fractional entitlement of a Participant to a part of a New Newcrest Share will be rounded up or down to the nearest whole number of New Newcrest Shares (rounded up if the fractional entitlement is equal to or greater than one half, and rounded down if the fractional entitlement is less than one half). The Scheme will contain standard provisions under which Newcrest will have the discretion to deem the holdings of two or more Participants to be held by one Participant to prevent any shareholding splitting or division designed to obtain unfair advantage by reference to such rounding. |
Page 3 |
Lihir Gold Limited Scheme Booklet | 431 |
5. | Conditions Precedent | |
5.1 | The Scheme will not become Effective and Newcrest will not be required to procure the provision of the Scheme Consideration unless each of the following conditions precedent is satisfied or waived: | |
Conditions for the benefit of Newcrest and Lihir |
(a) | before 8.00am on the Second Court Date, all Regulatory Approvals required to implement the Scheme being obtained and not withdrawn; | ||
(b) | ASX approving the quotation of the New Newcrest Shares; | ||
(c) | the Independent Expert providing an Independent Experts Report to Lihir that, in the opinion of the Independent Expert, the Scheme is in the best interests of Lihir Shareholders; | ||
(d) | the Scheme being approved by the requisite majority of Lihir Shareholders in accordance with section 250 of the Companies Act; | ||
(e) | the Court approving the Scheme in accordance with section 250 of the Companies Act (subject to any conditions ordered by the Court and approved in writing by the parties); | ||
(f) | no order or legislative restraint, whether permanent or temporary, being issued by a Governmental Agency that restricts the implementation of the Scheme; | ||
(g) | obtaining any income tax or other tax rulings agreed by Lihir and Newcrest to be reasonably necessary to implement the Scheme; |
Conditions for the benefit of Newcrest alone |
(h) | no Lihir Regulated Event nor Lihir Material Adverse Change occurring between the date of this agreement and 8.00am on the Second Court Date; | ||
(i) | to the extent that implementation of the Scheme would require consent or trigger any right of termination or other material right in favour of a person (other than a Lihir Group member), or any material liability owed by a Lihir Group member, under a Key Material Contract, each required consent, waiver of each such right, and release of each such liability, being obtained (including in favour of the post Scheme entity on terms no more onerous than those applying to Lihir) and not withdrawn (and, where given conditionally, subject to conditions acceptable to Newcrest); | ||
(j) | each representation and warranty of Lihir in clause 11 is true and correct in all material respects as at the date of this agreement and as at 8.00am on the Second Court Date; | ||
(k) | the Lihir Board unanimously recommends that Lihir shareholders vote in favour of the Scheme, in the absence of a Superior Proposal and in the absence of the Independent Expert finding that the Scheme is not in the best interests of Lihir Shareholders, and not withdrawing or varying that recommendation; | ||
(l) | as at 8.00am on the Second Court Date, Lihir has not entered into any agreement with a third party in relation to a Superior Proposal that has been announced and recommended by the Lihir Board; |
Page 4 |
B Merger Implementation Agreement continued | 432 |
(m) | no person (other than a Newcrest Group member or an existing institutional or portfolio investor in Lihir) acquiring a relevant interest (within the meaning of sections 608 and 609 of the Australian Corporations Act) in 25% or more of Lihir Shares; |
Conditions for the benefit of Lihir alone |
(n) | no Newcrest Regulated Event nor Newcrest Material Adverse Change occurring between the date of this agreement and 8.00am on the Second Court Date; and | ||
(o) | each representation and warranty of Newcrest in clause 11 is true and correct in all material respects as at the date of this agreement and as at 8.00am on the Second Court Date. |
5.2 | The conditions precedent in paragraphs (d) and (e) of clause 5.1 cannot be waived. The conditions precedent in paragraphs (a), (b), (c), (f) and (g) of clause 5.1 may only be waived by both Newcrest and Lihir by giving their written consent. The conditions precedent in paragraphs (h) to (m) (both inclusive) of clause 5.1 may only be waived by Newcrest by giving its written consent. The conditions precedent in paragraphs (n) and (o) of clause 5.1 may only be waived by Lihir by giving its written consent. | |
5.3 | Each of Newcrest and Lihir must use its best endeavours and cooperate with each other to satisfy the conditions precedent, to the extent that it is within its control and without providing any significant undertaking or financial consideration or commencing legal proceedings. Newcrest and Lihir must promptly update each other with respect to their progress in satisfying the conditions precedent. | |
5.4 | If, despite clause 5.3, a condition precedent is not satisfied, or is unable to be satisfied as at 8.00am two Business Days before the Second Court Date, the parties must consult in good faith to determine whether the Scheme, or any part of it, can be implemented on varied terms or by an alternative means. | |
5.5 | Each party must promptly apply for all relevant Regulatory Approvals, providing a copy to the other party of all such applications and keeping the other party promptly and reasonably informed of the steps it has taken and of its progress towards obtaining the relevant Regulatory Approval (provided that a party is not obliged to provide the other party with any information which is commercially sensitive or if the provision would breach an obligation of confidence owed to any third party), and must take all steps it is responsible for as part of the approval process for the Scheme, including responding to requests for information at the earliest practicable time. | |
5.6 | Each party must use best endeavours to consult with the other in advance in relation to all material communications with any Governmental Agency relating to any Regulatory Approval and provide the other party with all information reasonably requested in connection with the application for any Regulatory Approval. | |
6. | Implementation | |
6.1 | Each of Newcrest and Lihir must take all necessary steps, and co-operate with each other, to propose and implement the Scheme and (subject to clause 6.2(j)) give effect to the orders of the Court approving the Scheme, and in accordance with the Timetable (although the Timetable may be shortened with the consent of the parties). |
Page 5 |
Lihir Gold Limited Scheme Booklet | 433 |
Obligations of Lihir | ||
6.2 | Without limiting clause 6.1, Lihir must take the following steps in accordance with the Timetable: |
(a) | review all Material Contracts to identify any consent required to, or any right of termination or other material right in favour of a person (other than a Lihir Group member), or any material liability owed by a Lihir Group member, that would be triggered on, implementation of the Scheme, use its best endeavours to obtain all such consents, waivers of such rights and releases of such liabilities on conditions (if any) acceptable to Newcrest, and keep Newcrest informed of its progress in relation to the preceding; | ||
(b) | prepare the Scheme Booklet (including the form of scheme of arrangement, which is to be approved by Newcrest) which complies with all applicable regulatory, compliance and content requirements and the orders of the Court at the First Court Hearing (and update the Scheme Booklet for any material developments), and include in the Scheme Booklet the Lihir Boards unanimous recommendation pursuant to clause 9.1(a) and each Lihir Directors statement pursuant to clause 9.1(b); | ||
(c) | ensure that the Lihir Provided Information is not misleading or deceptive in any material respect and does not contain any material omissions, in the form and context in which it appears in the Scheme Booklet, and promptly inform Newcrest if it becomes aware that the Scheme Booklet contains a statement that is or has become misleading or deceptive in a material respect or contains a material omission; | ||
(d) | appoint the Independent Expert as soon as practical after the date of this agreement with instructions to prepare the Independent Experts Report as soon as reasonably practicable (and if possible by 8 June 2010), and including specifically in its terms of reference to consider the possible effect of the proposed Resource Super Profits Tax announced on 2 May 2010 when forming its opinion on whether the Scheme is in the best interests of Lihir Shareholders; | ||
(e) | procure a meeting of the Lihir Board to consider and, if thought fit, approve the Scheme Booklet; | ||
(f) | lodge a copy of the Scheme Booklet with the PNG Securities Commission, PNG Registrar of Companies, Port Moresby Securities Exchange, ASX and any other relevant securities exchange; | ||
(g) | prepare and lodge with the Court all documents required in the Court proceedings in relation to the Scheme; | ||
(h) | apply to the Court for orders to convene the Shareholders Meeting and, subsequently, if the resolutions submitted to the Shareholders Meeting in relation to approval of the Scheme are passed by the majority required by the Court, to approve the Scheme; | ||
(i) | comply with all Court orders (including to convene the Shareholders Meeting and dispatch the Scheme Booklet to Lihir Shareholders and, subsequently, to effect the |
Page 6 |
B Merger Implementation Agreement continued | 434 |
Scheme), and lodge the Court orders approving the Scheme with the PNG Registrar of Companies; and | |||
(j) | if the Court refuses to make orders convening the Shareholders Meeting or approving the Scheme (either altogether or on terms not acceptable to Newcrest or Lihir), appeal the Courts decision to the fullest extent possible (unless the parties, acting reasonably, agree that an appeal would have no reasonable prospect of success). |
Obligations of Newcrest | ||
6.3 | Without limiting clause 6.1, Newcrest must take the following steps in accordance with the Timetable: |
(a) | provide the Newcrest Provided Information to Lihir in a form which complies with all applicable regulatory, compliance and content requirements and the orders of the Court at the First Court Hearing (and update the Newcrest Provided Information for any material developments), | ||
(b) | ensure that the Newcrest Provided Information is not misleading or deceptive in any material respect and does not contain any material omissions, in the form and context in which it appears in the Scheme Booklet, and promptly inform Lihir if it becomes aware that the Scheme Booklet contains a statement that is or has become misleading or deceptive in a material respect or contains a material omission; | ||
(c) | provide all reasonable assistance and information to enable the preparation of the Scheme Booklet (including provision of the Newcrest Provided Information to Lihir) and the Independent Experts Report; | ||
(d) | procure a meeting of the Newcrest Board to consider and, if thought fit, approve the Newcrest Provided Information and the Scheme Booklet; | ||
(e) | do everything reasonably necessary to ensure that the New Newcrest Shares are approved for official quotation on ASX and that trading in the New Newcrest Shares commences by the first Business Day after the Implementation Date. In addition, Newcrests current intention is to seek approval for official quotation of Newcrest Shares on POMSoX and to consider whether to seek approval for official quotation of Newcrest Shares on an appropriate North American exchange; and | ||
(f) | prior to the First Court Date, execute the Deed Poll undertaking in favour of Lihir Shareholders and on the Implementation Date issue the New Newcrest Shares and pay the cash component of the Scheme Consideration to Participants in accordance with the Scheme. |
Responsibility for Scheme Booklet | ||
6.4 | Lihir and Newcrest agree that Lihir is solely responsible for the Lihir Provided Information and Newcrest is solely responsible for the Newcrest Provided Information and the Scheme Booklet will contain a statement to this effect. | |
Contents of Scheme Booklet |
Page 7 |
Lihir Gold Limited Scheme Booklet | 435 |
6.5 | Lihir will consider in good faith any comments by Newcrest in relation to the contents of the Scheme Booklet but Lihir reserves the right to determine, in good faith as it sees fit, any dispute as to the contents of the Scheme Booklet (other than any dispute as to the Newcrest Provided Information, which will be determined by Newcrest in good faith as it sees fit). | |
7. | Continued Access to Information | |
7.1 | Without limiting clause 8, from the date of this agreement until 8 June 2010, each Lihir Group member must provide to Newcrest and its representatives access to offices, sites, management personnel and documents, records and other information as reasonably required by Newcrest to complete its due diligence inquiries on the Lihir Group. | |
7.2 | If: |
(a) | prior to 8 June 2010, Newcrests due diligence inquiries on the Lihir Group pursuant to clause 7.1 disclose a major adverse discrepancy when compared to the information which Lihir has released to ASX or otherwise provided to Newcrest in writing prior to the date of this agreement (concerning the Lihir Groups resource and reserve position, liabilities (including contingent liabilities), title to, and physical condition of, assets, licences to operate, future capital commitments and production forecasts); and | ||
(b) | that discrepancy, individually or when aggregated with all other such discrepancies, would reduce the value of Lihir by A$700 million (provided that each discrepancy being aggregated would reduce the value of Lihir by at least A$200 million), | ||
then Newcrest may terminate this agreement by notice to Lihir at any time before 15 June 2010. |
7.3 | If the Independent Expert issues its report in which it states that in its opinion the Scheme is not in the best interests of Lihir Shareholders, then Lihir may terminate this agreement by notice to Newcrest. | |
8. | Conduct of Business and Requests for Access | |
8.1 | Each of Newcrest and Lihir undertake that it and its subsidiaries will: |
(a) | in the period from the date of this agreement to the earlier of the Implementation Date and the date this agreement is terminated: |
(i) | conduct its business and operations in the ordinary course and consistent with the manner conducted prior to this agreement and in compliance with all applicable laws and regulations; | ||
(ii) | preserve its current business organisation, the services of its current officers and its current relationship with third parties (including governmental agencies, rating agencies, customers, suppliers, licensors and licensees); |
(b) | without limiting clause 7.1, in the period from the date of this agreement to the earlier of 5.00pm on the Business Day before the Second Court Date and the date |
Page 8 |
B Merger Implementation Agreement continued | 436 |
this agreement is terminated (and subject to clause 8.3 and to the proper performance by its officers of their fiduciary duties): |
(i) | respond to reasonable requests from the other party for information regarding its business and operations (subject to maintaining confidentiality of all confidential information which may be provided); and | ||
(ii) | consult with the other party (to the extent legally permissible) with respect to any material dealings with a Governmental Agency or any action required to be taken in respect of: |
(A) | any Regulatory Approval; and | ||
(B) | any consent, waiver or release contemplated under clause 6.2(a). |
8.2 | Without limiting clause 7.1, Lihir undertakes that it and its subsidiaries will in the period from the date of this agreement to the earlier of 5.00pm on the Business Day before the Second Court Date and the date this agreement is terminated (and subject to clause 8.3 and to the proper performance by its officers of their fiduciary duties) provide to Newcrest reasonable access during its normal business hours to its officers, records and cooperate for the purposes of implementing the Scheme and integrating the Lihir Group and Newcrest Group. | |
8.3 | Newcrest and Lihir (and their respective subsidiaries) are not obliged to provide the other party with any information regarding their assessment of the Scheme, any commercially sensitive or competitive information or if the provision of information would breach an obligation of confidence owed to any third party. | |
8.4 | Lihir undertakes to procure that, in relation to each Lihir Group member, the following does not occur without Newcrests prior consent in writing: |
(a) | the entry into, renewal or change of the terms of any contract of service with any director or senior executive (excluding any change to the managing directors contract that the Lihir Board, acting reasonably, considers appropriate if the 2010 Lihir Annual General Meeting rejects or fails to approve the proposed grant of share rights to the managing director); and | ||
(b) | the payment of a bonus or increase in remuneration or compensation paid to any officer or personnel, other than in accordance with existing employment terms (and to the extent such terms are discretionary, in accordance with existing remuneration policy and past practice), |
8.5 | Lihir undertakes to procure that no Lihir Group member incurs any financial indebtedness (other than any indebtedness incurred in the ordinary course of Lihirs business or the draw down of funds under existing credit facilities where such funds are used for approved capital projects announced to ASX before the date of this agreement or refinancing of those existing credit facilities) or enters into any gold hedging or forward sales without first consulting in good faith on a reasonable basis with Newcrest. | |
9. | Board Recommendations and Intentions | |
9.1 | The public announcement to be issued by Lihir and Newcrest following execution of this agreement must state that: |
Page 9 |
Lihir Gold Limited Scheme Booklet | 437 |
(a) | the Lihir Board unanimously recommends to Lihir Shareholders that they approve the Scheme and elect to receive either Mixed Consideration or Maximum Share Consideration (in the absence of a Superior Proposal and subject to the Independent Expert opining that the Scheme is in the best interests of Lihir Shareholders); and | ||
(b) | each Lihir Director will vote the voting rights attached to all Lihir Shares over which he or she has control in favour of any Lihir Shareholder resolutions to implement the Scheme and any related or ancillary transactions (in the absence of a Superior Proposal and subject to the Independent Expert opining that the Scheme is in the best interests of Lihir Shareholders). |
9.2 | Lihir must use its best endeavours to procure that the Lihir Board and each Lihir Director: |
(a) | does not change, qualify or withdraw any of the statements or recommendation contemplated under clause 9.1; and | ||
(b) | does not make any public statement or take any action that is, or may be reasonably construed as being, inconsistent with any of the statements or recommendation contemplated under clause 9.1, unless: | ||
(c) | in the Independent Expert Report, the Independent Expert opines that the Scheme is not in the best interests of Lihir Shareholders; or | ||
(d) | the Lihir Board determines, after the operation of clause 13.7, that an announced Competing Proposal is a Superior Proposal, |
and a majority of the Lihir Board determines in good faith and acting reasonably that the Scheme is no longer in the best interests of Lihir Shareholders (having regard to their fiduciary and statutory duties). | ||
10. | Public Announcements and Communications | |
10.1 | Newcrest and Lihir agree to jointly issue on the date of this agreement a public release in the form agreed between the parties which announces the Scheme, sets out the Lihir Boards unanimous recommendation as contemplated in clause 9.1 and attaches a copy of this agreement. | |
10.2 | A party may make a public announcement or other disclosure, or communicate with a Governmental Agency, in respect of the Scheme if required by applicable law or the rules of any applicable securities exchange but only after, to the extent possible, providing reasonable notice to the other party and consulting with the other party regarding the form and content of the disclosure or communication. | |
11. | Representations and Warranties | |
Representations and warranties for the benefit of Newcrest and Lihir | ||
11.1 | Each of Newcrest and Lihir represent and warrant to the other party, on each date from the date of this agreement until and including the Second Court Date, that it has all of the necessary capacity, power and authority (whether corporate, regulatory or otherwise) to enter into and perform this agreement, and that in entering into and performing this agreement it will not violate any law, order or its constitution and that this agreement |
Page 10 |
B Merger Implementation Agreement continued | 438 |
constitutes its legal, valid and binding obligations enforceable against it in accordance with its terms.
|
||
11.2 | Newcrest represents and warrants to Lihir: |
(a) | on the date of this agreement and the Second Court Date, that each Newcrest Group member is solvent and in compliance with applicable laws, regulations and rules of any applicable securities exchange, has all material licences, permits and authorities to conduct its activities as conducted on the date of the agreement and, as far as Newcrest is aware, is not the subject of any action or investigation by a Governmental Agency; | ||
(b) | on the date of this agreement, Newcrest is not relying on any of the carve-outs in Rule 3.1A of the ASX Listing Rules to withhold material price sensitive information; and | ||
(c) | on the First Court Date, the date of the Scheme Booklet and the Second Court Date, the Newcrest Provided Information: |
(i) | is prepared and provided in good faith, with its consent and on the understanding that the Newcrest Provided Information will be relied on by Lihir to prepare the Scheme Booklet and to provide it to Lihir Shareholders and to propose the Scheme and by the Independent Expert to prepare the Independent Experts Report; | ||
(ii) | complies with applicable laws, regulations or rules of any applicable securities exchange; and | ||
(iii) | is not misleading or deceptive in any material respect and does not contain any material omissions, in the form and context in which it appears in the Scheme Booklet. |
Representations and warranties for the benefit of Newcrest alone | ||
11.3 | Lihir represents and warrants to Newcrest: |
(a) | apart from the Third Party Discussions, on the date of this agreement, Lihir is not relying on any of the carve-outs in Rule 3.1A of the ASX Listing Rules to withhold material price sensitive information; | ||
(b) | on the date of this agreement and on the Second Court Date, that: |
(i) | each Lihir Group member is solvent and in compliance with applicable laws, regulations and rules of any applicable securities exchange, has all material licences, permits and authorities to conduct its activities as conducted on the date of the agreement and, as far as Lihir is aware, is not the subject of any action or investigation by a Governmental Agency; and | ||
(ii) | it has no reason to believe, acting reasonably, that all Regulatory Approvals which the Lihir Group requires in PNG and West Africa to operate its business as operated at the date of this agreement, including in relation to the Million Ounce Plant Upgrade and associated community agreements and relevant agreements, will not be granted or issued in due |
Page 11 |
Lihir Gold Limited Scheme Booklet | 439 |
course, or, if already granted or issued, will not remain in force after the date of this agreement (including as a result of implementation of the Scheme) on materially the same terms that currently exist; and |
(c) | on the First Court Date, the date of the Scheme Booklet and the Second Court Date, that the Lihir Provided Information: |
(i) | is prepared in good faith, with its consent and on the understanding that Newcrest will rely on that information in preparing and approving the Newcrest Provided Information in the form and context in which it appears in the Scheme Booklet; | ||
(ii) | complies with applicable laws, regulations or rules of any applicable securities exchange; and | ||
(iii) | is not misleading or deceptive in any material respect and does not contain any material omissions, in the form and context in which it appears in the Scheme Booklet. |
12. | No Reliance | |
12.1 | Newcrest expressly acknowledges that it is making its own independent assessment of the Lihir Disclosed Information. | |
12.2 | Subject to clause 11.3(c) and 12.3, Lihir makes and gives no representation or warranty (except as specifically provided for in this agreement): |
(a) | as to the accuracy or completeness of any of the Lihir Disclosed Information; | ||
(b) | that any of the Lihir Disclosed Information has been audited, verified or prepared with reasonable care or that any statement about the future will or can be achieved or that the assumptions upon which statement is made are reasonable; or | ||
(c) | that the Lihir Disclosed Information is all of the information that the Recipient or a reasonable person would require or expect to receive for the proper evaluation of the Proposed Transaction. |
12.3 | Notwithstanding clause 12.2, Lihir will: |
(a) | use its reasonable endeavours to ensure that the Lihir Disclosed Information which is provided on or after the date of this agreement is accurate and not misleading; and | ||
(b) | not provide Newcrest or any of its representatives or advisers with any information as Lihir Disclosed Information that, to the actual knowledge of any Lihir Group member is false, inaccurate or misleading. |
13. | Commitment to Scheme and dealing with Third Party Discussions | |
13.1 | Prior to the Exclusivity Period and subject to clause 13.6, Lihir has the right to enter into, continue or participate in any negotiation, discussion, arrangement or understanding with a third party in connection with a possible Lihir Control Transaction (which was not solicited, invited or initiated (whether directly or indirectly) by a Lihir Group member or any of its representatives or advisers after the date of this agreement) (Third Party Discussion). Other than Third Party Discussions, Lihir undertakes that, as at the date of this agreement, |
Page 12 |
B Merger Implementation Agreement continued | 440 |
it will cease any existing negotiations or discussions in respect of any Competing Proposal, other material asset disposal or spin-off or other restructuring. | ||
13.2 | In the absence of a Superior Proposal that has been announced and recommended by the Lihir Board, Lihir undertakes that as at the commencement of the Exclusivity Period it will cease any existing negotiations or discussions in respect of any Competing Proposal with any person (including any Third Party Discussion) and promptly request in writing the immediate return or destruction of any confidential information provided to any third party in connection with any possible Competing Proposal prior to the Exclusivity Period (and in accordance with any confidentiality agreement entered into with that third party). | |
13.3 | Save for Third Party Discussions, on or after the date of this agreement, Lihir will not (and will not communicate an intention to) solicit, invite or initiate any Competing Proposal or any enquiries, negotiations or discussions with a third party which may lead to a Competing Proposal. | |
13.4 | Subject to clause 13.1 and 13.5, Lihir undertakes that as and from the commencement of the Exclusivity Period, it will not (and will not communicate an intention to) |
(a) | enter into, continue or participate in any negotiation, discussion, arrangement or understanding in connection with a possible Competing Proposal, other material asset disposal or spin-off or other restructuring; or | ||
(b) | permit any third party to receive any non-public information in respect of any Lihir Group member which may lead to that third party formulating, developing or finalising a Competing Proposal, other material asset disposal or spin-off or other restructuring, |
except with the prior written consent of Newcrest. | ||
13.5 | The restrictions in clauses 13.4(a) and 13.4(b) do not apply to the extent they require the Lihir Board to take or refuse to take any action with respect to a Competing Proposal (which was not solicited, invited or initiated (whether directly or indirectly) by a Lihir Group member or any of its representatives or advisers in contravention of clause 13.3) provided that the Lihir Board determines in good faith and acting reasonably that taking or refusing to take such action (as applicable) would constitute a breach of its fiduciary or statutory duties. | |
13.6 | If Lihir proposes to provide any non-public information in respect of any Lihir Group member to a third party pursuant to a Third Party Discussion or clause 13.5, it must, to the extent such information has not been disclosed to Newcrest, provide such information to Newcrest at the same time as the third party. | |
13.7 | If Lihir receives a Competing Proposal (whether before or during the Exclusivity Period) that it may consider to be superior to the Scheme, and proposes to change, qualify or withdraw its recommendation that Lihir Shareholders approve the Scheme, it must notify Newcrest 5 Business Days prior to doing so and, with that notice, provide Newcrest with all material terms of that Competing Proposal (including the price or implied value under the Competing Proposal and the identity of the relevant third party) to allow Newcrest to propose a variation to the terms of the Scheme so that the Scheme would be superior to the Competing Proposal. Lihir must consider the proposed variation in good faith and if it considers that proposed variation would result in the Scheme being superior to the |
Page 13 |
Lihir Gold Limited Scheme Booklet | 441 |
Competing Proposal, it must use its best endeavours to agree any amendments to the terms of the Scheme and this agreement. | ||
13.8 | References in this clause 13 to Lihir extend to Lihir Group members, and Lihir undertakes to procure that no Lihir Group member takes or refuses to take any action that would breach this clause 13. | |
14. | Break Fee | |
14.1 | Lihir acknowledges that Newcrest would not have entered into this agreement without this clause 14 and that the Break Fee Amount is a reasonable amount to compensate the actual costs (including adviser costs and out of pocket expenses) and reasonable opportunity costs of Newcrest. | |
14.2 | Lihir must pay Newcrest the Break Fee Amount (only once and without withholding or set off) if: |
(a) | the Lihir Board fails to make the unanimous recommendation contemplated in clause 9.1(a) or any Lihir director fails to make the statement contemplated in clause 9.1(b); | ||
(b) | the Lihir Board or any Lihir Director changes, qualifies or withdraws any statement or recommendation contemplated in clause 9.1 or makes any public statement that is fundamentally inconsistent with any statement or recommendation contemplated in clause 9.1, in either case other than where in the Independent Expert Report, the Independent Expert opines that the Scheme is not in the best interests of Lihir Shareholders (provided that the reasons for the Independent Experts conclusions do not include the existence of a Competing Proposal); | ||
(c) | a Superior Proposal is announced and recommended or supported by the Lihir Board or any Lihir Director; | ||
(d) | a Competing Proposal is announced before the End Date and, as contemplated by that Competing Proposal, a third party acquires voting power (within the meaning of section 610 of the Australian Corporations Act) of 50% or more of Lihir before the first anniversary of the date of this agreement; or | ||
(e) | this agreement is terminated by Newcrest pursuant to: |
(i) | a material breach of this agreement by Lihir (other than for a breach of clause 12.3(a) or where there is no material detriment for Newcrest, Lihir or the Scheme) at any time before 8.00am on the Second Court Date; or | ||
(ii) | the occurrence of a Lihir Regulated Event. |
14.3 | The Break Fee Amount is exclusive of Australian goods and services tax (GST). The Break Fee Amount (inclusive of GST) is payable only when due and then within 5 Business Days after a written demand being made by Newcrest. | |
14.4 | Newcrest acknowledges and agrees that the payment of the Break Fee Amount by Lihir will constitute full and final satisfaction of any and all liability to Newcrest under this agreement, (or otherwise) in respect of the breach by Lihir of the term of this agreement which permitted Newcrest to terminate this agreement. |
Page 14 |
B Merger Implementation Agreement continued | 442 |
15. | Termination | |
Termination rights of both parties | ||
15.1 | A party may terminate this agreement by notice to the other party: |
(a) | if a condition precedent for the benefit of that party is not satisfied (or waived, where permitted) (subject, in relation to the condition precedent in clause 5.1(e), to any appeal process pursuant to clause 6.2(j)) by 5.00pm on the day before the Second Court Date; or | ||
(b) | if the other party breaches any term of this agreement at any time before 8.00am on the Second Court Date and the breach is material in the context of the Scheme as a whole (provided that, if such breach is reasonably capable of remedy, notice of the material breach is given by the party not in breach and the material breach has not been remedied within five business days of such notice). |
Termination rights of Newcrest | ||
15.2 | Newcrest may terminate this agreement at any time before 8.00am on the Second Court Date by notice to Lihir if: |
(a) | there is a Lihir Regulated Event or Lihir Material Adverse Change (provided that notice of the relevant circumstances are provided to Lihir and such circumstances have continued to exist for a period of five Business Days from the time such notice is given); or | ||
(b) | a Lihir Director publicly changes, qualifies or withdraws their statement that the Scheme is in the best interests of Lihir Shareholders or their recommendation that Lihir Shareholders approve the Scheme, or publicly recommends, promotes or endorses a Competing Proposal. |
Termination rights of Lihir | ||
15.3 | Lihir may terminate this agreement at any time before 8.00am on the Second Court Date by notice to Newcrest if: |
(a) | there is a Newcrest Regulated Event or Newcrest Material Adverse Change (provided that notice of the relevant circumstances are provided to Newcrest and such circumstances have continued to exist for a period of five Business Days from the time such notice is given); or | ||
(b) | the Break Fee Amount is payable by Lihir and has been paid in full to Newcrest. |
Effect of termination | ||
15.4 | This clause 15 and clauses 14, 16, 17, 18 and 19 will survive termination of this agreement. | |
16. | Notices | |
16.1 | Notices and communications under this agreement must be made in writing and delivered by post, hand or fax to the address or facsimile details below: |
(a)
|
to Newcrest: |
Level 9, 600 St Kilda Road, Melbourne, Victoria 3004, Australia
Fax number: + 61 3 9521 3564 |
Page 15 |
Lihir Gold Limited Scheme Booklet | 443 |
|
Attention: Stephen Creese, General Counsel and Company Secretary | |||
|
||||
(b)
|
to Lihir: |
Level 9, AAMI Building, 500 Queen Street, Brisbane, Queensland
4000, Australia Fax number: + +61 7 3318 9203 Attention: Michael Sullivan |
17. | Governing Law | |
17.1 | This agreement is governed by the laws applicable of PNG and each party submits to the non-exclusive jurisdiction of the Courts of PNG. | |
18. | Definitions | |
Approved Budget means the budget for the Lihir Group for the calendar year 2010 as approved by the Lihir Board and in force as at the date of this agreement (to the extent it relates to capital projects approved by the Lihir Board, including Million Ounce Plant Upgrade and existing operating and exploration assets of the Lihir Group as at the date of this agreement). | ||
ASIC means the Australian Securities and Investments Commission. | ||
ASX means the Australian Securities Exchange. | ||
ASX Listing Rules means the official listing rules of ASX. | ||
Australian Corporations Act means the Corporations Act 2001 of the Commonwealth of Australia. | ||
Break Fee Amount means US$60 million. | ||
Cash Consideration means A$0.225 cash per Lihir Share (less any dividend recommended, declared, paid or resolved to be recommended, declared or paid by Lihir on or after the date of this agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date). | ||
Cash Consideration Cap means A$1 billion. | ||
Competing Proposal means any expression of interest, proposal, offer, transaction or arrangement which, if either entered into or completed, would result: |
(a) | in a third party (other than as nominee, custodian or bare trustee) acquiring an interest of 10% or more of the shares in any Lihir Group member, acquiring a direct or indirect economic interest in all or a substantial part of the assets or business of any Lihir Group member, acquiring control (within the meaning of section 50AA of the Australian Corporations Act) of any Lihir Group member, or acquiring or assuming or otherwise holding a significant beneficial, economic or other interest in any Lihir Group member or a substantial part of their respective business or assets, by whatever means; or | ||
(b) | in Lihir being required to abandon or otherwise not proceed with the Scheme, by whatever means. |
Page 16 |
B Merger Implementation Agreement continued | 444 |
Confidentiality Deed means the deed of that name between Newcrest and Lihir dated 23 March 2010. | ||
Court means the National Court of Papua New Guinea. | ||
Deed Poll means a deed poll to be executed by Newcrest in the form agreed between the parties under which Newcrest agrees to procure the provision of the Scheme Consideration to the Participants. | ||
Effective when used in relation to the Scheme, means the coming into effect, pursuant to section 250 of the PNG Companies Act, of the orders of the Court under section 250(1) of the PNG Companies Act approving the Scheme, but in any event at no time before a certified copy of the orders of the Court are lodged with the PNG Registrar of Companies. | ||
Effective Date means the date on which the orders of the Court under section 250(1) of the PNG Companies Act approving the Scheme come into effect in accordance with the PNG Companies Act. | ||
End Date means 31 December 2010, or such later date as agreed between the parties. | ||
Exclusivity Period means the period commencing on 8 June 2010 (or earlier with the consent of each party in its absolute discretion) and ending on the earlier of the date of termination of this agreement, the Implementation Date and the End Date. | ||
First Court Date means the first day of the First Court Hearing or, if the First Court Hearing is adjourned for any reason, means the first day of the adjourned First Court Hearing. | ||
First Court Hearing means the hearing of the application by Lihir for orders pursuant to section 250 of the Companies Act including for the convening of the Shareholders Meeting. | ||
Governmental Agency means any government or representative of a government or any governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, tribunal, agency or similar entity or organisation, or securities exchange | ||
Implementation Date means the date that is 5 Business Days after the Record Date, or such other date agreed by the parties or required by a Governmental Agency. | ||
Independent Expert means an independent expert to be engaged by Lihir in accordance with the PNG Companies Act to opine whether the Scheme is in the best interests of Lihir Shareholders. | ||
Independent Experts Report means the report prepared by the Independent Expert for inclusion in the Scheme Booklet in accordance with the PNG Companies Act and the orders of the Court at the First Court Hearing. | ||
Ineligible Lihir Shareholder means a Participant whose address as shown in the Lihirs members register is located outside PNG, Australia and its external territories, and any other jurisdictions as may be agreed in writing by Lihir and Newcrest (unless Newcrest is satisfied that it is permitted to allot and issue New Newcrest Shares to that Participant pursuant to the Scheme by the laws of that place), or a Lihir Group member. | ||
Key Material Contracts means: |
(a) | with respect to PNG: |
Page 17 |
Lihir Gold Limited Scheme Booklet | 445 |
(i) | the Mining Development Contract; | ||
(ii) | the Special Mining Lease; | ||
(iii) | the Exploration Licence EL485; | ||
(iv) | the Integrated Benefits Package (including the Revised IBP); | ||
(v) | the Pressure Oxidisation Methodology licence; and | ||
(vi) | contracts in relation to the following aspects of the Million Ounce Plant Upgrade: |
(A) | grinding mills; | ||
(B) | interim power supply; | ||
(C) | the community compensation package; | ||
(D) | the grinding and oxidisation feed and detailed design; | ||
(E) | the auto/clave internals; and | ||
(F) | low voltage MCCs and switchrooms; and |
(b) | with respect to Côte Dlvoire: |
(i) | the Mining Investment Convention; | ||
(ii) | the Bonikro Exploration Licence PE 32; | ||
(iii) | ELs, including over Birimian West African Greenstone belts; and | ||
(iv) | the Dougbafla East prospect. |
Lihir means Lihir Gold Limited. | ||
Lihir Board means the Board of Directors of Lihir. | ||
Lihir Control Transaction means any expression of interest, proposal, offer, transaction or arrangement by or with any person which, if either entered into or completed, would result in a third party acquiring a relevant interest in 50% or more of the shares in Lihir. | ||
Lihir Disclosed Information means all information provided by Lihir and its representatives to Newcrest and its representatives in connection with the Scheme or which relates to the past, present or future operations, affairs, business or strategic plans of the Lihir Group. | ||
Lihir Group means Lihir and its subsidiaries. | ||
Lihir Material Adverse Change means an event or occurrence after the date of this agreement and before the Implementation Date, that individually or when aggregated with all other such events or occurrences (provided that each individual event or occurrence being aggregated has a relevant net profit after tax negative impact of at least US$5 million): |
(a) | diminishes or a reasonable person acting in good faith would consider it likely to diminish: |
(i) | the consolidated net assets of the Lihir Group by an amount equal to or greater than US$330 million; or |
Page 18 |
B Merger Implementation Agreement continued | 446 |
(ii) | the future consolidated annual net profit after tax of the Lihir Group on a recurring basis by an amount equal or greater than US$30 million per year; or |
(b) | results in the Lihir Group being unable to carry on its business in substantially the same manner as at the date of this agreement, |
other than any event or occurrence: |
(i) | which is a direct result of general economic or securities markets conditions; | ||
(ii) | which is required to be done or undertaken pursuant to the Scheme; | ||
(iii) | which is done with the prior approval of Newcrest; or | ||
(iv) | to the extent that event or occurrence was known to Newcrest prior to the date of this agreement. |
Lihir Provided Information means all information included in the Scheme Booklet prepared by or on behalf of Lihir other than the Newcrest Provided Information and the Independent Experts Report. | ||
Lihir Regulated Event means, in relation to any Lihir Group member, the occurrence of any of the following (other than in connection with the Scheme or as fairly disclosed prior to the date of this agreement in the Lihir Disclosed Information): |
(a) | any matter referred to in section 652C(1) and (2) of the Australian Corporations Act; | ||
(b) | any change to a constituent document; | ||
(c) | the passing of any special resolution; | ||
(d) | the acquisition or disposal (whether directly or indirectly and by whatever means, including by way of spin-off or other restructuring) of any entity, business or assets (other than trade inventories or consumables) exceeding US$50 million in aggregate; | ||
(e) | the incurring of any capital expenditure exceeding US$50 million in aggregate; | ||
(f) | except to the extent provided under the terms of the Lihir Executive Share Plan, the purchase, buy-back, cancellation, redemption or repayment of any shares or other reduction of any share capital in any way, or consolidation or subdivision of all or any part of any share capital or other conversion of any shares into a larger or smaller number or other changes to, or reconstruction of, any part of any share capital; | ||
(g) | creation of any security interest or encumbrance, individually or in aggregate, over the whole or a substantial part of the business or assets; | ||
(h) | the incurring of any financial indebtedness in excess of US$50 million (other than any draw down of funds under existing credit facilities where such funds are used for approved capital projects announced to ASX before the date of this agreement or refinancing of those existing credit facilities) or entry into any gold hedging or forward sales; |
Page 19 |
Lihir Gold Limited Scheme Booklet | 447 |
(i) | issuance of any equity, debt or hybrid security (including any security convertible into shares of any class) or rights, warrants or options to subscribe for or acquire any such securities other than as publicly disclosed before the date of this agreement or satisfy any share rights that have vested or may vest prior to the Implementation Date under the Lihir Executive Share Plan; | ||
(j) | the provision of any financial accommodation or capital contributions to a person other than another Lihir Group member in excess of US$50 million; | ||
(k) | the entry into or variation of any Material Contract (other than pursuant to an approved capital project announced to ASX before the date of this agreement or the renewal of any existing Material Contract on substantially the same terms); or | ||
(l) | the recommendation, declaration, payment or resolving to recommend, declare or pay to Lihir Shareholders any bonus, dividend or other distribution in cash, in specie or otherwise except for half-year and full-year dividends payable in cash at a level which is no more than US$0.025 per Lihir Share, |
other than to the extent it is provided for in the Approved Budget or consented to in writing by Newcrest. | ||
Lihir Share means a fully paid ordinary share in the capital of Lihir. | ||
Lihir Shareholder means a person who is registered as a holder of Lihir Shares. | ||
Lihir Sustainable Development Plan means the Integrated Benefits Package entered into in 1995 and the Revised Integrated Benefits Package Agreement / Lihir Sustainable Development Program entered into around May 2007 between Lihir, the PNG Government and the people of Lihir, and any agreement or commitment entered into by Lihir which is for the benefit of the people of Lihir. | ||
Material Contract means any agreement or commitment between any one or more Lihir Group members and any one more other persons, or any lease, licence, permit or approval in relation to a mine, which: |
(a) | has a term of one year or more; or | ||
(b) | contemplates, during its entire term, payments of US$30 million or more in aggregate, |
and, in any case, includes the Key Material Contracts. | ||
Maximum Cash Consideration is defined in clause 3.3(b). | ||
Maximum Share Consideration is defined in clause 3.3(c). | ||
Mining Development Agreement means the Mining Development Contract between Lihir and the PNG Government entered into on 17 March, 1995, the Special Mining Lease issued on 17 March, 1995, the Exploration Licenses EL485 and EL1170 and any other licenses, leases, approvals or permits issued to, granted to or entered into by Lihir with respect to the operation of the Lihir mine. | ||
Million Ounce Plant Upgrade means the project titled Million Ounce Plant Upgrade undertaken to upgrade the operations of Lihir on Lihir Island, PNG. | ||
Mixed Consideration has the meaning given in clause 3.3(a). |
Page 20 |
B Merger Implementation Agreement continued | 448 |
Newcrest means Newcrest Mining Limited. | ||
Newcrest Board means the Board of Directors of Newcrest. | ||
Newcrest Disclosed Information means all information provided on or prior to the date of this agreement by Newcrest and its representatives to Lihir and its representatives in connection with the Scheme or which relates to the Newcrest Groups past, present or future operations, affairs, business or strategic plans. | ||
Newcrest Group means Newcrest and its subsidiaries. | ||
Newcrest Material Adverse Change means an event or occurrence after the date of this agreement and before the Implementation Date, that individually or when aggregated with all other such events or occurrences (provided that each individual event or occurrence being aggregated has a relevant net profit after tax negative impact of at least US$5 million): |
(a) | diminishes or a reasonable person acting in good faith would consider it likely to diminish: |
(i) | the consolidated net assets of the Newcrest Group by an amount equal to or greater than US$660 million; or | ||
(ii) | the future consolidated annual net profit after tax of the Newcrest Group on a recurring basis by an amount equal or greater than US$60 million per year; or |
(b) | results in the Newcrest Group being unable to carry on its business in substantially the same manner as at the date of this agreement, |
other than any event or occurrence: |
(i) | which is a direct result of general economic or securities markets conditions; | ||
(ii) | which is required to be done or undertaken pursuant to the Scheme; | ||
(iii) | which is done with the prior approval of Lihir; or | ||
(iv) | to the extent that event or occurrence was known to Lihir prior to the date of this agreement. |
Newcrest Provided Information means all information regarding the Newcrest Group and the New Newcrest Shares to enable the Scheme Booklet to be prepared, which for the avoidance of doubt will be the level of disclosure required if the issue of the New Newcrest Shares under the Scheme were a public offering of securities under the PNG Securities Act (1998). | ||
Newcrest Regulated Event means, in relation to any Newcrest Group member, the occurrence of any of the following (other than in connection with the Scheme or as fairly disclosed, and accepted for inclusion by Lihir, in the Newcrest Disclosed Information) |
(a) | any matter referred to in section 652C(1) or (2) of the Australian Corporations Act; | ||
(b) | any acquisitions of assets, properties or business that involves a series of commitments by the Newcrest Group exceeding US$500 million in aggregate, other than the exercise by a Newcrest Group member of any existing pre-emptive |
Page 21 |
Lihir Gold Limited Scheme Booklet | 449 |
right or interest in any joint venture in which a Newcrest Group member is a participant as at the date of this agreement; and | |||
(c) | any disposals of assets, properties or business exceeding US$350 million in aggregate. |
Newcrest Share means a fully paid ordinary share in the capital of Newcrest. | ||
Newcrest Subsidiary means a wholly owned subsidiary of Newcrest incorporated in PNG. | ||
Newcrest VWAP means the volume weighted average share price for Newcrest Shares traded on ASX (excluding any and all special crossings, crossings made prior to the commencement of normal trading, crossings made during the closing phase or the after hours adjust phase, overseas trades and overnight crossings and any other trades which Lihir and Newcrest reasonably agree to exclude on the basis that they are not representative of the general price at which Newcrest Shares are trading on ASX in the context of trading in Newcrest Shares on any day on which the trades took place) over the 5 consecutive Trading Days (as defined in the official listing rules of ASX) immediately preceding the Second Court Date (calculated to 2 decimal places). | ||
New Newcrest Shares means the new Newcrest Shares to be issued under the terms of the Scheme as Scheme Consideration. | ||
Participant means each Lihir Shareholder as at the Record Date. | ||
PNG means Papua New Guinea. | ||
PNG Companies Act means the Companies Act 1997 (PNG). | ||
PNG Registrar of Companies means the Registrar of Companies appointed under section 394(1) of the PNG Companies Act. | ||
POMSoX means Port Moresby Stock Exchange Limited or, as the context requires, the financial market operated by it. | ||
Proposed Transaction means the acquisition by Newcrest of Lihir by way of the Scheme. | ||
Record Date means 7.00pm on the date that is 5 Business Days after the date on which the Scheme becomes effective. | ||
Regulatory Approval means any approval, consent, authorisation, registration, filing, lodgement, permit, franchise, agreement, notarisation, certificate, permission, licence, direction, declaration, authority, waiver, modification or exemption from, by or with a Governmental Agency or anything that would be fully or partly prohibited or restricted by law if a Governmental Agency intervened or acted in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action. | ||
Scheme has the meaning given in clause 1.3. | ||
Scheme Booklet means the explanatory memorandum to be prepared in accordance with the Companies Act and the orders of the Court at the First Court Hearing in relation to the Scheme, which annexes the Independent Experts Report, scheme of arrangement by Lihir, the deed poll by Newcrest and the Notice of Meeting and Proxy Form as required by the Court. |
Page 22 |
B Merger Implementation Agreement continued | 450 |
Scheme Consideration means the consideration to be provided to Participants under the terms of the Scheme, as described in clause 2. | ||
Second Court Date means the first day of the Second Court Hearing or, if the Second Court Hearing of such application is adjourned for any reason, means the first day of the adjourned Second Court Hearing. | ||
Second Court Hearing means the hearing of the application by Lihir for orders pursuant to section 250(1) of the Companies Act including for the approval of the Scheme. | ||
Share Consideration means 1 New Newcrest Share per 8.43 Lihir Shares. | ||
Share Consideration Cap means 280,988,130 Newcrest Shares (provided that this number may be increased to take account of the issue of any new Lihir Shares under the Lihir Executive Share Plan). | ||
Shareholders Meeting means: |
(a) | the meeting of Lihir Shareholders convened by Court order under the PNG Companies Act at which Lihir Shareholders are to consider whether to approve the Scheme, including any adjournment of that meeting; and | ||
(b) | the meeting of Lihir Shareholders to be held immediately following the meeting described in paragraph (a) to consider whether to approve the acquisition by Newcrest of a relevant interest (within the meaning of the Securities Act 1997 (PNG)) in 100% of the voting shares of Lihir as a result of the Scheme. |
Superior Proposal means a bona fide Competing Proposal that the Lihir Board considers to be more favourable to the Lihir Shareholders than the Scheme taking into account its fiduciary and statutory duties and based on a qualitative assessment of the identity, reputation and standing of the party making the Competing Proposal. | ||
Third Party Discussion has the meaning given in clause 13.1. | ||
Timetable means the indicative timetable for the Scheme set out in the schedule, as varied by agreement between the parties. | ||
19. | Interpretation | |
19.1 | The following rules apply unless the context requires otherwise. |
(a) | The singular includes the plural, and the converse also applies. | ||
(b) | A reference to a person includes a corporation, trust, partnership, unincorporated body or other entity, whether or not it comprises a separate legal entity. | ||
(c) | A reference to a party, clause or schedule is a reference to a party to, clause or schedule of this agreement. | ||
(d) | A reference to an agreement or document (including a reference to this agreement) is to the agreement or document as amended, supplemented, novated or replaced, except to the extent prohibited by this agreement or that other agreement or document. | ||
(e) | A reference to writing includes any method of representing or reproducing words, figures, drawings or symbols in a visible and tangible form. |
Page 23 |
Lihir Gold Limited Scheme Booklet | 451 |
(f) | A reference to a party to this agreement or another agreement or document includes the partys successors, permitted substitutes and permitted assigns (and, where applicable, the partys legal personal representatives). | ||
(g) | A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. | ||
(h) | A reference to conduct includes an omission, statement or undertaking, whether or not in writing. | ||
(i) | A reference to an asset includes any real or personal, present or future, tangible or intangible property or asset (including intellectual property) and any right, interest, revenue or benefit in, under or derived from the property or asset. | ||
(j) | A reference to time is to the time in Port Moresby, PNG. | ||
(k) | Mentioning anything after includes, including, for example, or similar expressions, does not limit what else might be included. | ||
(l) | Words and phrases not specifically defined in this agreement have the same meanings (if any) given to them in the PNG Companies Act. | ||
(m) | If the doing of any act, matter or thing under this agreement is dependent on the consent or approval of a party or is within the discretion of a party, the consent or approval may be given or the discretion may be exercised conditionally or unconditionally or withheld by the party in its absolute discretion. |
Page 24 |
B Merger Implementation Agreement continued | 452 |
Days post execution of Merger | ||
Event | Implementation Agreement | |
Lihir provides draft Scheme Booklet to PNG Registrar of Companies
|
37 | |
First Court Date
|
51 | |
Despatch of Scheme Booklet
|
52 to 55 | |
Shareholders Meeting
|
86 | |
Second Court Date
|
94 | |
Effective Date
|
95 | |
Record Date
|
102 | |
Implementation Date
|
109 |
Page 25 |
Lihir Gold Limited Scheme Booklet | 453 |
|
|
|||||
|
||||||
|
||||||
Print Name
|
Print Name | |||||
|
||||||
Executed
by Lihir Gold Limited:
|
||||||
|
||||||
|
||||||
Director Signature
|
Director/Secretary Signature | |||||
|
||||||
|
||||||
Print Name
|
Print Name |
Page 26 |
SCHEME OF ARRANGEMENT |
Lihir Gold Limited Scheme Booklet | 455 |
C Scheme of Arrangement continued | 456 |
CONTENTS
|
2 | |||
|
||||
1. PRELIMINARY
|
3 | |||
|
||||
2. CONDITIONS
|
3 | |||
|
||||
3. SCHEME
|
4 | |||
|
||||
4. SCHEME CONSIDERATION
|
7 | |||
|
||||
5. DEALINGS IN LGL SHARES
|
12 | |||
|
||||
6. QUOTATION OF SHARES
|
13 | |||
|
||||
7. GENERAL
|
13 | |||
|
||||
8. DEFINITIONS AND INTERPRETATION
|
14 |
210282355_3 |
Lihir Gold Limited Scheme Booklet | 457 |
1. | PRELIMINARY |
1.1 | LGL | ||
LGL is a public company incorporated in Papua New Guinea, having its registered office at Level 7, Cnr Champion Pde and Musgrave St, Port Moresby, Papua New Guinea. LGL Shares are quoted on the official list of POMSoX and ASX and LGL has American Depository Shares (representing LGL Shares) quoted on NASDAQ. | |||
1.2 | Newcrest | ||
Newcrest Mining Limited is a public company incorporated in Australia, registered in Victoria, having its registered office at Level 9, 600 St Kilda Rd, Melbourne, VIC 3004 (Newcrest). Newcrest Shares are quoted on the official list of ASX and Newcrest has American Depository Receipts (representing Newcrest Shares) that are quoted on the OTCBB and traded over-the-counter in the United States. | |||
1.3 | Effect of Scheme | ||
If the Scheme becomes Effective, then: |
(a) | in consideration for Newcrests name being entered in the Register in respect of all the Scheme Shares under this Scheme, Newcrest will provide, or procure the provision of, the Scheme Consideration to the Scheme Participants in accordance with the terms of the Scheme; and | ||
(b) | LGL will enter the name of Newcrest in the Register in respect of all of the Scheme Shares in accordance with the terms of the Scheme. |
1.4 | Deed Poll | ||
Newcrest has entered into the Deed Poll in favour of the Scheme Participants pursuant to which it has covenanted to Scheme Participants that it will observe and perform the obligations contemplated of it under the Scheme, including without limitation, providing to each Scheme Participant, or procuring the provision to each of them of, the Scheme Consideration to which such Scheme Participant is entitled under the Scheme. |
2. | CONDITIONS |
2.1 | Conditions of Scheme | ||
The Scheme is conditional on: |
210282355_3 | 3 |
C Scheme of Arrangement continued | 458 |
(a) | all of the Conditions Precedent having been satisfied or waived in accordance with the terms of the Merger Implementation Agreement, which Conditions Precedent include the Court approving the Scheme in accordance with section 250 of the Companies Act 1997 (PNG) (PNG Companies Act);and | ||
(b) | any other conditions on which the Court makes its order approving the Scheme under section 250(1) or any subsequent order under section 251(1) of the PNG Companies Act that are approved in writing by LGL and Newcrest being satisfied. |
2.2 | Certificate | ||
LGL and Newcrest will each provide to the Court at the Second Court Hearing a certificate confirming whether, within their knowledge, as at 8.00am on the Second Court Hearing Date all the Conditions Precedent (other than in relation to the Scheme being approved by the Court pursuant to section 250 of the PNG Companies Act) have been satisfied or waived in accordance with the terms of the Merger Implementation Agreement. | |||
2.3 | Conclusive evidence | ||
The giving of a certificate by Newcrest or LGL under clause 2.2 will, in the absence of manifest error or a contradictory statement in the certificate given by the other, be conclusive evidence of the satisfaction or waiver of the conditions precedent referred to in each certificate. | |||
2.4 | Scheme becoming effective | ||
Subject to clause 2.5, the Scheme will become effective on the Effective Date. | |||
2.5 | End Date | ||
The Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the End Date. |
3. | SCHEME |
3.1 | Lodgement of Court order | ||
Following the approval of the Scheme by the Court at the Second Court Hearing in accordance with section 250 of the PNG Companies Act, LGL will, as soon as possible (and in any event within one month in accordance with section 250(4) of the PNG Companies Act), lodge with the PNG Registrar of Companies a certified copy of the Court order approving the Scheme. | |||
3.2 | Transfer of Scheme Shares and entry of Newcrest on Register | ||
On the Implementation Date, subject to the provision of the Scheme Consideration in accordance with clause 4.1 and the Deed Poll and Newcrest having provided LGL with written confirmation thereof, all of the Scheme Shares will, together with all rights and entitlement attaching to the Scheme Shares as at the Implementation Date, be transferred to Newcrest, without the need for any further act by any Scheme Participant (other than acts performed by LGL or any of its directors or officers as attorney or agent for Scheme Participants under this Scheme), in accordance with clauses 3.3 and 3.4. | |||
3.3 | PNG Register |
(a) | In respect of Scheme Participants holding Scheme Shares on the PNG Register, each such Scheme Participant, as transferor, authorises and directs the PNG broker to effect a transfer of their Scheme Shares on the PNG Register to Newcrest on the Implementation Date and for that purpose each such Scheme |
210282355_3 | 4 |
Lihir Gold Limited Scheme Booklet | 459 |
Participant authorises and directs the PNG Broker to execute a transfer of the Scheme Shares on the PNG Register on their behalf. | |||
(b) | LGL must enter Newcrest in the PNG Register as the holder of all the Scheme Shares on the PNG Register on the Implementation Date. |
3.4 | Australian Registers |
(a) | In respect of Scheme Participants holding Scheme Shares on the Australian Registers, each such Scheme Participant, as transferor, authorises and directs LGL to enter Newcrest in the Australian Registers as holder of those Scheme Shares, or to procure that those Scheme Shares are otherwise transferred to Newcrest on the Implementation Date by any means reasonably determined by LGL (after having consulted in good faith with Newcrest), including but not limited to, pursuant to: |
(i) | an ASTC Regulated Transfer; | ||
(ii) | a Holding Adjustment; or | ||
(iii) | a Scheme Transfer, |
and each such Scheme Participant further authorises and directs LGL to take any action which LGL reasonably determines is necessary or appropriate to give effect to the entry in the Australian Registers or transfer (as applicable), including but not limited to: |
(iv) | executing and delivering, or causing to be executed and delivered, any documents; | ||
(v) | giving instructions to any relevant Participant under the ASTC Settlement Rules; or | ||
(vi) | Transmitting, or causing to be Transmitted, any Message. |
(b) | LGL must enter Newcrest in the Australian Registers as the holder of all of the Scheme Shares on the Australian Registers on the Implementation Date. | ||
(c) | If any action taken by LGL pursuant to clause 3.4(a) is subsequently determined by a court having appropriate jurisdiction not to have been effective to bring about the entry in the Australian Registers of Newcrest as holder of the Scheme Shares then neither Newcrest nor LGL will be entitled to set aside or claim from the Scheme Participants any of the Scheme Consideration provided to the Scheme Participants (in whole or in part) and, subject to clause 3.4(d), Newcrest and LGL irrevocably waive any and all rights they would otherwise have in respect of the failure to bring about the entry in the Australian Registers of Newcrest as holder of the Scheme Shares. | ||
(d) | Paragraph 3.4(c) will not prevent LGL or Newcrest from taking any and all further action (including but not limited to the execution of a Scheme Transfer) which it deems necessary or advisable in order to validly effect the transfer of the Scheme Shares on the Australian Registers to Newcrest. |
3.5 | Agreement by Scheme Participants | ||
The Scheme Participants irrevocably agree, without the need for any further act by them, to the transfer of all of their Scheme Shares, together with all rights and entitlements attaching to their Scheme Shares as at the time of transfer, to Newcrest and the entry of Newcrest in the Register as the holder of all their Scheme Shares in accordance with the terms of the Scheme. Scheme Participants to whom New Newcrest Shares are issued |
210282355_3 | 5 |
C Scheme of Arrangement continued | 460 |
pursuant to the Scheme irrevocably agree, without the need for any further act by them, to become members of Newcrest for the purposes of the Australian Corporations Act and to have their name and address entered in Newcrests register of members and to accept the New Newcrest Shares issued by way of Scheme Consideration subject to the Newcrest Constitution and agree to be bound by the Newcrest Constitution. | |||
3.6 | Warranties by Scheme Participants | ||
Each Scheme Participant is deemed to have warranted to LGL and appointed and authorised LGL as its attorney and agent to warrant to Newcrest, that all its Scheme Shares (including any rights and entitlements attaching to those shares) which are transferred to Newcrest under the Scheme will, at the time of the transfer of the Scheme Shares to Newcrest, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and any restrictions on their transfer and that it has the full power and capacity to sell and transfer its Scheme Shares (including any rights and entitlements attaching to those shares) to Newcrest under the Scheme. LGL undertakes in favour of each Scheme Participant that it will provide such warranty to Newcrest on behalf of that Scheme Participant. | |||
3.7 | Transfer free from encumbrances | ||
To the extent permitted by law, all LGL Shares (including any rights and entitlements attaching to those shares) which are transferred to Newcrest under this Scheme will, at the time of the transfer of them to Newcrest, vest in Newcrest free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind whether legal or otherwise, and free from any restrictions on transfer of any kind not referred to in this Scheme. | |||
3.8 | Beneficial entitlement by Newcrest | ||
From the Effective Date, Newcrest shall be beneficially entitled to the LGL Shares to be transferred to it under the Scheme (together with all rights and entitlements attaching to those LGL Shares), pending the effective transfer of those LGL Shares to Newcrest. | |||
3.9 | Appointment of Newcrest as sole proxy | ||
From the Effective Date until the effective transfer of all the LGL Shares to Newcrest, each Scheme Participant: |
(a) | without the need for any further act by that Scheme Participant, irrevocably appoints Newcrest as its proxy to (and irrevocably appoints Newcrest as its agent and attorney for the purpose of appointing any director or officer of Newcrest as that Scheme Participants proxy and, where appropriate, its corporate representative to) attend shareholders meetings, exercise the votes attaching to LGL Shares registered in its name as the proxy or representative sees fit and sign any shareholders resolution, and no Scheme Participant may itself attend or vote at any of those meetings or sign any resolutions, whether in person, by proxy or by corporate representative (other than pursuant to this clause 3.9(a)); and | ||
(b) | must take all other actions in the capacity of the registered holder of LGL Shares as Newcrest directs. |
210282355_3 | 6 |
Lihir Gold Limited Scheme Booklet | 461 |
4. | SCHEME CONSIDERATION |
4.1 | Provision of Scheme Consideration |
(a) | In consideration of Newcrests name being entered in the Register in respect of all the Scheme Shares, Newcrest must: |
(i) | no later than one Business Day before the Implementation Date, deposit in immediately available funds an amount equal to the aggregate amount of the cash component of the Scheme Consideration payable to all Scheme Participants in accordance with this clause 4, into an account with an Australian ADI (as defined in the Australian Corporations Act) nominated by LGL for that purpose and which attracts interest at a commercial rate (with such interest accruing to the benefit of LGL) with those funds (excluding any interest accrued) to be held on trust by LGL for the Scheme Participants for the purpose of LGL paying the cash component of the Scheme Consideration to the Scheme Participants; and | ||
(ii) | on the Implementation Date, issue and allot to each Scheme Participant (other than an Ineligible Overseas Shareholder or an Electing Unmarketable Parcel Shareholder) such number of New Newcrest Shares (if any) as that Scheme Participant is entitled to as the New Newcrest Share component of the Scheme Consideration under this clause 4; | ||
(iii) | on the Implementation Date, issue and allot to the Sale Agent in accordance with clause 4.5 such number of New Newcrest Shares (if any) as are attributable to Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders; | ||
(iv) | on the Implementation Date, enter into the register of members of Newcrest the name and address of: |
(A) | each Scheme Participant (other than an Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder) in respect of the aggregate number of New Newcrest Shares issued to them under clause 4.1(a)(ii); | ||
(B) | the Sale Agent in respect of the aggregate number of New Newcrest Shares issued to it under 4.1(a)(iii); |
(b) | Subject to clause 4.7, as soon as practicable after the Implementation Date and no later than 5 Business Days after the Implementation Date, Newcrest must send or procure the despatch to: |
(i) | each Scheme Participant (other than an Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder) by pre-paid post to his or her address recorded in the Register at the Record Date; and | ||
(ii) | the Sale Agent by pre-paid post to its registered address or such other address as it has notified to Newcrest prior to the Implementation Date, |
a holding statement or notice confirming the issue of the New Newcrest Shares to that Scheme Participant or the Sale Agent (as the case may be) representing the total number of New Newcrest Shares to be issued to that Scheme Participant or the Sale Agent (as the case may be) in accordance with this Scheme. | |||
(c) | Subject to clause 4.7, within 5 Business Days after the Implementation Date, subject to receipt of the aggregate amount of the cash component of the Scheme |
210282355_3 | 7 |
C Scheme of Arrangement continued | 462 |
Consideration in accordance with clause 4.1(a)(i), LGL will pay to each Scheme Participant such amount of the cash component of the Scheme Consideration (if any) as that Scheme Participant is entitled to under this clause 4 for each Scheme Share registered in the name of that Scheme Participant by cheque drawn in Australian currency sent by pre-paid post to the address of Scheme Participant recorded in the Register at the Record Date. | |||
(d) | Except for a Scheme Participants tax file number, any binding instruction or notification between a Scheme Participant and LGL relating to Scheme Shares as at the Record Date (including, without limitation, any instructions relating to payment of dividends or to communications from LGL) will, from the Record Date, be deemed (except to the extent determined otherwise by Newcrest in its sole discretion) to be a similarly binding instruction or notification to, and accepted by, Newcrest in respect of the New Newcrest Shares issued to the Scheme Participant pursuant to the Scheme, until that instruction or notification is revoked or amended in writing addressed to Newcrest through the Newcrest Registry, provided that any such instructions or notifications accepted by Newcrest will apply to and in respect of the issue of New Newcrest Shares as part of the Scheme Consideration only to the extent that they are not inconsistent with the other provisions of the Scheme. |
4.2 | Election |
(a) | A Scheme Participant may make: |
(i) | an Election for Mixed Consideration, Maximum Cash Consideration or Maximum Share Consideration (but, subject to clause 4.2(b)(iv), not for two or more of them); and /or | ||
(ii) | an election that, if they would otherwise receive in aggregate 14 New Newcrest Shares or less under the Scheme (taking into account their Election and any scale back of their Scheme Consideration in accordance with clause 4.4), those New Newcrest Shares instead be issued to the Sale Agent in accordance with clause 4.5) (an Unmarketable Parcel Election), |
by completing, in accordance with the instructions on it, the election form for the purpose which accompanies the Scheme Booklet (or which is otherwise made available by LGL, including electronically) (the Election Form) and returning or submitting the completed Election Form to the address or via the method set out in the Election Form so that it is received by no later than the Election Date. | |||
(b) | Subject to clause 4.8(b): |
(i) | any Election (other than an Election deemed to be made pursuant to and in accordance with clause 4.2(d)) or Unmarketable Parcel Election must be made in accordance with the terms and conditions on the Election Form; | ||
(ii) | any Election or Unmarketable Parcel Election will apply to all of the LGL Shares of the Scheme Participant as at the Record Date; | ||
(iii) | once made, a valid Election or Unmarketable Parcel Election by a Scheme Participant may be varied before the Election Date by lodging or submitting a replacement Election Form in accordance with the instructions on the Election Form; and | ||
(iv) | in the manner considered appropriate by LGL (acting reasonably),a Scheme Participant that holds one or more parcels of LGL Shares as |
210282355_3 | 8 |
Lihir Gold Limited Scheme Booklet | 463 |
trustee or nominee for, or otherwise on account of, another person, may make separate Elections or Unmarketable Parcel Elections in relation to each of those parcels of LGL Shares (and, for the purposes of calculating the Scheme Consideration to which that Scheme Participant is entitled under the Scheme, each such parcel of LGL Shares will be treated as though it were held by a separate Scheme Participant). |
(c) | Any purported Election or Unmarketable Parcel Election not made in accordance with clause 4.2(a) and 4.2(b) will not be valid for any purpose and will not be recognised by LGL or Newcrest. | ||
(d) | Any Scheme Participant who has not made a valid Election is, for the purpose of the Scheme, deemed to have made a valid Election for Maximum Share Consideration. |
4.3 | Mixed Consideration |
(a) | A Scheme Participant may make an Election for Mixed Consideration in relation to the Scheme Consideration that the Scheme Participant is entitled to receive under this Scheme. | ||
(b) | If a Scheme Participant elects to receive the Mixed Consideration then, subject to clauses 4.5 and 4.8, the Scheme Participant will be entitled to receive as Scheme Consideration: |
(i) | a cash amount of A$0.225 for each Scheme Share held by that Scheme Participant at the Record Date; and | ||
(ii) | one New Newcrest Share for every 8.43 Scheme Shares held by that Scheme Participant at the Record Date, |
less (in respect of each Scheme Share held by that Scheme Participant at the Record Date) any dividend recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date. |
4.4 | Mix and match facility |
(a) | A Scheme Participant may, subject to the terms of this Scheme, elect to: |
(i) | maximise the New Newcrest Share component of the Scheme Consideration (Maximum Share Consideration); or | ||
(ii) | maximise the cash component of the Scheme Consideration (Maximum Cash Consideration). |
(b) | Any Election for Maximum Share Consideration will be subject to the Share Consideration Cap (subject to clause 4.4(c)), and any Election for Maximum Cash Consideration will be subject to the Cash Consideration Cap. | ||
(c) | Elections for Maximum Share Consideration will be satisfied in full where sufficient New Newcrest Shares are available (having regard to the Share Consideration Cap). If the number of New Newcrest Shares available after deducting the Mixed Consideration Shares is insufficient to satisfy the Maximum Share Number, then a Scheme Participant who has made, or is deemed to have made, a valid Election for Maximum Share Consideration will receive: |
(i) | a number of New Newcrest Shares equal to: |
210282355_3 | 9 |
C Scheme of Arrangement continued | 464 |
{(Shareholder Offer Value / Newcrest VWAP) / Maximum Share Number} x (Share Consideration Cap Mixed Consideration Shares) (the Maximum Share Consideration Share Component); and | |||
(ii) | cash equal to: | ||
Shareholder Offer Value (Maximum Share Consideration Share Component x Newcrest VWAP). |
(d) | Elections for Maximum Cash Consideration will be satisfied in full where sufficient cash is available (having regard to the Cash Consideration Cap). If, after deducting the Mixed Consideration Cash, the amount of cash available is insufficient to satisfy in full all valid Elections for Maximum Cash Consideration, a Scheme Participant who has made a valid Election for Maximum Cash Consideration will receive: |
(i) | cash equal to: | ||
(Shareholder Offer Value / Maximum Cash Value) x (Cash Consideration Cap Mixed Consideration Cash) (the Maximum Cash Consideration Cash Component); and | |||
(ii) | New Newcrest Shares equal to: | ||
(Shareholder Offer Value Maximum Cash Consideration Cash Component) / Newcrest VWAP. |
(e) | LGL may, with Newcrests consent (which may not be unreasonably withheld or delayed), settle as it thinks fit any difficulty, matter of interpretation or dispute which may arise in connection with any Election, whether arising generally or in relation to any particular Election of a Scheme Participant, and any decision is conclusive and binding on all relevant Scheme Shareholders and other persons to whom the decision relates. |
4.5 | Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders |
(a) | Newcrest will be under no obligation under the Scheme to issue, and will not issue, any New Newcrest Shares to an Ineligible Overseas Shareholder or an Electing Unmarketable Parcel Shareholder, and instead Newcrest will issue to the Sale Agent on the Implementation Date the New Newcrest Shares to which: |
(i) | each Ineligible Overseas Shareholder, having regard to their Election and the operation of clauses 4.4(c) and 4.4(d), would otherwise have been entitled (if they were a Scheme Participant that was not an Ineligible Overseas Shareholder); and | ||
(ii) | each Electing Unmarketable Parcel Shareholder, having regard to their Election and the operation of clauses 4.4(c) and 4.4(d), would otherwise have been entitled (if they had not submitted a valid Unmarketable Parcel Election). |
(b) | Newcrest will procure that, as soon as reasonably practicable, the Sale Agent: |
(i) | sells on ASX all of the New Newcrest Shares issued to the Sale Agent pursuant to clause 4.5(a) in such manner, at such price and on such other terms as the Sale Agent determines in good faith, and at the risk of the Ineligible Overseas Shareholder and Electing Unmarketable Parcel Shareholder; and |
210282355_3 | 10 |
Lihir Gold Limited Scheme Booklet | 465 |
(ii) | remits to Newcrest (or at its direction) the gross proceeds of sale without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions of tax required by law or any revenue authority). |
(c) | Promptly after the remittance in accordance with clause 4.5(b), Newcrest will pay, or procure the payment, by cheque drawn in Australian currency, to each Ineligible Overseas Shareholder and Electing Unmarketable Parcel Shareholder (in accordance with clause 4.6) such proportion of the gross proceeds of sale remitted to (or at the direction of) Newcrest pursuant to clause 4.5(b)(ii) as is equal to the number of New Newcrest Shares that would have been issued pursuant to the Scheme to that Ineligible Overseas Shareholder (if they were a Scheme Participant that was not an Ineligible Overseas Shareholder) or Electing Unmarketable Parcel Shareholder (if they had not submitted a valid Unmarketable Parcel Election) (as applicable) divided by the total number of New Newcrest Shares issued to the Sale Agent pursuant to clause 4.5(a), without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions for tax required by law or any revenue authority) in full satisfaction of Newcrests obligations to that Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholders applicable) under the terms of the Scheme in respect of the Share Consideration. |
4.6 | Sending cheques | ||
Subject to clause 4.7, the despatch to a Scheme Participant of any cheque drawn in Australian currency for the proceeds of sale pursuant to clause 4.5 must be by pre-paid ordinary post (or, if the address of the Scheme Participant in the Register is outside Australia, by pre-paid airmail post) in an envelope addressed to their address shown in the Register as at the Record Date. | |||
4.7 | Joint holders | ||
In the case of LGL Shares held in joint names: |
(a) | any cheque required to be paid to Scheme Participants under this Scheme must be payable to the joint holders and be forwarded to the holder whose name appears first in the Register as at the Record Date; and | ||
(b) | holding statements or notices confirming the issue of the New Newcrest Shares to Scheme Participants must be issued in the names of the joint holders and sent to the holder whose name appears first in the Register as at the Record Date. |
4.8 | Fractional entitlements |
(a) | If the number of Scheme Shares held by a Scheme Participant is such that the aggregate entitlement of that Scheme Participant to Scheme Consideration: |
(i) | includes a fractional entitlement to a New Newcrest Share; and/or | ||
(ii) | includes a fractional entitlement to a cent in cash, |
then the entitlement of that Scheme Participant must be rounded up or down, with any fractional entitlement of less than 0.5 being rounded down to the nearest whole number of New Newcrest Shares or cents (as applicable), and any fractional |
210282355_3 | 11 |
C Scheme of Arrangement continued | 466 |
entitlement of 0.5 or more being rounded up to the nearest whole number of New Newcrest Shares or cents (as applicable). | |||
(b) | If Newcrest is of the opinion (acting reasonably) that two or more Scheme Participants, each of which holds a holding of Scheme Shares which results in rounding in accordance with clause 4.8(a), have, before the Record Date, been party to a shareholding splitting or division in an attempt to obtain an advantage by reference to the rounding , Newcrest may give notice to those Scheme Participants: |
(i) | setting out the names and registered addresses of all of them; | ||
(ii) | stating that opinion; and | ||
(iii) | attributing to one of them specifically identified in the notice the Scheme Shares held by all of them, |
and, after the notice has been so given, the Scheme Participant specifically identified in the notice as the deemed holder of all the specified Scheme Shares shall, for the purposes of the Scheme, be taken to hold all those Scheme Shares and each of the other Scheme Participants whose names are set out in the notice shall, for the purposes of the Scheme, be taken to hold no Scheme Shares. |
4.9 | New Newcrest Shares to rank equally |
(a) | New Newcrest Shares issued to the Scheme Participants will be validly issued and will rank equally in all respects with all existing Newcrest Shares. | ||
(b) | On issue, each New Newcrest Share issued to the Scheme Participants will be fully paid and free from any mortgage, charge, lien, encumbrance or other security interest. |
5. | DEALINGS IN LGL SHARES |
5.1 | Determination of Scheme Participants | ||
For the purpose of establishing who are the Scheme Participants, dealings in LGL Shares will only be recognised if: |
(a) | in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant LGL Shares at or before the Record Date; and | ||
(b) | in all other cases, registrable transmission applications or transfers in registrable form in respect of those dealings are received at or before the Record Date at the place where the Register is kept. |
5.2 | Register |
(a) | Transmission applications or transfers received at or before the Record Date: LGL must register registrable transmission applications or transfers of the kind referred to in clause 5.1(b) by the Record Date. | ||
(b) | Transmission applications or transfers received after the Record Date: LGL will not accept for registration or recognise for any purpose any transmission applications or transfers in respect of LGL Shares received after the Record Date, other than a transfer to Newcrest in accordance with the Scheme. |
210282355_3 | 12 |
Lihir Gold Limited Scheme Booklet | 467 |
(c) | Maintaining of the Register: For the purpose of determining entitlements to participate in the Scheme, LGL will, until the Scheme Consideration has been provided, maintain the Register in accordance with the provisions of this clause 5 and, subject to clause 4.7, the Register in this form will solely determine entitlements to the Scheme Consideration. | ||
(d) | Scheme Participant details: LGL must procure that, as soon as practicable after the Record Date and in any event at least 2 Business Days before the Implementation Date, details of the names, registered addresses and holdings of LGL Shares of every Scheme Participant as shown in the Register at the Record Date are available to Newcrest in such form as Newcrest may reasonably require. | ||
(e) | Effect of the Record Date: All statements of holding for LGL Shares (other than statements of holding in favour of Newcrest) will cease to have any effect from the Record Date as documents of title in respect of those LGL Shares. As from the Record Date, each entry current at that date on the Register relating to LGL Shares will cease to be of any effect other than as evidence of entitlement to the Scheme Consideration in respect of the LGL Shares relating to that entry. |
6. | QUOTATION OF SHARES |
6.1 | Suspension of trading in LGL Shares and American Depository Shares | ||
LGL must apply to ASX and POMSoX for a suspension in trading in LGL Shares on and from the close of trading on the Effective Date. LGL must apply to NASDAQ for a suspension in trading in American Depository Shares (representing LGL Shares) on and from the close of trading on the trading day immediately preceding the Effective Date. | |||
6.2 | Termination from official quotation of LGL Shares and American Depository Shares | ||
LGL will apply, as and when required by Newcrest, for termination of the official quotation of LGL Shares on ASX and POMSoX and American Depository Shares (representing LGL Shares) quoted on NASDAQ and the removal of LGL from the official list of those exchanges with effect from the Business Day after the date on which Newcrest is duly registered as the holder of all the Scheme Shares in accordance with this Scheme. | |||
6.3 | Quotation of New Newcrest Shares | ||
Newcrest will use its best endeavours to procure that the New Newcrest Shares to be issued pursuant to the Scheme will be quoted on ASX and POMSoX as soon as practicable after the Effective Date, initially on a deferred settlement basis and thereafter on a normal T+3 settlement basis. |
7. | GENERAL |
7.1 | Appointment of attorney | ||
Each Scheme Participant, without the need for any further act, irrevocably appoints LGL as its attorney and agent for the purpose of doing all things and executing any document necessary or desirable to give effect to the Scheme, and LGL accepts such appointment. LGL, as agent and attorney of each Scheme Participant, may sub delegate its functions, authorities or powers under this clause 7.1 to all or any of its directors and officer (jointly, severally, or jointly and severally). | |||
7.2 | LGL and Scheme Participants bound |
210282355_3 | 13 |
C Scheme of Arrangement continued | 468 |
The Scheme binds LGL and all Scheme Participants (including those who did not attend the Shareholders Meeting, did not vote at that meeting or voted against the Scheme) and will, for all purposes, have effect notwithstanding any inconsistent provision in the constitution of LGL to the extent permitted by law. | |||
7.3 | Further assurances | ||
LGL will execute all documents and do all acts and things necessary or expedient to give effect to the terms of the Scheme and the transactions contemplated by it. | |||
7.4 | Authority | ||
Each of the Scheme Participants consent to LGL doing all things necessary or incidental to the implementation of the Scheme. | |||
7.5 | Communications | ||
Where a notice, transfer, transmission application, direction or other communication referred to in the Scheme is sent by post to LGL, it will not be deemed to have been received in the ordinary course of post or on a date other than the date (if any) on which it is actually received at LGLs registered office or at the share registry of LGL. If communications are sent by fax, they are taken to be received at the time shown in the transmission report as the time that the whole fax was sent. | |||
7.6 | Alterations and conditions | ||
LGL may by its counsel, and with the prior consent of Newcrest, consent on behalf of all Scheme Participants to any modifications or conditions which the Court thinks fit to impose. | |||
7.7 | Stamp Duty | ||
Newcrest will pay any stamp duty and any related fines, penalties and interest payable on, or in connection with the transfer by Scheme Participants of the LGL Shares and the entry of Newcrest as the holder of all the Scheme Shares in the Register. | |||
7.8 | Governing law | ||
This Scheme is governed by the laws of Papua New Guinea. The parties submit to the non-exclusive jurisdiction of the National Court of Papua New Guinea and the courts of appeal from it. |
8. | DEFINITIONS AND INTERPRETATION |
8.1 | Definitions | ||
In this Scheme, except where the context otherwise requires: | |||
ASTC
means ASX Settlement and Transfer Corporation Pty Ltd (ABN
49 008 504 532).
ASTC Regulated Transfer has the meaning given to that term in the ASTC Settlement Rules. |
|||
ASTC Settlement Rules means the operating rules of ASTC. | |||
ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial market known as the Australian Securities Exchange operated by it. |
210282355_3 | 14 |
Lihir Gold Limited Scheme Booklet | 469 |
ASX Listing Rules means the official listing rules of ASX as from time to time amended or waived in their application to a party. | ||
ASX Trading Day has the meaning given to the term Trading Day in the ASX Listing Rules. | ||
Australian Corporations Act means the Corporations Act 2001 of the Commonwealth of Australia. | ||
Australian Registers means those parts of LGLs share register comprising LGL Shareholders designated in the share register as being on the New South Wales Register or the Victorian Register and holding LGL Shares that are capable of being traded on the ASX. | ||
Business Day means Monday to Friday inclusive, except New Years Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that the ASX or POMSoX declares is not a business day. | ||
Cash Consideration Cap means A$1 billion (or such higher amount as Newcrest determines in its absolute discretion). | ||
CHESS means the Clearing House Electronic Subregister System, which facilitates electronic security transfer in Australia. | ||
Conditions Precedent means the conditions precedent in clause 5 of the Merger Implementation Agreement. | ||
Court means the National Court of Papua New Guinea. | ||
Deed Poll means the deed poll made by Newcrest in favour of Scheme Participants under which Newcrest agrees to procure the provision of the Scheme Consideration to Scheme Participants. | ||
Dividend Value means the amount of any dividend in respect of one LGL Share recommended, declared or paid or resolved to be recommended, declared or paid by LGL on or after the date of the Merger Implementation Agreement where the record date for the payment of that dividend will occur on or prior to the Implementation Date. | ||
Effective when used in relation to the Scheme, means the coming into effect, pursuant to section 250 of the PNG Companies Act, of the order of the Court under section 250(1) of the PNG Companies Act approving the Scheme. | ||
Effective Date means the date on which the orders of the Court under section 250(1) of the PNG Companies Act approving the Scheme become Effective. | ||
Electing Unmarketable Parcel Shareholder means a Scheme Participant who makes an Unmarketable Parcel Election and, but for making that Unmarketable Parcel Election, would receive in aggregate 14 New Newcrest Shares or less under the Scheme (taking into account their Election and any scale back of their Scheme Consideration in accordance with clause 4.4). | ||
Election means a valid election made by an LGL Shareholder pursuant to clause 4.2(a) and in accordance with clause 4.2(b), or deemed to be made pursuant to and in accordance with clause 4.2(d). | ||
Election Date means 9.00pm on the same date as the Record Date. | ||
Election Form has the meaning given in clause 4.2(a). | ||
End Date means 31 December 2010 or such later date as agreed between the parties. |
210282355_3 | 15 |
C Scheme of Arrangement continued | 470 |
First Court Hearing means the hearing of the application by LGL for orders pursuant to section 250 of the PNG Companies Act including for the convening of the Shareholders Meeting. |
Holding Adjustment has the meaning given to that term in the ASTC Settlement Rules. |
Implementation Date means the date that is 5 Business Days after the Record Date, or such other date agreed in writing by the parties. |
Independent Experts Report means the report prepared by the Independent Expert for inclusion in the Scheme Booklet in accordance with the PNG Companies Act and the order of the Court at the First Court Hearing. |
Ineligible Overseas Shareholder means a Scheme Participant whose address as shown in the LGL Register is located in a jurisdiction other than PNG, Australia (and its external territories), the United States, the United Kingdom (only certain LGL shareholders as described in section 14.14(a) of the Scheme Booklet), Canada, Singapore, Hong Kong, New Zealand, the Peoples Republic of China, Indonesia, France, Japan, Ireland or Switzerland (unless Newcrest is satisfied that it is permitted to allot and issue New Newcrest Shares to that Scheme Participant pursuant to the Scheme by the laws of that place), or LGL or any of its related bodies corporate (as defined in the Australian Corporations Act). |
LGL means Lihir Gold Limited (ARBN 069 803 998). |
LGL Share means a fully paid ordinary share in the capital of LGL. |
LGL Shareholder means a person who is registered in the Register as a holder of LGL Shares. |
Maximum Cash Consideration has the meaning given in clause 4.4(a)(ii). |
Maximum Cash Consideration Cash Component, in relation to a Scheme Participant, has the meaning given in clause 4.4(d)(i). |
Maximum Cash Value means the aggregate Shareholder Offer Value in respect of all valid Elections for Maximum Cash Consideration. |
Maximum Share Number means the aggregate number of New Newcrest Shares that would be issued if all valid Elections for Maximum Share Consideration were satisfied in full by the issue of New Newcrest Shares. |
Maximum Share Consideration has the meaning given in clause 4.4(a)(i). |
Maximum Share Consideration Share Component, in relation to a Scheme Participant, has the meaning given in clause 4.4(c)(i). |
Merger Implementation Agreement means the Merger Implementation Agreement between LGL and Newcrest dated 4 May 2010, a copy of which is included in the Scheme Booklet. |
Message has the meaning given to that term in the ASTC Settlement Rules. |
Mixed Consideration means the Scheme Consideration ascertained in accordance with clause 4.3. |
Mixed Consideration Cash means the amount of cash payable in respect of all valid Elections for Mixed Consideration. |
Mixed Consideration Shares means the aggregate number of New Newcrest Shares to be issued in respect of all valid Elections for Mixed Consideration. |
210282355_3 | 16 |
Lihir Gold Limited Scheme Booklet | 471 |
NASDAQ means Nasdaq Stock Market Inc. National Market. |
New Newcrest Shares means Newcrest Share to be issued under the Scheme as Scheme Consideration. |
Newcrest means Newcrest Mining Limited (ABN 20 005 683 625). |
Newcrest Constitution means the Newcrest Constitution as amended from time to time. |
Newcrest Daily VWAP in relation to an ASX Trading Day, means the volume weighted average share price of Newcrest Shares which are sold on ASX on that day (excluding any and all special crossings, crossings prior to the commencement of normal trading, crossings during the closing phase or the after hours adjust phase, overseas trades, trades pursuant to the exercise of options over Newcrest Shares and overnight crossings, and any other trades that Newcrest and LGL reasonably agree to exclude on the basis that they are not representative of the general price at which Newcrest Shares are trading on ASX in the context of trading in Newcrest Shares on any day in which the trades took place). This will be calculated using the IRESS Market System. |
Newcrest Registry means Link Market Services Limited of Level 9, 333 Collins St of Melbourne VIC 3000. |
Newcrest Share means a fully paid ordinary share in the capital of Newcrest. |
Newcrest VWAP means the arithmetic average of the Newcrest Daily VWAPs over the five ASX Trading Days up to and including the Record Date, rounded to two decimal places |
OTCBB means the over the counter bulletin board operated by the Financial Industry Regulatory Authority of the United States. |
Participant has the meaning given to that term in the ASTC Settlement Rules. | ||
PNG means Papua New Guinea. |
PNG Broker means [name of broker], being a stock broker registered to operate on POMSoX under PNG law and being a participating organisation for the purposes of, and as defined in, the business rules of POMSoX. |
PNG Companies Act means the Companies Act 1997 (PNG). |
PNG Register means that part of LGLs share register comprising LGL Shareholders designated in the share register as being on the PNG Register and holding LGL Shares that are capable of being traded on POMSoX. |
PNG Registrar of Companies means the Registrar of Companies appointed under section 394(1) of the PNG Companies Act. |
POMSoX means the Port Moresby Stock Exchange Limited. |
Record Date means 7.00pm on the date that is 5 Business Days after the Effective Date. |
Register means the PNG Register or the Australian Registers, as the case requires, and Registry has a corresponding meaning. |
Sale Agent means a person appointed by Newcrest to act as agent for the purposes of clause 4.5 (and/or a nominee of that person that is a subsidiary of that person). |
Scheme means this scheme of arrangement subject to any modifications or conditions made or required by the Court pursuant to section 250 or 251 of the PNG Companies Act and agreed or consented to by LGL and Newcrest. |
210282355_3 | 17 |
C Scheme of Arrangement continued | 472 |
Scheme Booklet means the explanatory memorandum prepared pursuant to an order of the Court under section 250(2) of the PNG Companies Act at the First Court Hearing in relation to the Scheme, its Attachments, the notice of meeting, proxy form and Election Form. | ||
Scheme Consideration means the consideration to be provided to Scheme Participants under the terms of this Scheme for the transfer to Newcrest of their Scheme Shares, as ascertained in accordance with clause 4. | ||
Scheme Participant
means each LGL Shareholder as at the
Record Date.
Scheme Share means each LGL Share on issue at the Record Date. |
||
Scheme Transfer means, in relation to each Scheme Participant, a form of transfer for the purposes of section 65(2) of the PNG Companies Act which may be a master transfer of all or part of all of the Scheme Shares. | ||
Second Court Date means the first day of hearing of an application to the Court for orders approving the Scheme or, if the hearing of such application is adjourned for any reason, means the first day of the adjourned hearing. | ||
Share Consideration Cap means 280,988,130 New Newcrest Shares (or such higher number of New Newcrest Shares as Newcrest determines in its absolute discretion). | ||
Shareholders Meeting means the meeting of LGL Shareholders convened by Court order pursuant to section 250(1) of the PNG Companies Act at which LGL Shareholders are to consider whether to approve the Scheme, including any adjournment of that meeting. | ||
Shareholder Offer Value in relation to a Scheme Participant means: |
{(1 / 8.43 x Newcrest VWAP) + A$0.225 Dividend Value} x the number of Scheme Shares held by that Scheme Participant |
TSX means Toronto Stock Exchange. | ||
Transmit has the meaning given to that term in the ASTC Settlement Rules. | ||
Unmarketable Parcel Election has the meaning given in clause 4.2(a). |
8.2 | Interpretation | |
In this Scheme, unless the context otherwise requires: |
(a) | headings and bolding are for convenience and do not affect interpretation; | ||
(b) | the singular includes the plural and vice versa; | ||
(c) | the word person includes a body corporate, a partnership, a joint venture, an unincorporated body or association, or any government agency; | ||
(d) | a reference to a person includes a reference to the persons executors, administrators, successors, substitutes and assigns; | ||
(e) | If a word or phrase is defined, its other grammatical forms have a corresponding meaning; | ||
(f) | references to any legislation or regulations include any statutory modification of or substitution for such legislation or regulations; | ||
(g) | references to agreements or deeds are to agreements or deeds as amended from time to time; |
210282355_3 | 18 |
Lihir Gold Limited Scheme Booklet | 473 |
(h) | a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, the Scheme and a reference to the Scheme includes any annexure, exhibit and schedule; | ||
(i) | the words including, for example or such as when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; | ||
(j) | a reference to a holder includes a joint holder; | ||
(k) | references to a currency are to Australian currency; and | ||
(I) | a reference to time is a reference to Port Moresby Time. |
210282355_3 | 19 |
DEED POLL |
Lihir Gold Limited Scheme Booklet | 475 |
210282410_3 |
D Deed Poll continued | 476 |
1. | CONDITIONS | |
1.1 | Conditions | |
The obligations of Newcrest under clause 2 are subject to the Scheme becoming Effective. | ||
1.2 | Termination | |
If the Merger Implementation Agreement is terminated or the Scheme has not become Effective on or before the End Date, the obligations of Newcrest under this deed poll will automatically terminate, unless Newcrest otherwise agrees in writing. | ||
1.3 | Consequences of termination | |
If this deed poll is terminated under clause 1.2, in addition and without prejudice to any other rights, powers or remedies available to a party: |
(a) | Newcrest is released from its obligations under this deed poll; and | ||
(b) | each Scheme Participant retains the rights, powers or remedies the Scheme Participant has against Newcrest in respect of any breach of this deed poll which occurs before it is terminated. |
2. | CONSIDERATION | |
2.1 | Performance of obligations generally | |
Subject to clause 1, Newcrest covenants in favour of each Scheme Participant: |
(a) | to provide or procure the provision of the Scheme Consideration to each Scheme Participant in consideration for to the entry of Newcrests name in the Register as the holder of all the Scheme Shares in accordance with the Scheme; | ||
(b) | to acquire all LGL Shares in accordance with the Scheme; and | ||
(c) | otherwise to do all things necessary or expedient on its part to implement the Scheme. |
210282410_3 | 1 |
Lihir Gold Limited Scheme Booklet | 477 |
2.2 | Scheme Consideration | |
Subject to clause 1, the obligation of Newcrest to provide, or procure the provision of, the Scheme Consideration referred to in clause 2.1 (a) will be satisfied by Newcrest: |
(a) | in respect of the cash component of the Scheme Consideration, no later than one Business Day before the Implementation Date, depositing in immediately available funds an amount equal to the aggregate amount of the cash component of the Scheme Consideration payable to all Scheme Participants in accordance with the Scheme, into an account with an Australian ADI (as defined in the Australian Corporations Act) nominated by LGL for that purpose and which attracts interest at a commercial rate (with such interest accruing to the benefit of LGL) with those funds (excluding any interest accrued) to be held on trust by LGL for the Scheme Participants for the purpose of LGL paying the cash component of the Scheme Consideration to the Scheme Participants; and | ||
(b) | in respect of the New Newcrest Shares component of the Scheme Consideration: |
(i) | on the Implementation Date, issuing and allotting to each Scheme Participant (other than an Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder) such number of New Newcrest Shares (if any) as that Scheme Participant is entitled to as the New Newcrest Share component of the Scheme Consideration under the Scheme; | ||
(ii) | on the Implementation Date, issuing and allotting to the Sale Agent in accordance with the Scheme such number of New Newcrest Shares (if any) as are attributable to Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders; | ||
(iii) | on the Implementation Date, entering into the register of members of Newcrest the name and address of: |
(A) | each Scheme Participant (other than an Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder) in respect of the aggregate number of New Newcrest Shares issued to them under clause 2.2(b)(i); and | ||
(B) | the Sale Agent in respect of the aggregate number of New Newcrest Shares issued to them under clause 2.2(b)(ii); |
(c) | subject to clause 2.4, as soon as practicable after the Implementation Date and no later than 5 Business Days after the Implementation Date, Newcrest must send or procure the despatch to: |
(i) | each Scheme Participant (other than an Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder) by pre-paid post to his or her address recorded in the Register at the Record Date; and | ||
(ii) | the Sale Agent (in respect of Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders) by pre-paid post to its registered address or such other address as it has notified to Newcrest prior to the Implementation Date, |
210282410_3 | 2 |
D Deed Poll continued | 478 |
(d) | as soon as reasonably practicable, Newcrest must procure that the Sale Agent: |
(i) | sells on ASX all of the New Newcrest Shares issued to the Sale Agent under clause 2.2(b)(ii) in such manner, at such price and on such other terms as the Sale Agent determines in good faith, and at the risk of the Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders; and | ||
(ii) | remits to Newcrest (or at its direction) the gross proceeds of sale without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions of tax required by law or any revenue authority). |
(e) | promptly after the remittance in accordance with clause 2.2(d), Newcrest must pay, or procure the payment, by cheque drawn in Australian currency, to each Ineligible Overseas Shareholder and Electing Unmarketable Parcel Shareholder (in accordance with clause 2.3) such proportion of the gross proceeds of sale remitted to (or at the direction of) Newcrest pursuant to clause 2.2(d)(ii) as is equal to the number of New Newcrest Shares that would have been issued pursuant to the Scheme to that Ineligible Overseas Shareholder (if they were a Scheme Participant that was not an Ineligible Overseas Shareholder) or Electing Unmarketable Parcel Shareholder (if they had not submitted a valid Unmarketable Parcel Election) (as applicable) divided by the total number of New Newcrest Shares issued to the Sale Agent under clause 2.2(b)(ii), without deducting any brokerage costs, out of pocket expenses, stamp duty or taxes (other than any applicable withholding tax or other deductions for tax required by law or any revenue authority) in full satisfaction of Newcrests obligations to that Ineligible Overseas Shareholder or Electing Unmarketable Parcel Shareholder (as applicable) under the terms of the Scheme in respect of the Share Consideration. |
2.3 | Sending cheques | |
Subject to clause 2.4, the despatch to a Scheme Participant of any cheque drawn in Australian currency for the proceeds of sale pursuant to clause 2.2(e) must be by pre-paid ordinary post (or, if the address of the Scheme Participant in the Register is outside Australia, by pre-paid airmail post) in an envelope addressed to their address shown in the Register as at the Record Date. | ||
2.4 | Joint holders | |
In the case of LGL Shares held in joint names: |
(a) | any cheque required to be paid to Scheme Participants under the Scheme must be payable to the joint holders and be forwarded to the holder whose name appears first in the Register as at the Record Date; and | ||
(b) | holding statements or notices confirming the issue of the New Newcrest Shares to Scheme Participants must be issued in the names of the joint holders and sent to the holder whose name appears first in the Register as at the Record Date. |
3. | NEWCREST WARRANTIES | |
Newcrest warrants that: |
(a) | it is validly existing corporation registered under the laws of its place of incorporation; |
210282410_3 | 3 |
Lihir Gold Limited Scheme Booklet | 479 |
(b) | it has the corporate power to enter into and perform its obligations under this deed poll and to carry out the transaction contemplated by this deed poll; | ||
(c) | it has taken all the necessary corporate action to authorise its entry into this deed poll and has taken or will take all necessary corporate action to authorise the performance of this deed poll and to carry out the transactions contemplated by this deed poll; | ||
(d) | this deed poll is valid and binding on it; and | ||
(e) | the New Newcrest Shares which are issued to Scheme Participants in accordance with the Scheme will be validly issued, fully paid and will rank equally in all respects with other Newcrest Shares. |
4. | CONTINUING OBLIGATIONS | |
This deed poll is irrevocable and, subject to clause 1, remains in full force and effect until: |
(a) | Newcrest has fully performed its obligations under this deed poll; or | ||
(b) | the earlier termination of this deed poll under clause 1.2. |
5. | NOTICES | |
5.1 | Form | |
Any communications in connection with this deed poll must be: |
(a) | in writing; | ||
(b) | addressed to Newcrest at the address shown below and marked for the attention of Stephen Creese, the General Counsel and Company Secretary: | ||
Newcrest |
|
Address: | Level 9, 600 St Kilda Road | ||
|
Melbourne, VIC 3004 | |||
|
||||
|
OR | |||
|
||||
|
PO Box 6213
St Kilda Road Central, VIC 8008 |
|||
|
||||
|
Fax No: | +61 3 9521 3564 | ||
|
||||
|
For the attention of: | General Counsel and Company Secretary |
(c) | signed by the person making the communication or (on its behalf) by the solicitor for, or by any attorney, director, secretary, or authorised agent of, that person. |
5.2 | Delivery | |
They must be: |
(a) | left at the address set out in clause 5.1 (b) of this deed poll; |
210282410_3 | 4 |
D Deed Poll continued | 480 |
(b) | sent by prepaid ordinary post (airmail if appropriate) to the address set out or referred to in clause 5.1 (b) of this deed poll; or | ||
(c) | sent by fax to the fax number set out or referred to in clause 5.1 (b) of this deed poll, |
However, if Newcrest has notified a changed postal address or changed fax number, then the communication must be to that address or number. | ||
5.3 | When effective | |
They take effect from the time they are received unless a later time is specified. | ||
5.4 | Receipt postal | |
If sent by post, they are taken to be received on the third Business Day after posting (or seven days after posting if sent to or from a place outside Australia). | ||
5.5 | Receipt-fax | |
If sent by fax, they are taken to be received at the local time in the place of receipt of the fax shown in the transmission report as the time that the whole fax was sent. | ||
5.6 | Receipt-general | |
Despite clauses 5.4 and 5.5, if they are received after 5.00 pm in the place of receipt or on a non-Business Day, they are to be taken to be received at 9.00 am on the next Business Day. | ||
6. | STAMP DUTY | |
6.1 | Stamp duty | |
Newcrest will: |
(a) | pay all stamp duties and any related fines, penalties and interest in respect of the Scheme or this deed poll, the performance of the Scheme or this deed poll and each transaction effected by or made under the Scheme or this deed poll; and | ||
(b) | indemnify each Scheme Participant against any liability arising from failure to comply with paragraph (a). |
7. | GENERAL | |
7.1 | Exercise of rights | |
If a Scheme Participant does not exercise a right of remedy fully or at a given time, it may still exercise it later. | ||
7.2 | Cumulative rights | |
The rights, powers and remedies of Newcrest and each Scheme Participant under this deed poll are cumulative and do not exclude any other rights, powers or remedies provided by law independently of this deed poll. |
210282410_3 | 5 |
Lihir Gold Limited Scheme Booklet | 481 |
7.3 | No Assignment | |
The rights and obligations of Newcrest and each Scheme Participant under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity. | ||
7.4 | Variation | |
Newcrest must not vary a provision of this deed poll, or a right created under it unless: |
(a) | before the Second Court Date, the variation is agreed to in writing by LGL and Newcrest (which such agreement may be given or withheld without reference to or approval by any LGL Shareholder); or | ||
(b) | after the Second Court Date, the variation is agreed to in writing by LGL and Newcrest (which such agreement may be given or withheld without reference to or approval by any LGL Shareholder), and is approved by the Court. |
7.5 | Waiver | |
Failure to exercise or enforce or a delay in exercising or enforcing or the partial exercise or enforcement of any right, power or remedy provided by law or under this deed poll by any party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or further exercise or enforcement of that or any other rights, power or remedy provided by law or under this agreement. | ||
7.6 | Severability | |
If the whole or any part of a provision of this deed poll is void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of this deed poll has full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause 7.6 has no effect if the severance alters the basic nature of this deed poll or is contrary to public policy. | ||
7.7 | Further action | |
Newcrest will at its own expense promptly do all things and execute and deliver all further documents required by law or reasonably requested by any other party to give effect to this deed poll and the transactions contemplated by it. | ||
7.8 | Governing law and jurisdiction | |
This deed poll is governed by the law in force in Papua New Guinea. Newcrest irrevocably and unconditionally submits to the non-exclusive jurisdiction of the National Court of Papua New Guinea and any court of appeal from it. | ||
8. | INTERPRETATION | |
8.1 | Definitions | |
The following definitions apply in this document. | ||
Scheme means the scheme of arrangement under Part XVI of the PNG Companies Act between LGL and the Scheme Participants pursuant to which Newcrest will acquire LGL. | ||
Other capitalised words and phrases have the same meaning as given to them in the Scheme. |
210282410_3 | 6 |
D Deed Poll continued | 482 |
8.2 | Interpretation | |
In this deed poll, headings and bolding are for convenience only and do not affect its interpretation and, unless the context requires otherwise: |
(a) | words importing the singular include the plural and vice versa; | ||
(b) | a reference to any document (including the Scheme) is to that document as varied, novated, ratified or replaced; | ||
(c) | a reference to a clause, party, annexure or schedule is a reference to a clause of, and a party, annexure and schedule to, this deed poll and a reference to this deed poll includes any annexure and schedule; | ||
(d) | a reference to a party to a document includes that partys successors and permitted assigns; | ||
(e) | a reference to an agreement other than this deed poll includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing; | ||
(f) | the word includes in any form is not a word of limitation; | ||
(g) | a reference to $ or dollar is to Australian currency; and | ||
(h) | a reference to time is a reference to Port Moresby Time. |
8.3 | Nature of this deed poll | |
Newcrest acknowledges that this deed poll may be relied on and enforced by any Scheme Participant in accordance with its terms, even though the Scheme Participants are not party to it. |
210282410_3 | 7 |
Lihir Gold Limited Scheme Booklet | 483 |
/s/ G. J. Robinson | /s/ S. E. N. Creese | ||
Signature of director
|
Signature of Secretary | ||
|
|||
G. J. ROBINSON
|
S. E. N. CREESE | ||
Name
|
Name |
210282410_3 | 8 |
1 Year Lihir Gold, Limited (MM) Chart |
1 Month Lihir Gold, Limited (MM) Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions