UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
July 22, 2010
Commission File No. 000-26860
LIHIR GOLD LIMITED
Level 7, Pacific Place
Cnr Champion Parade & Musgrave Street
Port Moresby, Papua New Guinea
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
Form 20-F
þ
Form 40-F
o
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): __)
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __)
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes
o
No
þ
(If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):82-
.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorised.
LIHIR GOLD LIMITED
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By:
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/s/ Stuart MacKenzie
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Name
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Stuart MacKenzie
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Title:
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Group Secretary & General Counsel
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Date: July 22, 2010
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SCHEME
BOOKLET
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In relation to the proposed acquisition of
Lihir Gold Limited
ARBN 069 803 998
by
Newcrest Mining Limited
ABN 20 005 683 625
by scheme of arrangement between Lihir Gold Limited and its members
This is Scheme Booklet includes a Notice of Meeting for LGL Shareholders to be held on 23
August 2010 at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas
Streets, Port Moresby, Papua New Guinea at 11.00am.
The LGL Directors unanimously recommend that LGL Shareholders
VOTE IN FAVOUR OF THE SCHEME in the absence of a Superior Proposal, and elect to receive
either the Mixed Consideration or the Maximum Share Consideration.
The Independent Expert
has concluded that the Scheme is in the best interests of LGL Shareholders, in the absence
of a superior proposal.
This is an
important document and requires each LGL Shareholder’s
immediate
attention.
LGL Shareholders and LGL ADS holders should read this document in its entirety before
deciding whether or not to vote in favour of the Scheme.
If an LGL Shareholder or LGL ADS holder 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.
This Scheme Booklet contains the same disclosure
required as if it were a concise prospectus prepared in accordance with the PNG Securities
Regulation.
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Financial Advisers
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Legal Adviser
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IMPORTANT
NOTICES
Purpose of Scheme Booklet
This Scheme Booklet has been prepared pursuant to an order of the
Court under section 250(2)(a) of the PNG Companies Act.
The purpose of this Scheme Booklet is to explain the terms of the Scheme and the manner in
which the Scheme will be implemented.
No investment advice
The information contained in this Scheme Booklet does not constitute
financial product advice and has been prepared without reference to LGL Shareholders’ own
investment objectives, financial situation, taxation position and particular needs. It is
important that LGL Shareholders read this Scheme Booklet in its entirety before making any
decision, including a decision on whether or not to vote in favour of the Scheme. 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.
Regulatory information
This Scheme Booklet is dated 22 July 2010.
A copy of this Scheme Booklet has been provided to the PNG Registrar of Companies, the PNG
Securities Commission, ASX, ASIC, POMSoX and NASDAQ. None of the PNG Registrar of Companies,
the PNG Securities Commission, ASX, ASIC, POMSoX, NASDAQ or the Ontario Securities
Commission, nor any of their officers, assumes any responsibility for the contents of this
Scheme Booklet.
Responsibility for information
The LGL Scheme Information has been prepared by LGL and is the responsibility of LGL. None
of Newcrest, its Related Bodies Corporate or the directors, officers, employees or advisers
of any of those entities assumes any responsibility for the accuracy or completeness of the
LGL Scheme Information.
The Newcrest Scheme Information has been provided by Newcrest and is the responsibility of
Newcrest. None of LGL, its Related Bodies Corporate or the directors, officers, employees or
advisers of any of those entities assumes any responsibility for the accuracy or
completeness of the Newcrest Scheme Information except to the extent that LGL has provided
Newcrest with information for the purpose of Newcrest preparing information on the Merged
Group.
Grant Samuel & Associates Pty Limited has prepared the Independent Expert’s Report contained
in section 11 and Grant Samuel & Associates Pty Limited takes responsibility for that
report. None of LGL, Newcrest, their respective Related Bodies Corporate or the directors,
officers, employees or advisers of any of those entities assumes any responsibility for the
accuracy or completeness of the Independent Expert’s Report.
PricewaterhouseCoopers Securities Ltd has prepared the Investigating Accountant’s Report
contained in section 13 and PricewaterhouseCoopers Securities Ltd takes responsibility for
that report, except to the extent that LGL or Newcrest has provided PricewaterhouseCoopers
Securities Ltd with information for the purpose of PricewaterhouseCoopers Securities Ltd
preparing the report contained in that section. None of LGL, Newcrest, their respective
Related Bodies Corporate or the directors, officers, employees or advisers of any of those
entities otherwise assumes any responsibility for the accuracy or completeness of the
Investigating Accountant’s Report, except to the extent that LGL or Newcrest (as applicable)
or their respective Related Bodies Corporate or directors, officers, employees or advisers
have provided PricewaterhouseCoopers Securities Ltd with information for the purpose of
PricewaterhouseCoopers Securities Ltd preparing the Investigating Accountant’s Report.
PricewaterhouseCoopers Securities Ltd does not assume any responsibility for the accuracy or
completeness of the information contained in this Scheme Booklet other than that contained
in section 13.
AMC Consultants Pty Ltd has prepared the Independent Technical Specialist’s Report contained
in section 12 and AMC Consultants Pty Ltd takes responsibility for that report. None of LGL,
Newcrest, their respective Related Bodies Corporate or the directors, officers, employees or
advisers of any of those entities assumes any responsibility for the accuracy or
completeness of the Independent Technical Specialist’s Report.
Blake Dawson has prepared the tax information contained in sections 10.1 and 10.2 and takes
responsibility for that information, except to the extent that LGL or Newcrest has provided
Blake Dawson with information for the purpose of Blake Dawson preparing the tax information
contained in that section. None of LGL, Newcrest, their respective Related Bodies Corporate
or the directors, officers, employees or advisers of any of those entities otherwise assumes
any responsibility for the accuracy or completeness of the information contained in sections
10.1 and 10.2, except to the extent that LGL or Newcrest (as applicable) or their respective
Related Bodies Corporate or directors, officers, employees or advisers have provided Blake
Dawson with information for the purpose of Blake Dawson preparing the tax information
contained in sections 10.1 and 10.2. Blake Dawson does not assume any responsibility for the
accuracy or completeness of the information contained in this Scheme Booklet other than that
contained in sections 10.1 and 10.2.
Sullivan & Cromwell LLP has prepared the tax information contained in sections 10.3 and
10.4, and is of the opinion that insofar as such sections purport to describe or summarise
the provisions of United States federal income tax law applicable to United States Scheme
Participants and of United Kingdom tax law applicable to UK Scheme Participants, the
statements set forth under the captions “United States taxation implications” and “United
Kingdom taxation implications” are accurate in all material respects. None of LGL, Newcrest,
their respective Related Bodies Corporate or the directors, officers, employees or advisers
of any of those entities otherwise assumes any responsibility for the accuracy or
completeness of the information contained in section 10.3 or section 10.4, except to the
extent that LGL or Newcrest (as applicable) or their respective Related Bodies Corporate or
directors, officers, employees or advisers have provided Sullivan & Cromwell with
information for the purpose of Sullivan & Cromwell preparing the tax information contained
in that section. Sullivan & Cromwell does not assume any responsibility for the accuracy or
completeness of the information contained in this Scheme Booklet other than that contained
in sections 10.3 and 10.4.
Forward-looking statements
This Scheme Booklet contains both historical and forward-looking
statements. All statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements.
All forward-looking statements in this Scheme Booklet reflect the current expectations of
LGL or Newcrest (as applicable) concerning future results and events and may generally be
identified by the use of forward-looking words such as “believe”, “aim”, “expect”,
“anticipate”, “intend”, “foresee”, “likely”, “should”, “planned”, “may”, “estimate”,
“potential”, “target”, or other similar words. Similarly, statements that describe LGL’s,
Newcrest’s or the Merged Group’s objectives, plans, goals or expectations are or may be
forward-looking statements. The Merged Group does not come into existence until the Scheme
is implemented. For this reason, all statements in this Scheme Booklet concerning the Merged
Group are forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties and
other factors concerning LGL or Newcrest (as applicable). These factors may cause LGL’s,
Newcrest’s or, if the Scheme is implemented, the Merged Group’s actual results, performance
or achievements to differ materially from the anticipated results, performance or
achievements expressed, projected or implied by these forward-looking statements.
The operations and financial performance of LGL, Newcrest and, if the Scheme is implemented,
the Merged Group, are subject to various risks which may be beyond the control of LGL,
Newcrest or the Merged Group (as applicable). As a result, LGL’s, Newcrest’s and, if the
Scheme is implemented, the Merged Group’s actual operational and earnings results, as well
as the actual advantages of the Scheme, may differ materially from those that are
anticipated in respect of timing, amount or nature, and may never be achieved. Certain risks
that LGL, Newcrest and, if the Scheme is implemented, the Merged Group are or will be
subject to are summarised in this Scheme Booklet (see sections 7.8, 9.5 and 9.6).
The forward-looking statements included in this Scheme Booklet do not, among other
things, take account of any movements in gold, copper or silver prices, changes in other
relevant commodity prices, exchange rate volatility, movements in interest rates or changes
in economic activity in relevant markets. Neither LGL nor Newcrest are making any
predictions or forecasts about these prices, risks or other factors and the impact that they
might have on the operations and performance of LGL, Newcrest or, if the Scheme is
implemented, the Merged Group.
The forward-looking statements included in this Scheme Booklet are made only as at the
date of this Scheme Booklet. None of LGL, Newcrest, their respective Related Bodies
Corporate, the directors, officers, employees or advisers of any of those entities, any
persons named in this Scheme Booklet with their consent or any person involved in the
preparation of this Scheme Booklet makes any representation or warranty (express or implied)
as to the likelihood of the fulfilment of any forward-looking statement included or referred
to in this Scheme Booklet, or any events or results expressed or implied in any such
forward-looking statement. LGL Shareholders are cautioned not to place undue reliance on any
forward-looking statement included or referred to in this Scheme Booklet.
To the extent that either LGL or Newcrest has provided forward-looking information which has
been used by the Independent Expert or the Independent Technical Specialist in forming the
conclusions and opinions expressed in the Independent Expert’s Report or the Independent
Technical Specialist’s Report, any forward-looking statements in that information were made
only as at the date that it was provided. Neither LGL nor Newcrest makes any representation
or warranty (express or implied) as to the likelihood of the fulfilment of any events or
results expressed or implied in such forward-looking information that they have respectively
provided. LGL Shareholders are cautioned that the Independent Expert and Independent
Technical Specialist may have used this information as the basis on which they formed
conclusions or their opinion and LGL Shareholders should therefore not place undue reliance
on any conclusion or opinion where this was the case.
1
LGL Shareholders should carefully review all of the information in this Scheme Booklet.
Sections 1.1 and 6.1 set out the reasons to vote in favour of the Scheme and sections 1.2
and 6.2 set out the reasons not to vote in favour of the Scheme. Sections 9.5 and 9.6 set
out some of the risks associated with an investment in the Merged Group.
All subsequent written and oral forward-looking statements attributable to LGL or Newcrest
are qualified by this cautionary statement.
Subject to any continuing obligations under the Listing Rules, the Australian Corporations
Act or the PNG Companies Act, none of LGL, Newcrest, nor, if the Scheme is implemented, the
Merged Group give any undertaking to update or revise any forward-looking statements
included in this Scheme Booklet after the date of this Scheme Booklet to reflect any change
in expectations in relation to any such statements thereto or any change in events,
conditions or circumstances on which any such statements are based.
United States LGL Shareholders
This Scheme Booklet is neither an offer to sell nor a
solicitation of an offer to buy securities as such terms are defined under the US Securities
Act. The New Newcrest Shares to be issued under the Scheme have not been and will not be
registered under the US Securities Act.
Newcrest and LGL intend to rely on an exemption from the registration requirements of the US
Securities Act provided by Section 3(a)(10) of that Act in connection with the
implementation of the Scheme and the issue of New Newcrest Shares. Approval of the Scheme by
the Court will be relied upon by Newcrest and LGL for the purpose of qualifying for the
Section 3(a)(10) exemption.
None of the SEC, any US state securities commission or any other US regulatory authority has
passed comment upon or endorsed the merits of the Scheme or the accuracy, adequacy or
completeness of this Scheme Booklet. Any representation to the contrary may be a criminal
offence.
See sections 14.14(b) and 15.15 for further information relating to United States
shareholders.
Other overseas LGL Shareholders
An LGL Shareholder whose address, as shown in the LGL
Register, is in a jurisdiction other than PNG, Australia (and its external territories) or
the United States should refer to section 14.14.
LGL ADS holders
Holders of LGL ADSs should refer to section 14.15.
Glossary and defined terms
Capitalised terms used in this Scheme Booklet have special
meanings. These are listed in the Glossary at the back of this Scheme Booklet. Each of the
documents reproduced in some of the attachments to this Scheme Booklet has its own defined
terms, which are sometimes different from those in the Glossary.
LGL Shareholder information line
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.
References to time
Unless otherwise stated in this Scheme Booklet, a reference to time or a
calendar date in this Scheme Booklet is a reference to the local time or calendar date in
Port Moresby, PNG.
Rounding
A number of figures, amounts, percentages, prices, estimates, calculations of value
and fractions in this Scheme Booklet, including but not limited to those in respect of the
Scheme Consideration, are subject to the effect of rounding (unless otherwise stated).
Accordingly, the actual calculation of these figures may differ from the figures set out in
this Scheme Booklet, and any discrepancies in any table between totals and sums of amounts
listed in that table or to previously published figures are due to rounding.
Currency
Unless otherwise stated in this Scheme Booklet, all references in this Scheme
Booklet to:
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“cash”, “A$”, “AUD”, “Australian dollars” and “cents” are to Australian currency;
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“US$”, “USD” and “US dollars” are to United States currency; and
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“K” or “PNG kina” are to PNG currency.
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Certain amounts are expressed in US dollars in this Scheme Booklet as a consequence of the
fact that LGL’s financial accounts are prepared in US dollars and because Newcrest plans to
change its presentation currency from Australian dollars to US dollars once the Scheme has
been implemented.
Date at which information is stated
Unless otherwise stated in this Scheme Booklet, the
information contained in this Scheme Booklet is stated as at 22 July 2010.
Unless otherwise stated in this Scheme Booklet, all data contained in charts, graphs and
tables in this Scheme Booklet is based on information available as at the date of this
Scheme Booklet.
CONTENTS
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IMPORTANT NOTICES
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IFC
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IMPORTANT DATES
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2
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LETTER FROM THE CHAIRMAN OF LGL
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3
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LETTER FROM THE CHAIRMAN OF NEWCREST
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6
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1
REASONS TO VOTE IN FAVOUR OF OR
AGAINST THE SCHEME
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8
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2
SCHEME HIGHLIGHTS
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11
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3
HOW TO VOTE
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15
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4
FREQUENTLY ASKED QUESTIONS
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17
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5
SUMMARY OF THE SCHEME
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32
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6
MATTERS RELEVANT TO THE VOTE ON
THE SCHEME
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42
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7
PROFILE OF LGL
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58
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8
PROFILE OF NEWCREST
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79
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9
PROFILE OF THE MERGED GROUP
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111
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10
AUSTRALIAN, PNG, US AND UK TAXATION
IMPLICATIONS
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126
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11
INDEPENDENT EXPERT’S REPORT
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133
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12
INDEPENDENT TECHNICAL
SPECIALIST’S REPORT
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284
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13
INVESTIGATING ACCOUNTANT’S REPORT
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373
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14
IMPLEMENTATION OF THE SCHEME
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385
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15
ADDITIONAL INFORMATION
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394
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16
GLOSSARY
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415
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ATTACHMENTS
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A
NOTICE OF MEETING
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423
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B
MERGER IMPLEMENTATION AGREEMENT
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427
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C
SCHEME OF ARRANGEMENT
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454
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D
DEED POLL
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474
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IMPORTANT
DATES
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Date
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Event
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Thursday, 12 August 2010
at 5.00pm, New York time
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Latest time for LGL ADS holders to deliver voting instructions to the
LGL ADS Depositary.
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Saturday, 21 August 2010
at 11.00am
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Latest time for lodgement of Proxy Forms with the LGL Registry.
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Saturday, 21 August 2010
at 7.00pm
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Date and time for determining eligibility to vote at the Scheme Meeting.
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Monday, 23 August 2010
at 11.00am
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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.
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Friday, 27 August 2010
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Second Court Hearing
for approval of the Scheme by the Court.
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Friday, 27 August 2010,
New York time
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LGL ADSs are suspended from trading at the close of trading
on NASDAQ.
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Monday, 30 August 2010
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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.
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Tuesday, 31 August 2010
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New Newcrest Shares commence trading on ASX and POMSoX on
a deferred settlement basis.
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Tuesday, 31 August 2010
at 5.00pm, New York time
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Latest time for LGL ADS holders to deliver a Scheme Consideration
election to the LGL ADS Depositary.
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Monday, 6 September 2010
at 7.00pm
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Record Date
Determination of entitlements to the Scheme Consideration.
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Monday, 6 September 2010
at 9.00pm
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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.
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Monday, 13 September 2010
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Implementation Date
All Scheme Shares transferred to Newcrest.
Scheme Consideration provided to Scheme Participants by Newcrest
in accordance with the Scheme.
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Tuesday, 21 September 2010
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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.
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All dates following the Scheme Meeting are indicative only and, among other things, are
subject to all necessary approvals from the Court and other Governmental Agencies. Any
changes to the above timetable will be announced through ASX, POMSoX and NASDAQ and notified
on LGL’s website at www.lglgold.com.
Except as otherwise stated, the dates and times above are references to calendar dates and
time in Port Moresby, PNG.
3
LETTER FROM THE
CHAIRMAN OF LGL
22 July 2010
Dear Fellow Shareholder
Background
On 4 May 2010, the boards of Lihir Gold Limited (
LGL
) and Newcrest Mining Limited (
Newcrest
)
announced that the companies had entered into a Merger Implementation Agreement (
MIA
).
Under the MIA, LGL agreed to propose a Scheme to LGL Shareholders, which if approved by LGL
Shareholders at the Scheme Meeting and by the Court, will result in Newcrest acquiring all
of the LGL Shares.
Under the Scheme, LGL Shareholders will receive one New Newcrest Share for every 8.43 LGL
Shares they own, plus A$0.225 cash per LGL Share, subject to a mix and match facility
described below (
Scheme Consideration
).
LGL Directors’ recommendation
The LGL Directors unanimously recommend that LGL Shareholders vote in favour of the
Scheme, in the absence of a Superior Proposal. 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.
The LGL Board commissioned Grant Samuel & Associates Pty Limited (
Independent Expert
)
to prepare an Independent Expert’s Report on the Scheme. The LGL Directors’ recommendation
is supported by the Independent Expert’s conclusion that “the Proposal is in the best
interests of LGL Shareholders, in the absence of a superior proposal”.
Implied premium received by LGL Shareholders
Based on the closing price of Newcrest Shares of A$32.06 on 3 May 2010 (being the last
trading day prior to the date of the announcement by LGL and Newcrest that they had entered
into the MIA (
Announcement Date
)), the implied value of the Scheme Consideration was A$4.03
per LGL Share. This represented a 33.3% premium to the one month volume weighted average
price of LGL Shares to 31 March 2010 (being the last trading day prior to LGL announcing it
had rejected a proposal from Newcrest, which it received on 29 March 2010). Based on this
measure, the Scheme Consideration represents a substantial premium for LGL Shareholders.
Based on the closing price of Newcrest Shares of A$33.31 on 21 July 2010 (being the last
trading day prior to the date of this Scheme Booklet), the implied value of the Scheme
Consideration is A$4.18 per LGL Share.
With regard to the premium offered, the Independent Expert noted, that between the
announcement of Newcrest’s approach on 1 April 2010 and 13 July 2010, Newcrest shares
underperformed global gold equities (in US$ terms) by around 10%, potentially reflecting
amongst other factors the fall in the copper price over that period. Furthermore, the
Independent Expert believes that, in the absence of Newcrest’s proposal, LGL’s 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 Scheme Consideration, the premium remains significant.
LGL Shareholders should also 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.
There are also several other reasons your directors continue to unanimously
recommend that LGL Shareholders vote in favour of the Scheme in the absence of a Superior
Proposal.
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Letter from the Chairman of LGL continued
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Other reasons for directors’ recommendation
You should read section 6 of this Scheme Booklet carefully as it sets out other
considerations relevant to the decision of your directors in recommending the Scheme. In
this regard, it is important to note that, among other things, LGL Shareholders can receive
share consideration under the Scheme which enables them, should they wish to do so, to
maintain an exposure to LGL’s existing operations and participate in the strategic and
financial benefits of the Merged Group, including benefits arising from a larger and more
diversified portfolio. The LGL Board believes LGL’s and Newcrest’s portfolios are
strategically and operationally complementary.
In assessing and recommending the Scheme, the LGL Board evaluated the benefits of LGL
continuing as a standalone entity against other strategic alternatives; these are more fully
discussed at section 6.2. The LGL Board had taken steps to strengthen management and
strategic focus with a view to increasing significantly the standalone value of the company.
The improvements would take time, and inevitably involve some risk. On 1 April 2010, the
LGL Board announced that it had rejected an offer from Newcrest dated 29 March 2010 after
weighing up the risks and benefits of remaining independent against those of accepting
Newcrest’s merger proposal. The LGL Board responded to a further improved offer from
Newcrest on 4 May 2010 when it announced the recommendation of the higher offer to LGL
Shareholders subject to the opinion of an independent expert and in the absence of a
superior proposal.
This improved offer by Newcrest included a number of measures more favourable for LGL
Shareholders than the previously rejected offer including an improved ratio of Newcrest
shares in exchange for LGL shares, less conditionality of terms in the Merger Implementation
Agreement and the ability to continue a process that had the best possible chance of
maximising shareholder value. As part of this and as permitted by the Merger Implementation
Agreement, LGL has undertaken a competitive sale process, under which it provided a number
of large global gold companies with access to an extensive data room following Newcrest’s
approach. The LGL Board notes that while no competing proposal has been received to date,
an alternative offer could be made at any time until the completion of the transaction. If a
third party approaches LGL with a competing proposal after the date of this Scheme Booklet,
the LGL Directors will conscientiously consider it where the fiduciary or statutory duties
of the LGL Directors require them to do so.
In deciding that it should recommend the improved Newcrest offer to 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.
Independent Expert’s conclusion
The Independent Expert’s Report, set out in section 11 of this Scheme Booklet,
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:
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the relative contributions of LGL and Newcrest to the combined entity;
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the estimated value of the Scheme Consideration (which the Independent Expert estimates to
be A$4.20–A$4.32 per LGL Share based on Newcrest’s recent trading prices) compared to the
underlying value of LGL, which the Independent Expert estimates to be
A$4.28–A$4.83 per LGL
Share;
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•
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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;
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•
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in this regard, the Independent Expert notes that, on one view, LGL’s competitive sale
process described above will provide the best possible evidence of LGL’s current underlying
value. If LGL’s 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
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•
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the Independent Expert’s 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.
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Lihir Gold Limited Scheme Booklet
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5
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Furthermore, the Independent Expert is of the view that LGL’s Share price is likely to fall,
potentially significantly, if the proposal does not proceed (in the absence of an
alternative proposal).
As part of assessing whether the Scheme was in the best interests of LGL shareholders, the
Independent Expert’s terms of reference included consideration of the possible effect of the
proposed Resource Super Profits Tax on Newcrest. However, it is now clear that the Minerals
Resource Rent Tax, which has replaced the proposed Resource Super Profits Tax, will not
apply to Newcrest’s operations.
The LGL Board agrees with the conclusion of the Independent Expert that the Newcrest
offer is in the best interests of LGL Shareholders, in the absence of a Superior Proposal.
Scheme Consideration choices
The Scheme has been structured to enable Newcrest to provide a limited mix and match
facility to provide LGL Shareholders with greater flexibility with respect to the form of
Scheme Consideration they will receive. For details of the Scheme Consideration alternatives
available to LGL Shareholders, please refer to section 5.4 of this Scheme Booklet. Depending
on the Scheme Consideration elections made by LGL Shareholders under the limited mix and
match facility, LGL Shareholders will own approximately 35.5% to 36.8% of the Merged Group
once the Scheme has been implemented.
The LGL Directors unanimously recommend that LGL Shareholders elect to receive either
the Mixed Consideration or the Maximum Share Consideration. This will allow shareholders to
retain diluted exposure to the potential upside in the value of the LGL assets that are
being sold into Newcrest.
Scheme Meeting
The Scheme can only be implemented if it is approved by the Required Majority of LGL
Shareholders at the Scheme Meeting to be held at 11.00am on Monday, 23 August 2010 at
Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port
Moresby, Papua New Guinea and if it is subsequently approved by the Court. LGL Shareholders
do not need to attend the Scheme Meeting in person to vote, as their vote can be made by
proxy. A Proxy Form is enclosed with this Scheme Booklet and if LGL Shareholders wish to
vote by proxy they must return the completed Proxy Form to the LGL Registry by post at
Computershare Investor Services Pty Limited, GPO Box 52, Melbourne, Victoria 3001,
Australia, or by facsimile on 1800 268 260 (within Australia) or +61 3 9473 2083 (outside
Australia) no later than 11.00am on Saturday, 21 August 2010.
I encourage each LGL Shareholder to exercise their right to vote. I urge LGL Shareholders to
read the Scheme Booklet, including the Independent Expert’s Report, in full. 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.
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 contact 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.
Yours sincerely
Ross Garnaut
Chairman
Lihir Gold Limited
6
LETTER FROM THE
CHAIRMAN OF NEWCREST
22 July 2010
Dear LGL Shareholder
The Newcrest Board is very pleased to provide you with the opportunity to participate
in the combination of Newcrest and LGL, creating Asia Pacific’s leading gold producer.
We firmly believe the combination will be beneficial for shareholders in both Newcrest and
LGL. We encourage you to:
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read this Scheme Booklet in full;
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vote in favour of the Scheme at the Scheme Meeting; and
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consider your preferences for the mix and match elections and elect to receive either the
Maximum Share Consideration or Mixed Consideration.
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The Scheme is unanimously recommended by your LGL Directors, in the absence of a
Superior Proposal. The Independent Expert also concludes that, in the absence of a superior
proposal, the scheme is in the best interests of LGL Shareholders. The Independent Expert
notes there are strong grounds to conclude that in the absence of a superior proposal
arising as a result of LGL’s formal process to solicit alternative offers the consideration
is the highest available to LGL Shareholders and on this basis, the consideration represents
full underlying value and the proposal is fair and reasonable.
Newcrest today is Australia’s largest independent gold company and one of the world’s major
gold producers, with a significant and world-class suite of assets with major growth
potential located in Australia, PNG, Indonesia and Fiji. It is one of the lowest cost
producers in the global gold industry, has an outstanding record in exploration and mine
development, and is a recognised leader in the disciplines of bulk-surface and underground
mining. Newcrest also has a highly experienced and well regarded management team.
Pursuant to the Scheme, LGL Shareholders will receive a significant premium for their LGL
Shares and, by choosing to receive New Newcrest Shares, will become shareholders in the
fourth largest gold company in the world by market capitalisation,
1
with a
diversified portfolio of assets and attractive growth options. Further, by receiving the New
Newcrest Shares, LGL Shareholders will be entitled to receive any Newcrest dividend with a
record date which is after the Implementation Date. This is expected to include the Newcrest
2009–10 final dividend.
In addition, eligible Australian and UK LGL Shareholders should be able to obtain roll-over
relief and defer any capital gains tax liability in relation to the share-based component of
the Scheme Consideration they receive for their LGL Shares.
Note
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1
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Based on the pro forma market capitalisation of A$25.5 billion of both companies as at 21 July 2010.
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Lihir Gold Limited Scheme Booklet
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7
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Newcrest believes the companies fit together extremely well, including strategically and
operationally. The combination should deliver significant value enhancement for all
shareholders through cost reductions, sharing knowledge, productivity improvements and a
greater capacity to capture and execute future opportunities. Following implementation of
the Scheme, Newcrest intends to conduct a strategic review of the combined companies’
strategy, portfolio of exploration tenements, projects and operations and functional
capabilities with a view to maximising value to shareholders. Subject to this review,
Newcrest’s intention is to continue with the current LGL operational commitments for Lihir
Island, Mount Rawdon and Bonikro mines and to maintain existing development and exploration
programs. Like LGL, Newcrest is also strongly committed to investing in, and working with,
local communities in all places in which we operate. This is consistent with Newcrest’s own
safety, environmental and community standards.
The Australian Government’s recent decision to replace the proposed Resource Super
Profits Tax with a Minerals Resource Rent Tax — which will not apply to Newcrest’s
operations — together with a proposed reduction in the corporate tax rate from 1 July 2013,
are positive for Newcrest and the Merged Group.
On behalf of the Newcrest Board, I encourage you to vote in favour of the Scheme at the
Scheme Meeting on 23 August 2010. We look forward very much to welcoming you as a
shareholder of the Merged Group.
Yours sincerely
Don Mercer
Chairman
Newcrest Mining Limited
8
REASONS TO VOTE
IN FAVOUR OF OR
AGAINST THE SCHEME
1
Set out below is a summary of some of the reasons why the LGL Board considers that LGL
Shareholders should vote in favour of the Scheme. These are addressed in more detail in
section 6.1. Set out below is also a summary of some of the reasons why LGL Shareholders may
decide to vote against the Scheme. These are addressed in more detail in section 6.2. LGL
Shareholders should read the entire Scheme Booklet before deciding whether or not to vote in
favour of the Scheme.
While the LGL Directors acknowledge reasons to vote against the Scheme, they believe the
advantages of the Scheme significantly outweigh the disadvantages.
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1.1
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Reasons to vote in favour of the Scheme
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ü
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The LGL Directors
unanimously recommend that LGL Shareholders vote in favour
of the
Scheme, in the absence of a Superior Proposal.
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ü
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The Independent Expert has concluded that “the Proposal is in the best interests of LGL
Shareholders, in the absence of a superior proposal”.
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ü
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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$4.03 per LGL Share, which represents:
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a
32.9%
premium to the closing price of LGL Shares on ASX on 31 March 2010, being the last
ASX Trading Day prior to LGL announcing it had rejected a proposal from Newcrest (which it
received on 29 March 2010);
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a
33.3%
premium to the one month VWAP of the LGL Shares traded on ASX to 31 March 2010;
and
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a
35.4%
premium to the three month VWAP of LGL Shares traded on ASX to 31 March 2010.
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With regard to the premium offered, the Independent Expert noted that between the announcement of
Newcrest’s approach on 1 April 2010 and 13 July 2010, Newcrest’s shares underperformed
global gold equities (in US$ 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 Newcrest’s 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.
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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.
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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.
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ü
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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:
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Asia Pacific’s largest gold company and one of the world’s largest gold companies;
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diversified portfolio of world-class assets;
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attractive growth profile;
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lowest quartile position on the global cash cost curve;
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increased scale, financial strength and access to debt to capture future large-scale
growth opportunities;
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potential synergies;
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•
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strong operational and management capabilities to drive further value opportunities; and
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increased liquidity of Newcrest Shares and potential for upward re-rating of Newcrest as a
result of increased scale.
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Lihir Gold Limited Scheme Booklet
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9
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ü
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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.
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1.2
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Reasons to vote against the Scheme
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û
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LGL Shareholders may
not agree with the LGL Directors’ unanimous recommendation or the Independent Expert’s conclusion.
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û
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The Merged Group will be subject to
a number of risks to which LGL is not currently exposed.
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Newcrest anticipates that these risks will include:
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exposure to the market price of copper;
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exposure to foreign exchange risk in countries where LGL does not have existing operations such as Indonesia and Fiji;
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indebtedness of Newcrest following the implementation of the Scheme;
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Newcrest may not meet its goals for production and operating costs and its development
plans may not be realised;
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exposure to the exploration and new project uncertainty of the Newcrest operations;
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integration risks associated with the merger of the Newcrest and LGL businesses; and
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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.
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Further details of these risks can be found in sections 9.5 and 9.6.
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û
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LGL Shareholders may prefer LGL to be exposed to the opportunity for increased value from
remaining as a
standalone entity.
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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.
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In assessing and recommending the Scheme, the LGL Board evaluated the benefits of LGL
continuing as a standalone entity against other strategic alternatives.
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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.
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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).
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û
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LGL Shareholders may prefer to
hold shares in a pure gold company.
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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.
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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.
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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.
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Note
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1
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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.
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1
Reasons to vote in favour of or against the Scheme continued
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10
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û
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LGL Shareholders may consider that
a proposal
which is more attractive for LGL Shareholders
may materialise in the future.
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The implementation of the Merger would mean that LGL Shareholders will not obtain the
benefit of any such proposal.
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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
Newcrest’s approach. As at the date of this Scheme Booklet, the LGL Board has not received a
Competing Proposal.
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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.
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11
SCHEME
HIGHLIGHTS
2
The information contained in this section is a summary only. LGL Shareholders should read the
entire Scheme Booklet before deciding whether or not to vote in favour of the Scheme.
Who is Newcrest?
Newcrest is a major Australian-based explorer for, and producer of, gold. In addition to
gold production, Newcrest also produces a significant amount of copper and some silver.
Newcrest is Australia’s largest independent gold producer and one of the world’s top ten
gold mining companies by production, reserves and market capitalisation. As at 21 July 2010,
it had a market capitalisation of A$16.1 billion.
Further information on Newcrest is available in section 8.
Scheme Consideration
If the Scheme is implemented, Scheme Participants will receive the Scheme Consideration for
the transfer of their LGL Shares held at the Record Date.
Newcrest will also provide a limited mix and match facility, giving Scheme Participants
greater flexibility in relation to the form of Scheme Consideration they will receive (see
section 5.4).
Scheme Participants whose 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 People’s Republic of China, Indonesia, France, Japan, Ireland or Switzerland,
may not be able to receive New Newcrest Shares under the Scheme. Further information is set
out in section 14.14.
Each Scheme Participant will be given the opportunity to elect to receive their Scheme
Consideration in one of the following forms by lodging an Election Form with the LGL
Registry, or by logging on to the LGL website at www.lglgold.com and following the relevant
instructions by 9.00pm on 6 September 2010:
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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
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•
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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
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•
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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).
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The LGL Directors unanimously recommend that LGL Shareholders elect to receive either
the Mixed Consideration or the Maximum Share Consideration.
If a Scheme Participant does not make a Scheme Consideration election (or that Scheme
Consideration election is not valid) they will be deemed to have elected the Maximum Share
Consideration.
The Maximum Cash Consideration and the Maximum Share Consideration alternatives are
subject, respectively, to a maximum total Cash Consideration of A$1.0 billion and a maximum
total Share Consideration of 280,988,130 New Newcrest Shares.
1
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Note
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1
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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.
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2
Scheme highlights continued
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12
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To the extent that Maximum Share Consideration elections or Maximum Cash Consideration
elections cannot be satisfied in full within these maximum cash and share amounts (after
having satisfied all Mixed Consideration elections), they will be scaled back on a pro-rata
basis (see section 5.4 for further information).
Before making a Scheme Consideration election, Scheme Participants should consider their
personal tax position and other circumstances. If Scheme Participants are in any doubt about
what they should do or anything in this Scheme Booklet, they should consult with their
legal, investment, taxation or other professional adviser without delay.
In the case of holders of LGL ADSs, the LGL ADS Depositary, as the registered holder of the
relevant LGL Shares, and subject to the terms of the LGL ADS Deposit Agreement, will vote
and will make Scheme Consideration elections in accordance with instructions it receives
from LGL ADS holders in connection with the Scheme. If the Scheme is implemented, the LGL
ADS Depositary will receive the Scheme Consideration on behalf of LGL ADS holders, and will
distribute that Scheme Consideration to LGL ADS holders, after deduction or upon payment of
the fees and expenses of the LGL ADS Depositary. To the extent that the LGL ADS Depositary
does not make a Scheme Consideration election on behalf of some or all of the LGL ADSs (or
that Scheme Consideration election is not valid), it will be deemed to have elected the
Maximum Share Consideration (subject to scale-back) for all LGL ADSs.
The Share
Consideration will be issued in the form of New Newcrest Shares (subject to scale-back) to
the LGL ADS Depositary. The LGL ADS Depository will then deposit those New Newcrest Shares
for issuance of the corresponding number of Newcrest ADSs to the LGL ADS holders. If LGL ADS
holders wish to receive New Newcrest Shares instead of Newcrest ADSs, they will need to
instruct the LGL ADS Depository to cancel their LGL ADSs (in the manner, and prior to the
time, advised by the LGL ADS Depository) and participate directly in the Scheme as an LGL
Shareholder.
The LGL ADS Depositary will vote the number of LGL Shares underlying an LGL ADS in
accordance with instructions from holders of such ADSs. To the extent the LGL ADS Depositary
does not receive instructions, it may, if LGL so requests, vote the LGL Shares in accordance
with instructions from LGL.
In the United States, LGL ADSs will be delisted from NASDAQ following implementation of the
Scheme, and Newcrest has stated that it does not intend to list its ADRs on NASDAQ or any
other US national securities exchange after the Scheme becomes Effective.
Information regarding the Scheme and how LGL ADS holders will be able to participate in the
Scheme will be sent to LGL ADS holders by the LGL ADS Depositary. See section 14.15 for
additional information.
Small holdings of New Newcrest Shares
An LGL Shareholder may also 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 otherwise would have received will be
issued to the Sale Agent. The Sale Agent will sell those New Newcrest Shares on-market,
together with all the New Newcrest Shares which the Ineligible Overseas Shareholders and
other Electing Unmarketable Parcel Shareholders would otherwise receive, and remit the gross
proceeds of that sale to Newcrest. Newcrest will then remit the proportionate proceeds from
that sale to the LGL Shareholder, without deduction of any brokerage costs, out of pocket
expenses, stamp duty or taxes, other than withholding tax or other deductions of 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.
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Lihir Gold Limited Scheme Booklet
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13
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Interest in the Merged Group
The implementation of the Scheme will result in LGL Shareholders as a whole receiving
New Newcrest Shares representing between approximately 35.5%
1
and
36.8%
2
of the total issued capital of the Merged Group (depending on Scheme
Consideration elections under the limited mix and match facility). Each Scheme Participant
who is issued New Newcrest Shares as part of their Scheme Consideration will become a
Newcrest Shareholder.
Directors’ recommendation
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.
Independent Expert’s 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:
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the relative contributions of LGL and Newcrest to the Merged Group;
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•
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the estimated value of the Scheme Consideration (which the Independent Expert estimates to be
A$4.20–A$4.32 per LGL share based on Newcrest’s recent trading prices) compared to the
underlying value of LGL, which the Independent Expert estimates to be
A$4.28–A$4.83 per
share;
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•
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|
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;
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|
|
|
|
•
|
|
in this regard, the Independent Expert notes that, on one view, LGL’s competitive
sale process described above will provide the best possible evidence of LGL’s current
underlying value. If LGL’s 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 Expert’s 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 LGL’s share price is likely to fall,
potentially significantly, if the proposal does not proceed (absent an alternative
proposal).
No brokerage or stamp duty payable
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 them of their 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.
LGL ADS holders should refer to section 14.15 of this Scheme Booklet for information on fees
applicable to them.
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Notes
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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.
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2
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|
36.8% ownership is based on the minimum total amount of cash that may be paid by Newcrest
of A$533 million.
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2
Scheme highlights continued
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14
|
No Superior Proposal
The terms of the Merger Implementation Agreement permitted LGL, prior to the
commencement of the Exclusivity Period, to enter into, continue or participate in any
negotiation, discussion, arrangement or understanding with a third party in connection with
a possible LGL Control Transaction which was not solicited, invited or initiated by LGL
after the date of the Merger Implementation Agreement. The Exclusivity Period commenced on
8 June 2010. Further details of the exclusivity arrangements contained in the Merger
Implementation Agreement are set out in section 15.16. No Superior Proposal has emerged from
those discussions as at the date of this Scheme Booklet.
Although no Competing Proposal has
been received to date, if a third party approaches LGL with a Competing Proposal after the
date of this Scheme Booklet, the LGL Directors will conscientiously consider it where the
fiduciary or statutory duties of the LGL Directors require them to do so.
The Independent Expert has concluded 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.
3
3.1 Read this document carefully
This Scheme Booklet provides information necessary for LGL Shareholders to make a decision whether
or not to vote in favour of the Scheme at the Scheme Meeting. The LGL Directors recommend LGL
Shareholders read this Scheme Booklet in its entirety.
The Scheme is subject to various conditions precedent, including the approval of LGL Shareholders
and the approval of the Court.
LGL Shareholders are being asked to approve the Scheme at the Scheme Meeting to be held at
Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets, Port Moresby,
Papua New Guinea on 23 August 2010 at 11.00am.
The Scheme cannot be implemented unless it is approved by the Required Majority of LGL Shareholders
at the Scheme Meeting. The Required Majority 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.
If the Scheme is approved by LGL Shareholders at the Scheme Meeting, LGL will make an application
to the Court to approve the Scheme at the Second Court Hearing.
LGL ADS holders should refer to section 14.15 of this Scheme Booklet for information applicable to them.
3.2 Exercising voting rights
LGL Shareholders may vote by attending the Scheme Meeting in person, by proxy, by attorney or, in
the case of corporate LGL Shareholders, may vote by way of a corporate representative.
3.3 Voting in person
To vote in person at the Scheme Meeting, LGL Shareholders must attend the Scheme Meeting to be held
on
23 August 2010 at Ballrooms 1 and 2, the Crowne Plaza Hotel, Corner of Hunter and Douglas Streets,
Port Moresby,
Papua New Guinea. The meeting is scheduled to commence at 11.00am.
An LGL Shareholder attending the Scheme Meeting in person where the LGL Shareholder is entitled to
attend and vote will be admitted to the Scheme Meeting and given a voting card upon providing
written evidence of their name and address at the point of entry to the Scheme Meeting.
3.4 Voting by proxy
If an LGL Shareholder wishes to appoint a proxy in respect of the Scheme Meeting, they must
complete and sign the Proxy Form sent to them with this Scheme Booklet. Replacement forms can be
obtained by contacting the LGL Shareholder information line on 1300 749 597 (within Australia) and
+61 3 9415 4665 (from outside of Australia) between 8.30am and 5.00pm (Australian Eastern Standard
Time) Monday to Friday.
Replacement proxy forms can be downloaded in pdf format by visiting www.investorcentre.com and
logging in and following the command prompts.
Proxy Forms should be sent to the LGL Registry using the reply paid envelope provided, or as
indicated in the Proxy Form. LGL Shareholders resident outside of Australia will need to affix the
appropriate postage.
Proxy Forms must be received by the LGL Registry 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).
A proxy will be admitted to the Scheme Meeting and given a voting card upon providing written
evidence of their name and address at the point of entry to the Scheme Meeting.
The sending of a Proxy Form will not preclude an LGL Shareholder from attending in person and
voting at the Scheme Meeting at which the LGL Shareholder is entitled to attend and vote (in which
case their proxy will be revoked).
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3
How to vote continued
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16
|
3.5 Voting by attorney
Original or certified copies of the powers of attorney and authorities should be sent to the LGL
Registry using the reply paid envelope provided, or as indicated in the Proxy Form.
Powers of attorney must be received by the LGL Registry 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 attorney will be admitted to the Scheme Meeting and given a voting card upon providing written
evidence of their appointment, their name and address and the identity of their appointor at the
point of entry to the Scheme Meeting.
The sending of a power of attorney will not preclude an LGL Shareholder from attending in person
and voting at the Scheme Meeting at which the LGL Shareholder is entitled to attend and vote, but
only one of the LGL Shareholder or their attorney can both attend and vote.
3.6 Voting by corporate representative
To vote at the meeting (other than by proxy or attorney), a corporate LGL Shareholder must appoint
a person to act as its representative. A corporate LGL Shareholder may appoint a representative to
attend a meeting of LGL Shareholders on its behalf in the same manner as that in which it could
appoint a proxy. The appointment must comply with Rule 13.11 of the LGL Constitution.
An appointment of a corporate representative must be received by the LGL Registry 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 authorised corporate representative will be admitted to the Scheme Meeting and given a voting
card upon providing written evidence of their appointment including any authority under which it is
signed, their name and address and the identity of their appointor at the point of entry to the
Scheme Meeting.
3.7 Voting entitlement
Each LGL Shareholder who is registered on the LGL Register at 7.00pm on 21 August 2010 is entitled
to attend and vote at the Scheme Meeting, whether in person, by proxy, by attorney or, in the case
of corporate LGL Shareholders, by a corporate representative. Registrable transmission applications
or transfers registered after this time will be disregarded in determining entitlements to attend
and vote at the Scheme Meeting.
In the case of LGL Shares held by joint shareholders, only one of the joint shareholders is
entitled to vote. If more than one shareholder votes in respect of jointly held LGL Shares, only the
vote of the shareholder whose name appears first in the LGL Register at 7.00pm on 21 August 2010
will be counted.
Any LGL Shareholder who is not registered on the LGL Register at 7.00pm on 21 August 2010 will not
be entitled to vote at the Scheme Meeting.
3.8 Share splitting
If Newcrest reasonably believes that a Scheme Participant has dealt with LGL Shares (including
splitting or dividing a shareholding) in an attempt to obtain an advantage by reference to the
rounding provided for in the calculation of that Scheme Participant’s Scheme Consideration, then
Newcrest reserves the right to adjust that Scheme Participant’s Scheme Consideration so as to
provide only the number of New Newcrest Shares that would have been received but for the dealing.
3.9 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) and +61 3 9415 4665 (from outside of 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.
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FREQUENTLY ASKED QUESTIONS
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17
|
4
This section includes brief answers to some frequently asked questions about the Scheme and its
implementation. It is not intended to address all issues relevant for LGL Shareholders and should
be read together with all other sections of this Scheme Booklet.
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|
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.
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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.
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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.
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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.
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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.
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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;
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•
in consideration each Scheme Participant (whether or not they voted in
favour of or against the Scheme) will receive their Scheme Consideration;
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•
LGL will become a wholly-owned subsidiary of Newcrest; and
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•
LGL will subsequently cease to be listed on ASX, POMSoX and NASDAQ.
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What are LGL
Shareholders’ choices in
relation to the Scheme?
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|
An LGL Shareholder may:
•
vote in favour of the Scheme at the Scheme Meeting;
•
vote against the Scheme at the Scheme Meeting;
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•
sell their LGL Shares before the Effective Date which is expected to be 30
August 2010; or
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•
do nothing.
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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.
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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.
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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).
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4
Frequently asked questions continued
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18
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QUESTION
|
|
ANSWER
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|
Assessment of the Scheme
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What do the LGL
Directors recommend?
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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.
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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.
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Section 6 sets out the reasons for the LGL Directors’ unanimous recommendation.
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What is the
Independent
Expert’s
conclusion?
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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:
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•
the relative contributions of LGL and Newcrest to the Merged Group;
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•
the estimated value of the Scheme Consideration (which the Independent
Expert estimates to be A$4.20–A$4.32 per LGL Share based on Newcrest’s recent
trading prices) compared to the underlying value of LGL, which the Independent
Expert estimates to be A$4.28–A$4.83 per LGL Share;
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•
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;
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|
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•
in this regard, the Independent Expert notes that, on one view, LGL’s
competitive sale process described above will provide the best possible
evidence of LGL’s current underlying value. If LGL’s 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
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•
the Independent Expert’s 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.
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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.
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Furthermore, the Independent Expert is of the view that LGL’s share price is
likely to fall, potentially significantly, if the proposal does not proceed
(absent an alternative proposal).
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The Independent Expert’s 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.
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Lihir Gold Limited Scheme Booklet
|
|
19
|
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|
|
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.
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•
The Independent Expert has concluded that “the Proposal is in the best interests
of LGL Shareholders, in the absence of a superior proposal”.
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•
The Scheme Consideration represents a substantial premium over historical trading
prices for LGL Shares.
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With regard to the premium offered, the Independent Expert noted that between the
announcement of Newcrest’s approach on 1 April 2010 and 13 July 2010, Newcrest’s
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
Newcrest’s 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.
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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.
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•
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:
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•
Asia Pacific’s largest gold company and one of the world’s largest gold companies;
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•
diversified portfolio of world-class assets;
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•
attractive growth profile;
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•
lowest quartile position on the global cash cost curve;
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•
increased scale, financial strength and access to debt to capture future
large-scale growth opportunities;
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•
potential synergies;
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•
strong operational and management capabilities to drive further value
opportunities; and
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•
increased liquidity of Newcrest Shares and potential for upward re-rating as a
result of increased scale.
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•
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.
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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.
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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 Expert’s conclusion.
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•
The Merged Group will be subject to certain risks to which LGL is not currently
exposed. Newcrest anticipates that these risks will include:
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•
exposure to the market price of copper;
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|
•
exposure to foreign exchange risk arising from the increased international currency
exposures of the Merged Group;
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|
•
economic, financial and share market risks applying to the Merged Group;
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|
•
indebtedness of Newcrest following the implementation of the Scheme and its
potential need for further capital;
|
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|
•
Newcrest may not meet its goals for production and operating costs and its
development plans may not be realised;
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•
exposure to the exploration and new project uncertainty of the Newcrest operations;
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|
•
integration risks associated with the merger of the Newcrest and LGL businesses; and
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|
•
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.
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|
Further details of these risks can be found in section 9.5.
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|
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|
•
LGL Shareholders may prefer LGL to be exposed to the opportunity for increased
value from remaining as a standalone entity.
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|
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.
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|
In assessing and recommending the Scheme, the LGL Board evaluated the benefits of LGL
continuing as a standalone entity against other strategic alternatives.
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|
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.
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|
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).
|
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.
|
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|
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.
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|
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.
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|
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.
|
|
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|
|
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|
•
LGL Shareholders may consider that a proposal which is more attractive for
LGL Shareholders may materialise in the future.
|
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|
The implementation of the Merger would mean that LGL Shareholders will not
obtain the benefit of any such proposal.
|
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|
|
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 Newcrest’s 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.
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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.
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|
|
LGL Shareholders are already exposed
to the risks associated with LGL’s
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
LGL’s business and operations
contained in section 7.8.
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4
Frequently asked questions continued
|
|
22
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|
|
|
|
|
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:
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•
Mixed Consideration; or
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•
Maximum Share Consideration; or
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|
•
Maximum Cash Consideration.
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Full details of the Scheme Consideration alternatives are set out in section 5.4.
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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.
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|
The LGL Directors unanimously recommend that LGL Shareholders elect to receive
either the Mixed Consideration or the Maximum Share Consideration.
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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.
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|
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders
should refer to section 5.15 for further details about the consideration they
will receive.
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|
LGL ADS holders should refer to section 14.15 of this Scheme Booklet for
information applicable to them.
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Lihir Gold Limited Scheme Booklet
|
|
23
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|
|
|
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.
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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.
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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.
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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 LGL’s 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.
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|
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.
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|
|
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.
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|
|
|
|
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.
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|
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 Shareholder’s
Scheme Consideration election.
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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.
|
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|
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|
|
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.
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|
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|
|
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.
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|
|
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|
|
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).
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|
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|
|
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.
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|
|
|
|
|
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.
|
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|
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 Shareholder’s 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 People’s 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.
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|
|
|
|
|
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
Newcrest’s 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.
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|
|
|
|
|
|
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.
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|
|
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|
|
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).
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|
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|
|
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|
|
Section 14.14 contains further
detail regarding the
entitlements of overseas LGL
Shareholders.
|
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|
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.
|
|
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|
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|
|
|
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
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|
|
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|
|
•
by attorney.
|
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|
|
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.
|
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|
|
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 Newcrest’s 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 Newcrest’s 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 LGL’s 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.
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
33
|
5.1 Background
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 LGL Shares from the Scheme Participants
in consideration for the Scheme Consideration. The Merger Implementation Agreement is included as
Attachment B to this Scheme Booklet.
5.2 Scheme approval
The Scheme cannot be implemented unless it is approved by the Required Majority of LGL Shareholders
at the Scheme Meeting and by the Court at the Second Court Hearing.
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.
If the Scheme is approved by the Required Majority of LGL Shareholders at the Scheme Meeting, LGL
will apply to the Court for an order approving the Scheme.
If the Court makes an order approving the Scheme, the Scheme will become Effective on the Effective
Date and LGL and Newcrest will become bound to implement the Scheme in accordance with its terms.
5.3 Implementation of the Scheme
If the Scheme becomes Effective:
|
(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.
|
5.4 Scheme Consideration
If the Scheme is implemented, Scheme Participants will receive the Scheme Consideration in
consideration for their Scheme Shares.
Newcrest will also provide a limited mix and match facility in relation to the Scheme
Consideration, giving each Scheme Participant greater flexibility in relation to the form in which
they receive their Scheme Consideration. Under that limited mix and match facility, Scheme
Participants may elect to maximise the amount of cash or the number of New Newcrest Shares they
receive as Scheme Consideration.
Each Scheme Participant will be given the opportunity to elect to receive their Scheme
Consideration in one of the following forms:
|
(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
|
If LGL Shareholders do not make a valid Scheme Consideration election, they will be deemed to have
elected the Maximum Share Consideration.
LGL Shareholders do not need to return the Election Form or make an election online if they wish to
receive the Maximum Share Consideration.
LGL Shareholders may make a Scheme Consideration election regardless of whether or not they intend
to vote on, or in favour of, the Scheme.
All valid Mixed Consideration elections will be satisfied in full. Maximum Share Consideration
elections and Maximum Cash Consideration elections will not affect the entitlements of those Scheme
Participants who make a valid Mixed Consideration election.
The outcome of Maximum Share Consideration elections and Maximum Cash Consideration elections will
depend on the amount of available New Newcrest Shares and cash after all Scheme Consideration
elections have been received. The total number of New Newcrest Shares to be issued under the Scheme
will not exceed 280,988,130 New Newcrest Shares,
1
and the maximum amount of cash to be
paid in aggregate by Newcrest under the Scheme will not exceed A$1.0 billion.
To the extent that valid Maximum Share Consideration elections and valid 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 only New Newcrest Shares and Scheme
Participants who make a valid Maximum Cash Consideration election will receive only 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 valid Maximum Cash Consideration
elections cannot be satisfied in full, they will be scaled back on a pro-rata basis. In those
circumstances where a valid Scheme Consideration election cannot be satisfied in full, the Scheme
Participant will receive the balance of their Scheme Consideration in cash (if Maximum Share
Consideration is elected) or in New Newcrest Shares (if Maximum Cash Consideration is elected).
If the number of Scheme Shares that a Scheme Participant holds 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 to the nearest whole number.
2
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 Employee Share Ownership Plan.
|
|
|
|
2
|
|
Please also see section 3.8.
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
35
|
The following table illustrates the implied value of a Mixed Consideration election at a range
of illustrative Newcrest VWAPs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Notes
|
|
|
|
|
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
|
By way of example, the following table, which is based on a Newcrest Share price of A$33.96
(representing the arithmetic average of the Newcrest Daily VWAPs over the five ASX Trading Days up
to and including 21 July 2010) illustrates the impact on the Scheme Consideration received after
scale-back under different scenarios for Mixed Consideration elections, Maximum Cash Consideration
elections and Maximum Share Consideration elections (showing the implied value of the Scheme
Consideration that would be received under each scenario).
For example, if total Scheme Consideration elections are equally divided between Mixed
Consideration, Maximum Share Consideration and Maximum Cash Consideration (i.e. “Scenario A”
demonstrated in the table below), the amount of cash received under a Maximum Cash Consideration
election would be scaled back to A$1.04 per LGL Share, with the remaining A$3.21 to be in the form
of New Newcrest Shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Note
|
|
|
|
|
1
|
|
Excludes the issue of any new LGL Shares under the LGL Executive Share Plan.
|
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.
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
37
|
If the Scheme proceeds according to the timetable contained in the Scheme Booklet, then LGL
will not declare or pay an interim dividend for the half year ended 30 June 2010. On the basis of
LGL’s 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.
Scheme Participants who make (or are deemed to have made) a Maximum Share Consideration election or
who make a Maximum Cash Consideration election will not know the precise number of New Newcrest
Shares or amount of cash to be provided to them until after the Record Date. Given that the cash
consideration is capped at A$1.0 billion and represents a smaller proportion of the total Scheme
Consideration than the Scheme Shares, LGL Shareholders who make a Maximum Cash Consideration
election may be scaled back. It is also possible that LGL Shareholders who make a Maximum Share
Consideration election could be scaled back.
The Record Date is currently expected to be 7.00pm on 6 September 2010.
LGL will announce the outcome of the Scheme Consideration elections as soon as possible following
the Record Date. The announcement will be available from ASX’s website at www.asx.com.au or from
LGL’s website at www.lglgold.com.
5.5 How to make a Scheme Consideration election
LGL Shareholders can use the Election 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 that accompanies this Scheme Booklet in accordance with the instructions set out in the
Election Form and return it in accordance with the instructions set out on the Election Form.
LGL Shareholders can also make a valid 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
completed, by no later than 9.00pm on 6 September 2010.
Scheme Participants that do not make a valid Scheme Consideration election will be deemed to have
made a valid Maximum Share Consideration election for the purposes of determining their Scheme
Consideration.
A Scheme Participant’s entitlement to Scheme Consideration will be calculated on the basis of their
registered holding, not any beneficial interest in the relevant Scheme Shares.
Before making a Scheme Consideration election, LGL Shareholders should consider their personal tax
position and other circumstances and, if they are in any doubt about what they should do or
anything in this Scheme Booklet, they should consult with their legal, investment, taxation or
other professional adviser without delay.
The LGL Directors unanimously recommend that LGL Shareholders elect to receive either the Mixed
Consideration or the Maximum Share Consideration. Please refer to section 5.11 for further details.
LGL Shareholders may 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.
|
|
|
|
|
|
|
|
|
5
Summary of the Scheme continued
|
|
38
|
The last valid Election Form received from an LGL Shareholder by the LGL Registry or valid online
instruction completed by an LGL Shareholder by 9.00pm on 6 September 2010 will be used for the
purposes of determining the election of that LGL Shareholder.
Scheme Consideration elections need to be made for each separate registered holding. A valid
Election Form will apply to all the LGL Shares held by an LGL Shareholder in the relevant
registered holding as at the Record Date.
An LGL Shareholder who LGL accepts as holding one or more parcels of LGL Shares as trustee or
nominee for, or otherwise on account of, another person, may make separate elections in relation to
each of those parcels of LGL Shares, and an election made in respect of one such parcel shall not
be taken to extend to the other parcels. Otherwise, if an LGL Shareholder makes a Scheme
Consideration election in respect of some of their LGL Shares and another Scheme Consideration
election in respect of other LGL Shares, or makes no election in respect of the remainder of their
LGL Shares, the LGL Shareholder will be deemed to have elected the Maximum Share Consideration in
respect of all of their LGL Shares.
Trustees and nominees must establish sufficient distinct holdings in the LGL Register to cater for
their underlying client’s Scheme Consideration election instructions. On each of these separate
holdings, the trustee or nominee must make a distinct election in respect of the Scheme
Consideration. Each election and holding will serve as the point for the aggregation of a trustee’s
or nominee’s underlying client instructions. Trustees and nominees must arrange their holdings by
the Record Date, taking into account the cut-off time and date and the method of transfer available
to them.
5.6 Ineligible Overseas Shareholders
An LGL Shareholder whose 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 People’s
Republic of China, Indonesia, France, Japan, Ireland or Switzerland, may not be able to receive New
Newcrest Shares under the Scheme and may be an Ineligible Overseas Shareholder for the purposes of
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 the New Newcrest Shares to which the Ineligible Overseas Shareholder would
otherwise have been entitled under the Scheme will be issued to the Sale Agent rather than to the
Ineligible Overseas Shareholder. Please see section 5.15 for further details on the Sale Agent
process.
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.
Section 14.14 contains further detail regarding the entitlements of overseas LGL Shareholders.
5.7 Cash Out Facility for certain LGL Shareholders
An LGL Shareholder may elect that, in the event that they would receive 14 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. 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 the Cash Out Facility.
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
39
|
5.8 Factors relevant to Scheme Consideration election
The following factors may be relevant to an LGL Shareholder’s decision as to which Scheme
Consideration election to make:
|
|
|
|
|
|
|
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
Participant’s
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.
|
5.9 Implied value of the Scheme Consideration
The implied value of the Scheme Consideration was A$4.03 per LGL Share 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).
The implied value of the Scheme Consideration was A$4.18 per LGL Share 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).
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 Scheme Consideration will be reduced 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.
|
|
|
|
|
|
|
|
|
5
Summary of the Scheme continued
|
|
40
|
If the Scheme proceeds according to the timetable contained in the Scheme Booklet, then LGL will
not declare or pay an interim dividend for the half year ended 30 June 2010. On the basis of LGL’s
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.
5.10 Timing for provision of the Scheme Consideration
The Scheme Consideration will be provided to Scheme Participants in accordance with the Scheme on
or following the Implementation Date, which is currently expected to be 13 September 2010. Please
refer to sections 14.4, 14.5 and 14.6 for information in relation to the provision of the Scheme
Consideration by Newcrest.
5.11 LGL Board recommendation
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.
5.12 Independent Expert’s Report
The Independent Expert has concluded that “the Proposal is in the best interests of LGL
Shareholders, in the absence of a superior proposal”.
The Independent Expert’s Report is set out in section 11, and LGL Shareholders should read it in
full as part of their consideration of the Scheme.
5.13 Conditions precedent to the Scheme
Implementation of the Scheme is subject to a number of conditions precedent and regulatory
approvals. As at the date of this Scheme Booklet, neither Newcrest nor LGL is aware of any reason
why any of these conditions precedent will not be satisfied by the required date. These conditions
precedent include:
|
(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.
|
An application for FIRB approval was made by Newcrest, and FIRB notified Newcrest on 17 July 2010
that it has no objections to the proposal in terms of the Australian Government’s foreign
investment policy.
Please refer to section 15.20 for further details.
5.14 Australian, PNG, US and UK tax consequences
All LGL Shareholders should seek their own independent tax advice in relation to the consequences
of the Scheme.
|
(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
|
5.15 Sale of New Newcrest Shares by Sale Agent
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders will not receive New
Newcrest Shares. Instead, the New Newcrest Shares that would otherwise have been issued to
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders will be issued to
the Sale Agent on the Implementation Date.
Newcrest will:
|
(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.
|
For each New Newcrest Share to which an Ineligible Overseas Shareholder or Electing Unmarketable
Parcel Shareholder would otherwise receive under the Scheme, the shareholder will receive an amount
equivalent to the average price per New Newcrest Share obtained by the Sale Agent (which may be
more or less than the actual price that is received by the Sale Agent for that particular New
Newcrest Share).
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders will be paid the
sale proceeds, 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). The New Newcrest Shares issued to the Sale Agent will be sold on ASX in such
manner and at such price and on such other terms as the Sale Agent determined in good faith (and at
the risk of the Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders).
The market price of Newcrest Shares is subject to change from time to time and LGL, Newcrest and
the Sale Agent give no assurance as to the price that will be achieved for the sale of New Newcrest
Shares described above. The proceeds that Ineligible Overseas Shareholders and Electing
Unmarketable Parcel Shareholders will be paid may be more or less than the current market value of
Newcrest Shares. Up to date information regarding the market price of Newcrest Shares on ASX is
available from Newcrest’s website at www.newcrest.com.au and ASX’s website at www.asx.com.au.
The proportionate net proceeds of the sale of the New Newcrest Shares will be paid to each relevant
Scheme Participant as soon as reasonably practicable following the sale of such shares by the Sale
Agent, in the form of a cheque drawn in Australian currency.
If the relevant Scheme Participant’s whereabouts are unknown as at the Record Date, the cash
consideration will be paid into a separate bank account and held until claimed or applied under
laws dealing with unclaimed moneys.
5.16 No brokerage or stamp duty payable
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 them of their Scheme Consideration.
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders will be paid the
sale proceeds of any sale of New Newcrest Shares they would otherwise receive sold by the Sale
Agent, 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).
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.
|
matters relevant to the vote on the scheme
The Mount Rawdon process plant in Queensland, Australia.
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
43
|
6.1 Reasons to vote in favour of the Scheme
(a) Directors’ recommendation
For the reasons set out below, 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.
Further details about the interests of the LGL Directors in LGL Shares are set out in section 15.1.
While the LGL Directors acknowledge reasons to vote against the Scheme, they believe the advantages
of the Scheme significantly outweigh the disadvantages.
(b) Independent Expert’s conclusion
Grant Samuel & Associates Pty Limited was appointed by the LGL Board as the Independent Expert to
assess the merits of the Scheme. The Independent Expert’s Report is set out in section 11. The
report contains the evaluation of the Scheme, and sets out the Independent Expert’s opinion and
conclusions.
The Independent Expert has concluded that “the Proposal is in the best interests of LGL
Shareholders, in the absence of a superior proposal”.
In arriving at this conclusion, the Independent Expert assessed the following considerations:
|
•
|
|
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$4.20–A$4.32 per LGL Share based on Newcrest’s recent trading prices) compared to the underlying
value of LGL, which the Independent Expert estimates to be A$4.28–A$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, LGL’s competitive sale process
described above will provide the best possible evidence of LGL’s current underlying value. If LGL’s
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 Expert’s 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 LGL’s share price is likely to fall,
potentially significantly, if the proposal does not proceed (absent an alternative proposal).
LGL Shareholders are encouraged to read the Independent Expert’s Report in its entirety. It
contains important information relevant to the Scheme.
(c) 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, being 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 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
|
Implied Premium of the Scheme Consideration to Recent Trading Prices of LGL Shares
|
|
|
|
|
Source: IRESS, LGL and Newcrest Company announcements.
|
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, the implied value of the Scheme Consideration
is A$4.18 per LGL Share. The implied value of the Scheme Consideration has been as high as A$4.50
per LGL Share
1
and as low as A$3.83 per LGL Share
2
since the Announcement
Date and 21 July 2010.
With regard to the premium offered, the Independent Expert noted that between the announcement of
Newcrest’s approach on 1 April 2010 and 13 July 2010, Newcrest’s shares underperformed global gold
equities (in US$ 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
Newcrest’s 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.
As the following chart illustrates, the implied value of the Scheme Consideration of A$4.03 per LGL
Share (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) exceeds the price at which LGL Shares have
traded during the 12 month period ending on 31 March 2010.
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Notes
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1
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Based on the closing price of Newcrest Shares on ASX of A$36.00 on 25 June 2010.
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2
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Based on the closing price of Newcrest Shares on ASX of A$30.38 on 5 May 2010.
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Lihir Gold Limited Scheme Booklet
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45
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LGL Share price for the 12 Months Prior to 31 March 2010
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Source: IRESS, Company announcements.
|
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.
Please refer to sections 7.7 and 8.9 for the recent price history of LGL Shares and Newcrest
Shares.
|
(d)
|
|
Scheme Participants will have the opportunity to participate in the strategic and financial
benefits of the Merged Group
|
LGL Shareholders that receive New Newcrest Shares as part of their Scheme Consideration will have
the opportunity to participate in the strategic and financial benefits of the Merged Group.
Newcrest has identified in this section 6.1(d) the strategic and financial benefits of the Merged
Group.
(i) Asia Pacific’s largest gold company and one of the world’s largest gold companies
The Merged Group will be amongst the world’s top five gold companies by Ore Reserves and Mineral
Resources with potential for further upgrades and substantial production growth.
The Merged Group will be the largest Asia Pacific gold company and:
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•
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|
the fifth largest gold company in the world by gold reserves;
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•
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the fifth largest gold company in the world by gold resources;
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•
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the fifth largest gold producer in the world;
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•
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a world-class operator of long-life mines with three of the world’s top 15 producing gold mines.
1
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Note
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1
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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.
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6
Matters relevant to the vote on
the Scheme continued
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46
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Gold reserves (Moz) of Global Gold Companies
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Source: Company announcements.
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Gold resources (Moz)
1
of Global Gold Companies
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Source: Bloomberg, Company announcements.
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Note
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1
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Includes Measured, Indicated and Inferred Resources.
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Lihir Gold Limited Scheme Booklet
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47
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Annual Gold Production (koz)
1
of Global Gold Companies
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Source: Company announcements.
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Note
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1
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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.
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Gold Reserves (Moz) of the World’s Top 15 Producing Mines
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Source: Company announcements.
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(ii) Diversified portfolio of world-class assets
The Merged Group will benefit from having a larger and more diversified portfolio of high quality
assets across a broader geographic region.
Combining Newcrest and LGL brings together a highly complementary portfolio of operating and
development projects. Newcrest already holds significant assets in PNG and in Australia that will
complement LGL’s operations in those countries.
Supplementing these operations are:
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•
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three key long-life producing assets with upside potential (Cadia, Lihir Island and Telfer);
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•
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four shorter-life operations (Gosowong, Bonikro, Mount Rawdon and Cracow);
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•
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significant brownfield growth potential (Gosowong, Bonikro and Hidden Valley);
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•
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two large established resource growth options (Wafi-Golpu and Namosi);
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6
Matters relevant to the vote on
the Scheme continued
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48
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•
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significant greenfield growth potential in Côte d’Ivoire and Morobe Province, PNG;
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•
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complementary mix of pure gold and gold-copper assets; and
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•
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cash costs in the lowest quartile of the industry.
1
|
The merger of Newcrest and LGL will also combine complementary skill sets to drive further value opportunities, including:
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•
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open pit, bulk underground and selective underground skills;
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•
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metallurgical expertise in flotation and refractory processing;
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•
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copper concentrate marketing skills;
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•
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strong technical expertise; and
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•
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proven exploration skills.
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As the chart below illustrates, the Merged Group will have a strong geographic focus in the Asia
Pacific region and regional opportunities in West Africa. This broader operational and geographic
footprint should provide the Merged Group with a better diversified country risk profile.
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Source: Company websites.
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Note
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1
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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.
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Lihir Gold Limited Scheme Booklet
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49
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The Merged Group will have a diversified asset and geographic portfolio, with the following diversification breakdown:
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•
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No asset will represent more than 40% of the gold reserve base or more than 32% of combined 2009 gold production.
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•
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Australia will represent 53% of the combined gold reserve base and 48% of combined 2009 gold production.
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•
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PNG will represent 42% of the combined gold reserve base and 32% of combined 2009 gold production.
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Source: Company announcements.
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Pro Forma Gold Reserve Breakdown by Asset
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Source: LGL and Newcrest company announcements.
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Pro Forma Geographic Breakdown of Gold Production for 12 Months Ended 31 December 2009
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Source: LGL and Newcrest company announcements.
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6
Matters relevant to the vote on
the Scheme continued
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50
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(iii)
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Attractive growth profile
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The Merged Group will benefit from a highly attractive growth profile through its existing organic
growth pipeline, including the expansion potential at existing mines.
The Merged Group will have a pipeline of committed projects to deliver substantial growth over the
next five years. Production is forecast to grow at a compound rate of around 6.0% per year to
around 3.75 M ounces by FY2014. However, LGL Shareholders should refer to section 9.6 for the
production and operation risks of the Merged Group.
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Source:
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Newcrest’s 2009 Full Financial Year Results Presentation filed with ASX on 17 August 2009,
and LGL’s BMO Presentation of March 2010 filed with ASX on 1 March 2010.
|
LGL Shareholders are currently exposed to the ramp-up of production at Lihir Island through
completion of the Million Ounce Plant Upgrade, and potential expansion of its West African
operations. If the Scheme is implemented, LGL Shareholders will also participate in the production
growth expected from Newcrest’s operations.
Newcrest has forecast a 40% increase in gold production
and 30% increase in copper production over the next five years from existing brownfields expansion
projects at Ridgeway Deeps, Cadia East, Hidden Valley, Telfer and Gosowong.
1
In addition
to the already committed projects, Newcrest has a suite of undeveloped deposits with the potential
to grow into large, long-life projects. It is expected that this extensive pipeline of development
and exploration projects will over time add significant value to shareholders of the Merged Group.
These include:
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•
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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;
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•
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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;
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•
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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
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•
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the Telfer gold/copper mine in Western Australia, which has the potential to develop into a
sizeable polymetallic region. Opportunities such as O’Callaghan’s polymetallic discovery should
further reduce Telfer’s operating cost and continue to add longer-term value.
|
With Newcrest’s significant production and technical expertise in copper, the LGL Directors believe
that the implementation of the Scheme will widen the range of growth and development opportunities
open to shareholders of the Merged Group to include other undeveloped gold reserves around the
world.
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Note
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1 Source: Newcrest’s 2009 Full Financial Year Results Presentation filed with ASX on 17 August
2009.
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Lihir Gold Limited Scheme Booklet
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51
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(iv) Lowest quartile position on the global cash cost curve
The Merged Group will hold a portfolio of quality assets characterised by a favourable low-cost
position. LGL expects its cash costs of production in 2010 to be below US$450 per gold ounce.
Similarly, Newcrest has low cash cost operations with a cash cost of production for the nine months
ended 31 March 2010 of A$349 per gold ounce, after by-product credits.
The Merged Group is expected to enjoy a strong position with relatively low cash costs when
compared to the broader gold industry. With pro forma cash costs of US$346 per gold ounce for the
Merged Group (for the three months ended 31 March 2010, including the expected synergies obtained
from the implementation of the Scheme), the Merged Group would, for that period, have had costs in
the industry’s lowest quartile. The Merged Group will also have the potential for further
improvement through an enhanced focus on cost reduction and productivity improvements achieved by
combining the complementary skill sets of Newcrest and LGL.
(v) Increased scale, financial strength and access to debt to capture future large-scale growth
opportunities
The Merged Group will benefit from enhanced scale and scope as one of the world’s
largest global gold producers.
With a market capitalisation of over A$24.5 billion,
1
low
gearing and strong operating cash flows, the Merged Group would have greater scale and financial
capability to deliver superior financial performance and to increase access to debt to capture and
invest in future large-scale growth opportunities and development.
Another benefit of increased scale would be an expected lower cost of funding for the Merged Group.
The Merged Group would seek to maintain gearing levels commensurate with a strong investment grade
credit rating, which should result in improved debt funding spreads. Access to all other capital
markets is also expected to improve, with the increased size, diversity and liquidity of the Merged
Group also potentially reducing the cost of capital.
The Merged Group is also expected to benefit from increased scale through stronger relationships
with the different stakeholders involved in the operations of the Merged Group, including suppliers
of consumables and mining service providers. By being in a position to offer enhanced career
development and advancement opportunities, the Merged Group is expected to be more competitive in
the attraction and retention of high-quality staff.
(vi) Potential synergies
The Merged Group is expected to benefit from cash cost savings from potential synergies to be
achieved in the short term, estimated at A$85 million per year pre tax, which represents
approximately 4% of the combined cost base of LGL and Newcrest.
Integration of the two companies is expected to result in natural synergies that would be delivered
through:
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•
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logistics and supply chain efficiencies;
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•
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fleet and equipment maintenance costs;
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•
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proven approaches to productivity improvement;
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•
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ability to sharpen the focus of the projects and exploration spend;
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•
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lower funding costs; and
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•
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removal of duplicated corporate costs.
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Note
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1
|
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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.
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6
Matters relevant to the vote on
the Scheme continued
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52
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(vii) Strong operational and management capabilities to drive further value opportunities
The Merged Group will benefit from sharing of the knowledge base, management expertise and
technical, industry, development and operating skills of Newcrest and LGL, which will provide a
solid base for the long-term optimisation of the combined portfolio of assets, including:
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•
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open pit, bulk surface and underground mining expertise, as well as selective underground mining
techniques;
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•
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recognised strength in low-cost, fast underground development rates;
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•
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metallurgical expertise in flotation and refractory gold ore processing;
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•
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expertise in exploration;
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•
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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;
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•
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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;
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•
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maintenance focus delivering cost reductions and productivity improvements;
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•
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recognised industry leaders in greenfield and brownfield exploration; and
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•
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valuable experience in PNG, in particular in relation to approach to community, environment and
relations with the PNG Government.
|
(viii) Increased liquidity of Newcrest Shares and potential for re-rating as a result of increased
scale
The Merged Group will benefit from being a larger, more liquid company.
With a pro
forma market capitalisation of approximately A$24.5 billion at the Announcement Date and A$25.5 billion at the last ASX Trading Day prior to the date of this Scheme Booklet, the Merged
Group would be a top 15 S&P ASX listed entity. Its revised index position, combined with it being
the leading Asia Pacific gold major, with enhanced scale, coverage and recognition, should increase
its stock market appeal and is likely to result in stronger investment support from both Australian
and Asian investors, improved liquidity and potential re-rating to a level similar to that of other
global gold majors.
Index Weighted Market Capitalisation (A$m) of Largest ASX Listed Companies
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Source: Iress, company announcements.
|
Merged market capitalisation based on pro forma number of Newcrest shares and Newcrest closing
price of A$33.31 as at 21 July 2010.
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Lihir Gold Limited Scheme Booklet
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53
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Market Capitalisation (A$m) of Gold Majors
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|
Note: Reflects total market capitalisation (not free float). Source: Factset, company
announcements.
|
(e) The price of LGL Shares may fall if the Scheme is not approved
If the Scheme is not approved, the price of LGL Shares may fall (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.
6.2 Reasons to vote against the Scheme
(a) LGL Shareholders may not agree with the LGL Directors’ unanimous recommendation or the
Independent Expert’s
conclusion
LGL Shareholders may believe that the Scheme is not in the best interests of LGL Shareholders
notwithstanding the LGL Directors’ unanimous recommendation and the Independent Expert’s
conclusion.
LGL Shareholders are not obliged to follow the unanimous recommendation of the LGL Directors or
agree with the Independent Expert’s conclusion.
(b) The Merged Group will be subject to a number of risks to which LGL is not currently exposed
Sections 9.5 and 9.6 outline the risks associated with an investment in the Merged Group and risks
which affect the Merged Group. LGL Shareholders are currently exposed to the risks associated with
an investment in LGL and its business. Some of these risks are outlined in section 7.8.
While LGL and Newcrest are both gold producers, the operational profile, capital structure, size
and geography of the Merged Group will be different from that of LGL on an independent entity
basis.
Newcrest is a company incorporated in Australia and is subject to Australia’s governing laws. In
particular, it has significant mining operations in Australia and is subject to the Australian
regulatory system.
Newcrest also has operations and developments in other countries in which LGL does not currently
operate, including Indonesia and Fiji. As a result of acquiring the New Newcrest Shares, Scheme
Participants will be exposed to the risks associated with those particular projects and the
countries in which they are located.
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6
Matters relevant to the vote on
the Scheme continued
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54
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(c)
|
|
LGL Shareholders may prefer to be exposed to the opportunity for increased value from LGL
remaining as an independent 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 believe that LGL’s assets
alone, particularly Lihir Island, Bonikro and LGL’s exploration potential in Côte d’Ivoire, have
greater growth potential in the medium term than the Merged Group’s aggregated assets.
LGL Shareholders may consider that this is not the right time for LGL to enter into a merger. LGL
Shareholders may consider that LGL should continue to develop its existing asset portfolio and
consider acquisitions before accepting a merger with another gold producer. Refer to section 7 of
the Independent Expert’s Report for an assessment of LGL value as a stand alone entity.
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%
1
of the Merged Group (depending
on Scheme Consideration elections under the limited mix and match facility). The risk and return
characteristics of an investment in the Merged Group will be different from those presently
applicable to LGL. This means that LGL Shareholders will have a diluted or smaller investment in the
current LGL asset portfolio and will share any future revaluation of development and exploration
upside in this asset portfolio within the Merged Group.
(d) 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. Based on calendar year 2009 revenues,
copper sales comprised 15% total revenue for the pro forma merged entity.
2
Copper will
comprise 26% of the Merged Group’s Gold-Equivalent reserves and 37% of its Gold-Equivalent
resources (based on LGL’s and Newcrest’s reserves and resources as stated in their latest reserves
and resources statements).
While the production of copper as a gold by-product helps to maintain
Newcrest’s low cost profile, there are risks associated with an investment in a company with gold
and copper production which LGL Shareholders will become exposed to as a result of holding the New
Newcrest Shares. 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. Further details of these risks can be found in section 9.5.
Between the Announcement Date and 20 July 2010, the gold price has increased (0.8%) on a US dollar
basis and increased (5.6%) on an Australian dollar basis. Over the same period, the copper price
has fallen (10.4%) on a US dollar basis and fallen (6.1%) on an Australian dollar basis. The price
of gold and copper may increase or decrease over time.
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(e)
|
|
LGL Shareholders may consider that a proposal which is more attractive for LGL Shareholders may
materialise in the future
|
It is possible that a proposal for LGL, which is more attractive for LGL Shareholders than
Newcrest’s proposal to acquire LGL by way of the Scheme, 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 Newcrest’s approach.
Although no Competing Proposal has been received to date, if a third party approaches LGL with a
Competing Proposal after the date of this Scheme Booklet (which was not solicited, invited or
initiated (whether directly or indirectly) by a member of the LGL Group or any of its
representatives or advisers in contravention of the Merger Implementation Agreement), the LGL Board
will conscientiously consider that Competing Proposal, provided that the LGL Board determines in
good faith and acting reasonably that not considering that Competing Proposal would constitute a
breach of its fiduciary or statutory duties.
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.
|
|
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|
|
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.
|
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2
|
|
Based on a 2009 average exchange rate of US$1/A$0.79.
|
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Lihir Gold Limited Scheme Booklet
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|
55
|
6.3 Implications if the Scheme is not approved
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 other conditions precedent to the
implementation of the Scheme outlined in section 15.20 are not satisfied (or waived, where
permitted):
|
(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;
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|
(c)
|
|
LGL will continue to operate as an independent entity under the management of the current LGL
Board and management;
|
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|
(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 Expert’s 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.
|
6.4 Other relevant considerations
(a) No Superior Proposal has emerged
Since the Scheme was announced on 4 May 2010, the proposal from Newcrest to acquire LGL by way of
the Scheme is the only proposal that has been received by the LGL Board.
In this regard, it is important to note that, as permitted by the Merger Implementation Agreement,
LGL undertook a competitive sale process, under which it provided a number of large global gold
companies with access to an extensive data room following Newcrest’s approach.
The terms of the Merger Implementation Agreement permitted LGL, prior to commencement of the
Exclusivity Period on 8 June 2010, to enter into, continue or participate in any negotiation,
discussion, arrangement or understanding with a third party in connection with a possible LGL
Control Transaction which was not solicited, invited or initiated by
LGL after the date of the
Merger Implementation Agreement. Further details of the exclusivity arrangements contained in the
Merger Implementation Agreement are set out in section 15.16.
The LGL Board has not received any Competing Proposal following these discussions. If a third
party approaches LGL with a Competing Proposal after the date of this Scheme Booklet (which was not
solicited, invited or initiated (whether directly or indirectly) by a member of the LGL Group or
any of its representatives or advisers in contravention of the Merger Implementation Agreement),
the LGL Board will conscientiously consider that Competing Proposal provided that the LGL Board
determines in good faith and acting reasonably that not considering that Competing Proposal would
constitute a breach of its fiduciary or statutory duties.
(b) The implied value of the Scheme Consideration is likely to fluctuate
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. Newcrest Shares are
exposed to the normal risks associated with equity ownership and therefore the Newcrest Share price
could fluctuate up or down depending on market conditions and other relevant risk factors affecting
relevant markets and exchange rates.
(c) No brokerage or stamp duty payable by Scheme Participants
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 them of their 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.
Ineligible Overseas Shareholders and Electing Unmarketable Parcel Shareholders will receive the
sale proceeds of any sale of New Newcrest Shares which they would otherwise receive sold by the
Sale Agent, 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 information.
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6
Matters relevant to the vote on
the Scheme continued
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56
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(d) NASDAQ de-listing
It is presently possible to trade LGL Shares on ASX and POMSoX and LGL ADSs on NASDAQ.
After the Scheme becomes Effective, Newcrest Shares will continue to be listed on ASX, and
Newcrest’s “level 1” ADR program will remain in place (see section 9.3(c) for further information
about Newcrest’s ADR program). Newcrest intends to seek a listing of its shares on POMSoX. However,
LGL ADSs will be delisted from NASDAQ following implementation of the Scheme, and 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. In addition, although Newcrest will be deemed to succeed
to LGL’s registration with the SEC under the US Exchange Act when the Scheme becomes Effective,
Newcrest has further advised that, provided it satisfies the applicable requirements under the US
Exchange Act and the rules and regulations thereunder, it intends to terminate such registration
under the US Exchange Act as soon as practicable following the time the Scheme becomes Effective.
If Newcrest is able to terminate the registration of its shares under the US Exchange Act, it will
not be subject to reporting obligations under, and other requirements of, the US Exchange Act and
the rules and regulations thereunder, and will continue to maintain the exemption from registration
under the US Exchange Act (and the reporting obligations thereunder) pursuant to Rule 12g3-2(b)
under the US Exchange Act. See section 9.3(c) for additional information.
(e) Australian, PNG, US and UK taxation consequences for LGL Shareholders
Implementation of the Scheme may have varying tax consequences for LGL Shareholders depending on
their specific circumstances. Further information on the Australian, PNG, US and UK tax
consequences of the Scheme for certain LGL Shareholders is outlined in section 10. LGL Shareholders
should consult their own professional tax adviser regarding the tax consequences applicable in
their specific circumstances.
(f) Break fee
LGL has agreed to pay a break fee of US$60 million to Newcrest in certain circumstances. The
details of the break fee arrangements are set out in section 15.17.
(g) Termination of the Merger Implementation Agreement
LGL and
Newcrest may terminate the Merger Implementation Agreement in certain
circumstances. These
are detailed in section 15.18.
(h) Warranties by Scheme Participants under the Scheme
If the Scheme becomes Effective, each Scheme Participant will be taken to have warranted to LGL and
authorised LGL as its attorney and agent to warrant to Newcrest that all of their Scheme Shares
(including any rights and entitlements attaching to those shares) which will be transferred to
Newcrest under the Scheme will, at the time of 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 of any kind, and that
each Scheme Participant has full power and capacity to sell and transfer their LGL Shares
(including any rights attaching to those shares to Newcrest under the Scheme).
6.5 LGL reliance on Newcrest Scheme Information
The Newcrest Scheme Information has been provided by Newcrest and is the responsibility of
Newcrest. Newcrest agreed with LGL in the Merger Implementation Agreement that the Newcrest Scheme
Information would contain all information regarding the Newcrest Group and the New Newcrest Shares
that would be required to be disclosed if the issue of the New Newcrest Shares under the Scheme
were a public offering of securities under the PNG Securities Act. Newcrest has also given
representations and warranties to LGL in the Merger Implementation Agreement that the Newcrest
Scheme Information complies with applicable laws, regulations and rules of applicable securities
exchanges, 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 this Scheme Booklet. LGL will be relying
on Newcrest having complied with its disclosure obligations under the Merger Implementation
Agreement and these representations and warranties in respect of the Newcrest Scheme Information.
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Lihir Gold Limited Scheme Booklet
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57
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6.6 Newcrest reliance on LGL Scheme Information
The LGL Scheme Information has been provided by LGL and is the responsibility of LGL. LGL has
given representations and warranties to Newcrest in the Merger Implementation Agreement that the
LGL Scheme Information complies with applicable laws, regulations and rules of applicable
securities exchanges, 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 this Scheme Booklet. Newcrest
will be relying on these representations and warranties in respect of the LGL Scheme Information.
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profile of lgl 58
Mining operations at Lihir Island.
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Lihir Gold Limited Scheme Booklet
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59
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7.1 Background
LGL is a major global gold producer with operations in PNG, West Africa and Australia. It is one of
the ten largest gold producers in the world, with production totalling 1.12 M ounces during 2009.
LGL has advanced from a single mine operation in PNG in 2005, to now holding a diversified
portfolio of producing gold mines in three countries and a large number of exploration tenements.
LGL has rapidly elevated itself into the top tier of global gold producers.
As at the date of this
Scheme Booklet, it has 2,368,729,935 shares on issue and a market capitalisation of approximately
A$9.7 billion.
LGL is incorporated in PNG, where it operates one of the world’s largest gold mines on Lihir Island
in the New Ireland province. LGL also has operations at Mount Rawdon in Queensland, Australia and
at Bonikro in Côte d’Ivoire in West Africa. Combined from its three operations, LGL has more than
30 M ounces in gold reserves. Record production in 2009 saw LGL join the group of gold miners
producing in excess of one M ounces annually. This comprised a record 853,391 ounces from Lihir
Island, 150,023 ounces from Bonikro in its first full 12 months of production and 107,780 ounces
from Mount Rawdon.
LGL is publicly listed, with its shares traded on ASX, and POMSoX and ADSs traded on NASDAQ.
Canadian LGL Shareholders should also note that LGL voluntarily filed an application with TSX
requesting delisting of LGL Shares from TSX. The delisting took effect from 12 July 2010, Toronto
time.
The figure below illustrates the location of LGL’s operations.
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7
Profile of LGL continued
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60
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7.2 Major assets
(a) Operations
Lihir Island
LGL’s flagship Lihir Island operation is one of the world’s largest gold mines and processing
facilities. The operation is 100% owned by LGL and is located on the island of Niolam, 900
kilometres north-east of Port Moresby in the New Ireland province of PNG. As Niolam Island is the
principal island of the Lihir Group, it is generally referred to as Lihir Island.
The Ladolam deposit on Lihir Island has been extensively drilled and explored since discovery in
1982. Production at Lihir Island commenced in May 1997, and in the period to March 2010, more than
eight M ounces of gold have been produced.
The Lihir Island mine consists of a single ore body with three linked open pits – Minifie, Lienetz
and Kapit. Ore is predominantly refractory sulphide ore which must be treated via pressure
oxidation through an autoclave before the gold can be recovered. Following the commissioning of the
flotation circuit expansion in July 2007, the processing plant is capable of treating more than six
M tonnes of ore per annum. The Million Ounce Plant Upgrade described in more detail below is
expected to lift gold production by an average 240,000 ounces of gold per year, taking capacity to
more than one M ounces per year from 2012.
As released in August 2009, Lihir Island contained Measured and Indicated Mineral Resources of 43 M
ounces of contained gold at an average grade of 2.42 g/t (as at December 2008) and as at 30 June
2009, Lihir Island contained Ore Reserves of 28.8 M ounces gold at an average grade of 2.71 g/t
gold.
Production for the year ended 31 December 2009 was 853,391 ounces at a total cash cost of US$394
per ounce and for the three months ended 31 March 2010 was 180,273 ounces at a total cash cost of
US$510 per ounce.
Bonikro
The Bonikro operation is located in the central-southern portion of the West African nation of Côte
d’Ivoire, approximately 250 kilometres north-west of the commercial capital Abidjan. LGL acquired
the Bonikro gold project, along with a large exploration portfolio in Côte d’Ivoire, in June 2008
through a merger with Equigold NL.
1
LGL holds 89.9% of the shares in Equigold Mines CI SA, which in turn holds a 100% interest in the
Bonikro operation. The government of Côte d’Ivoire holds a 10% interest in Equigold Mines CI SA,
with 0.1% of the issued shares held by a minority shareholder.
Equigold NL secured the Oumé project area in 1996 and gold mineralisation was discovered at Bonikro
shortly after, following geochemical soil sampling. In July 2006, Equigold NL announced the
completion of a bankable feasibility study into the Bonikro project. Construction of the mine began
in May 2007, with gold production commencing in October 2008.
The Bonikro operation employs a conventional open pit mining method comprising drill, blast, load
and haul. The predominant method of gold recovery is via carbon in leach (CIL) technology, with
some gold recovered via a gravity circuit.
As at 31 March 2010, Bonikro contained:
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(i)
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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.
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(ii)
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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.
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Production for the year ended 31 December 2009 was 150,023 ounces at a total cash cost of US$416
per ounce and for the three months ended 31 March 2010 was 26,628 ounces at a net cash cost of
US$503 per ounce.
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Note
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1
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Equigold NL has since been renamed LGL Mount Rawdon Operations Pty Ltd.
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Lihir Gold Limited Scheme Booklet
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61
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Mount Rawdon
LGL’s 100% owned Mount Rawdon operation is an open pit gold and silver mine and process plant
located in South East Queensland, Australia approximately 80 kilometres south-west of Bundaberg.
LGL acquired the Mount Rawdon operation in June 2008 through a merger with Equigold NL. Equigold NL
had purchased the project in August 1998. Equigold NL completed a bankable feasibility study on the
operation in June 1999, and began construction the following year. The Mount Rawdon operation was
commissioned in January 2001, with first gold production in February 2001. It has produced over
830,000 ounces of gold since operations began in 2001.
The operation mines a single open pit using conventional open pit mining methods of drill,
blast, load and haul, using a local mining contractor. The processing plant consists of primary
and secondary crushing, SAG and ball milling, followed by conventional cyanidation leaching. Mill
throughput is maintained at ~3.4 Mtpa of ore with a recovery of approximately 90%.
As at 1 January 2010, Mount Rawdon contained Measured and Indicated Mineral Resources of 1,190 k
ounces of contained gold and 3,710 k ounces of contained silver at an average grade of 0.73 g/t and
2.28 g/t respectively, and Ore Reserves of 835 k ounces of gold and 2,433 k ounces of silver at an
average grade of 0.81 g/t gold and 2.37 g/t silver.
Production for the year ended 31 December 2009
was 107,780 ounces of gold at a total cash cost of US$396 per ounce of gold and for the three
months ended 31 March 2010 was 22,856 ounces of gold at a total cash cost of US$572 per ounce of
gold.
(b) Development projects
LGL is aiming to produce 1.45 M ounces of gold per annum on average for the five years from 2012 to
2016.
Million Ounce Plant Upgrade
In 2008, the LGL Board approved a major expansion of the Lihir Island process plant, known as the
Million Ounce Plant Upgrade. This expansion will involve substantially replicating the existing
process stream, including installation of an additional autoclave along with more milling
equipment, oxygen production capacity and leaching capacity, and is on track for completion by the
end of 2011.
The
Million Ounce Plant Upgrade is expected to lift gold production at Lihir Island by an average of
240,000 ounces per year over the life of the operation. Also, due to improved processing
efficiencies, the upgrade will increase total gold production over the life of the operation by in
excess of 1 M ounces.
Hiré feasibility study
In 2009, LGL commenced a feasibility study for the development of satellite deposits at Hiré,
approximately 10 kilometres from the Bonikro plant. Under the proposed expansion plan, higher grade
ore from Hiré will be trucked to Bonikro for processing,
commencing in 2012. This would potentially
increase gold production to approximately 200 to 250 k ounces of gold per year from 2012, and
extend the life of the Bonikro operation. The technical assessment considers the expansion of the
plant from 2 M tonnes to 3.5 M tonnes per year, through the installation of additional milling
capacity. Drilling of the Hiré deposits continues during 2010 and results are expected to provide a
restatement of Mineral Resources and Ore Reserves for these deposits in the second half of 2010.
The feasibility assessment is expected to be completed early in 2011.
(c) Exploration
LGL is currently exploring numerous prospects within 30 kilometres of Bonikro which offer strong
opportunities to supplement the present mine plan. These include Dougbafla East, approximately 15
kilometres north of the Bonikro deposit, and Hiré, 12 kilometres south-east of Bonikro.
Dougbafla East contains an Indicated Mineral Resource of 217 k ounces and an Inferred Mineral
Resource of 15 k ounces. Hiré includes the individual prospects of Agbalé, Akissi-So, Chappelle and
Assondji-So (in order from north to south), all of which contain significant mineralisation. The
current Mineral Resource at Hiré totals approximately 442 k ounces of Indicated Resource and a
further 450 k ounces of Inferred Resource.
LGL also
holds rights to a very large package of exploration tenements in
Côte d’Ivoire. These
tenements are contained in the highly prospective Birimian Greenstone belt, which is known to host
a large number of significant gold deposits in the West African region. LGL holds exploration
rights to 16 approved licences covering approximately 10,600 square kilometres, with a further 12
licences currently under application (covering an additional ~ 7,500 square kilometre area). The
principal targets for LGL’s exploration activities are shallow, bulk tonnage, multi M ounce gold
deposits amenable to open pit extraction, as well as high grade, structurally controlled
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7
Profile of LGL continued
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62
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gold deposits which can be exploited by underground mining methods. Most of the exploration
tenements are greenfields projects having little to no systematic exploration activities completed
over them in the past, and are therefore at an early stage of evaluation. Nonetheless, work
completed to date by LGL has defined numerous, very large, high tenor soil anomalies which may
indicate the presence of significant gold deposits. Drilling activities over one such anomaly
(Didiévi) has identified numerous mineralised zones in addition to returning a very encouraging
intercept of 37 metres at 7.0 g/t Au within 150 metres of the surface. LGL is committed to rigorous
and systematic exploration of its Côte d’Ivoire licences, and has budgeted to invest in excess of
US$30 million on exploration activities in the country in 2010.
7.3 Gold production and cost profile
The table below sets out recent production history for LGL’s mines.
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3 MONTHS
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YEAR ENDED
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YEAR ENDED
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TO 31 MARCH
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31 DECEMBER
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31 DECEMBER
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2010
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2009
2
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2008
1,2
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Mining
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Mine production
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Mt
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Lihir Island
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10.46
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46.37
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50.7
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Mount
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Rawdon
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3.15
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11.34
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10.0
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Bonikro
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3.61
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11.70
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N/A
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Processing
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Tonnes treated
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Mt
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Lihir Island
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1.73
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6.51
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6.15
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Mount
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Rawdon
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0.78
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3.35
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3.46
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Bonikro
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0.48
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2.05
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0.64
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Head grade
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Au g/t
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Lihir Island
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5.01
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6.41
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5.86
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(Autoclave
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Feed Grade)
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Mount
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Rawdon
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0.97
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1.11
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1.03
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Bonikro
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1.83
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2.39
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2.19
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Gold recovery
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%
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Lihir Island
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81.1
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81.3
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82.5
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Mount
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Rawdon
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90.2
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90.9
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89.8
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Bonikro
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94.2
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94.9
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90.0
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Gold produced
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kozs
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Lihir Island
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180.3
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853.4
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771.5
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Mount
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22.9
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107.8
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102.4
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Rawdon
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(53.6
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attributable to LGL)
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Bonikro
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26.6
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150.0
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36.7
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Cash costs
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Total costs
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US$/oz
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Lihir Island
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510
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394
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406
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Mount
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Rawdon
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572
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396
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411
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Bonikro
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503
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416
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307
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(Dec quarter)
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Notes
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1
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The Kirkalocka operation, acquired as part of LGL’s 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.
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2
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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.
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Lihir Gold Limited Scheme Booklet
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63
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7.4 Mineral Resources and Ore Reserves
LGL’s most recent statement of Mineral Resources for the Lihir Island operation and Côte d’Ivoire
projects (other than Bonikro) was made as at August 2009, as released to ASX on 26 August 2009.
LGL’s most recent statement of Ore Reserves for the Lihir Island operation was made as at 30 June
2009, as released to ASX on 29 October 2009. LGL’s most recent statement of Mineral Resources and
Ore Reserves for the Bonikro operation was made as at 31 March 2010, as released to ASX on 31 May
2010. LGL’s most recent statement of Mineral Resources and Ore Reserves for the Mount Rawdon
operation was made as at 1 January 2010, as released to ASX on 18 February 2010. LGL’s Mineral
Resources stated in this Scheme Booklet are inclusive of Ore Reserves.
(a) Mineral Resources – Lihir Island
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TONNES
|
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AVERAGE GRADE
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CONTAINED OUNCES
|
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(MT)
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(AU G/T)
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(MOZS)
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Measured
|
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59.4
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|
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2.48
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4.7
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Indicated
|
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494
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2.41
|
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38.3
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TOTAL
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43.0
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Inferred
|
|
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87.3
|
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1.95
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5.5
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Notes
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1
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Cut-off grade of 1.0 g/t. Rounding, conforming to the JORC Code, may cause some computational
discrepancies.
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2
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Stated resources numbers have been adjusted to account for mining depletion during the period
up to 31 December 2008.
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3
|
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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.
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(b) Ore Reserves – Lihir Island
|
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RESERVE
|
|
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TONNES
|
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AVERAGE GRADE
|
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CONTAINED GOLD
|
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CATEGORY
|
|
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(MT)
|
|
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(AU G/T)
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|
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(MOZS)
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|
|
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
|
(c) Mineral Resources – Côte d’Ivoire (other than Bonikro)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, LGL’s 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
|
(d) Mineral Resources – Bonikro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
(e) Ore Reserves – Bonikro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
(f) Mineral Resources – Mount Rawdon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(g) Ore Reserves – Mount Rawdon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
The information in this Scheme Booklet that relates to Ore Reserves at Bonikro and Mount
Rawdon is based on information compiled by Nicholas Spicer. Nicholas Spicer is an employee of LGL
Services Australia Pty Ltd (a company that provides management services to LGL), and is not
independent for NI 43-101 purposes. Nicholas Spicer is a member of the Australasian Institute of
Mining and Metallurgy, a Competent Person under the JORC Code, and a Qualified Person for purposes
of NI 43-101 in Canada. Nicholas Spicer consents to the inclusion in this Scheme Booklet of the
matters based on his information in the form and context in which it appears.
The information in
this Scheme Booklet that relates to Mineral Resources at Lihir Island, Bonikro and Mount Rawdon,
and Exploration Results from Côte d’Ivoire, is based on information compiled by Roy Kidd. Roy Kidd
is an employee of LGL Services Australia Pty Ltd (a company that provides management services to
LGL), and is not independent for NI 43-101 purposes. Roy Kidd is a member of the Australian
Institute of Geoscientists, a Competent Person under the JORC Code, and a Qualified Person for
purposes of NI 43-101 in Canada. Roy Kidd consents to the inclusion in this Scheme Booklet of the matters based on his information
in the form and context in which it appears.
The information in this Scheme Booklet that relates to Ore Reserves at Lihir Island is based
on information compiled by David Grigg. David Grigg is an employee of LGL, and is not independent
for NI 43-101 purposes. David Grigg is a member of the Australasian Institute of Mining and
Metallurgy, a Competent Person under the JORC Code, and a Qualified Person for purposes of NI
43-101 in Canada. David Grigg consents to the inclusion in this Scheme Booklet of the matters based
on his information in the form and context in which it appears.
Ore Reserves and Mineral Resources included herein are presented in accordance with the JORC Code.
LGL Shareholders should note that it is a requirement of the Listing Rules of ASX that the
reporting of Ore Reserves and Mineral Resources in Australia comply with the JORC Code, whereas
mining companies in other countries may be required to report their mineral reserves and/or
resources in accordance with other guidelines. LGL Shareholders should note that while LGL’s Ore
Reserve and Mineral Resource estimates comply with the JORC Code, they may not comply with the
relevant guidelines in other countries.
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
67
|
7.5 Capital structure and ownership
As at the date of this Scheme Booklet, LGL’s capital comprises 2,368,729,935 LGL Shares on
issue (including 380,447 restricted executive shares).
As at 21 July 2010, LGL had received the following current substantial shareholder notices
pursuant to the PNG Securities Act:
|
|
|
|
|
|
|
|
|
|
|
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 equivalent substantial shareholder disclosure required in Australia (Chapter 6A of the
Australian Corporations Act) does not apply to LGL. However, the thresholds for disclosure (5%)
and for changes in substantial shareholders (1%) are the same under the PNG Securities Act and the
Australian Corporations Act.
7.6 Dividend history and policy
Prior to 2009, LGL declared a shareholder dividend in respect of the 2002 year and this
was paid in 2003. Dividend payments thereafter were not made. LGL declared both an
interim dividend and a final dividend (each of US$0.015 per share) in respect of the 2009
year.
If the Scheme is not implemented, the LGL Board intends to continue to pay interim and final
dividends in the future, subject to gold price performance, resultant profitability and
requirements for reinvestment of operating cash flow. Dividends paid by LGL are subject to PNG 10%
dividend withholding tax. While a formal policy for the quantum of future dividends has not been
established, it is envisaged that dividends would be targeted in the range of 20%–50% of
underlying profits in each half year period, subject to alternative reinvestment requirements for
existing operations and growth projects.
7.7 Recent LGL Share price performance
The following chart shows the closing price of LGL Shares on ASX over the past 12 months:
The closing price of LGL Shares on ASX on 21 July 2010 (being the last ASX Trading Day prior
to the date of this Scheme Booklet) was A$4.10.
During the 12 months ended 21 July 2010:
|
•
|
|
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.
|
The closing price of LGL Shares on ASX on the last ASX Trading Day prior to the Announcement Date
was A$3.67.
|
|
|
|
|
|
|
|
|
7
Profile of LGL continued
|
|
68
|
7.8 Risks relating to LGL’s business
There are existing risks relating to LGL’s business and an investment in LGL which will continue to
be relevant to LGL Shareholders if the Scheme is not implemented. These risks, set out below, have
the potential to impact the future price of LGL Shares and LGL’s ability to pay dividends.
(a) Risks associated with the gold mining industry
Change in gold prices
LGL’s profitability is dependent on the price of gold. There are many factors outside of LGL’s
control which determine the gold price and it is impossible for management to predict future
movements in gold prices.
Exploration and developmental risk
Exploration and mining activity is speculative in nature and requires a significant financial
investment to fund the exploration drilling necessary to quantify the grades of mineralised
material. If mineralisation is discovered, it may take additional time and further financial
investment to determine whether an ore reserve exists and commission a feasibility study for the
project. Feasibility studies are based on many assumptions, each introducing an additional element
of risk into this feasibility calculation. Similarly, LGL’s Ore Reserve estimates are merely
expressions of judgment based on knowledge, experience and industry practice, and may require
revision when new information becomes available. Changes in the forecast price of commodities,
exchange rates, production costs or recovery rates may alter the economic status of the Ore
Reserves and may result in the restatement of those reserves. Such changes could affect
depreciation and amortisation rates, asset carrying values, deferred stripping calculations and
provisions for environmental clean-up costs. In summary, no assurance can be given that the
indicated amount of gold will be recovered or at the rates estimated.
Changes in oil prices
Oil-based products, fuels and consumables (including chemicals, explosives, heavy fuel oil and
diesel) are a large operating cost to any mining company. Diesel fuel is used to power the mining
equipment while heavy fuel oil is used to generate electrical power. While the development of
alternative power (e.g. geothermal) reduces the dependence on heavy fuel oil, LGL remains
vulnerable to the impact of increases in oil prices for diesel and for its remaining heavy fuel oil
requirements (e.g. lubricants).
High demand for input production factors
Due to the increased demand for most mineral commodities experienced over the last few years, there
has been significant demand for many mining and processing inputs. LGL, like most other mining and
processing operations worldwide, has faced shortages and delays in the procurement of some required
parts and supplies. These market pressures have been reflected in the cost and availability of
certain inputs. LGL cannot guarantee that no equipment will be rendered inoperative due to lack of
parts supply, or that there will be no other adverse effects from LGL’s inability to obtain other
mining and processing inputs.
Insurance may not address all operating risks
LGL’s mines, processing plants or related facilities could be forced to shut down or operations
could otherwise be disrupted by a variety of risks and hazards, some of which may be outside the
control of LGL. While LGL does maintain insurance with a range of coverage consistent with
industry practice, no assurance can be given that this coverage can be maintained at reasonable
rates or that any coverage it arranges will be adequate and available to cover any claims.
Competition with other mining companies for projects and key personnel
LGL competes with other mining companies on a global basis to attract and retain key human
resources. With an increase in mining activity observed in the past few years, there is a global
shortage of key mining industry human resource skills, including geologists, metallurgists, mining
engineers and governance, finance and administrative personnel. In addition, there is a high degree
of competition for the acquisition of attractive gold mining projects. A failure to attract and
retain key personnel or a failure to acquire attractive gold mining projects could have a material
adverse effect on LGL’s business and operations.
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
69
|
(b) Risks
specific to LGL
Dependence on production from Lihir Island
LGL’s primary operating mine is on Lihir Island in PNG. While LGL’s Bonikro and Mount Rawdon
operations make material contributions to LGL’s gold production, for the year ended 31 December
2009, Lihir Island represented 76% of LGL’s gold production. As a result, the commercial viability
of LGL is currently highly dependent upon the successful operation of its Lihir Island mine.
Political and community risk
LGL operates in PNG and Côte d’Ivoire, which are developing countries that are subject to political
uncertainties including, but not limited to, the risk of civil rebellion, expropriation,
nationalisation and land ownership disputes. Unpredictable government actions concerning the
economy, taxation, or the operation and regulation of facilities deemed important (such as mines)
could have a significant adverse effect on LGL.
Hydrological and geothermal risks
The success of the Lihir Island operation depends, in part, upon the implementation of LGL’s
engineering solutions to particular hydrological and geothermal conditions. Notwithstanding
experience gained since the start of the operation, geothermal and hydrological ground conditions
are unique in a mine the size of the Lihir mine. Significant removal of both groundwater and sea
water inflow and geothermal control are required before and during mining. While LGL has achieved
considerable success to date in addressing these conditions, no assurance can be given that future
efforts will be adequate or meet expectations. A failure to resolve any unexpected problems
relating to these conditions at a commercially reasonable cost could adversely affect the
economics, safety and/or feasibility of the Lihir operation.
Earthquake seismic activity risks
Lihir Island is a volcanic seamount and the Lihir Island operation is located within the caldera of
a volcano believed to be extinct. In addition, seismic investigations confirmed that Lihir Island
is 90 kilometres away from a seismically active area of PNG. No assurance can be given that
operations at the Lihir Island mine will not be adversely affected by earthquake activity
(including resulting tsunami risk) during the life of the Lihir mine.
Landslide risks
The Lihir Island mine is located in a high erosion environment with the risk of landslides.
Landslides are influenced by natural phenomenon such as rainfall and earthquakes, but may also be
influenced by the ongoing mining operations. No assurance can be given that operations at the Lihir
Island mine will not be adversely affected by a significant landslide during the life of the
operation.
Construction, commissioning and other operational risks
LGL operates in remote locations and this may exacerbate construction, commissioning and
operational risk. Specifically, the successful completion of the Million Ounce Plant Upgrade
is subject to a number of risks and uncertainties, including unforeseen geological, physical,
economic or environmental conditions that may result in cost over-runs, delays in construction
or delivery of equipment resulting in delayed project commissioning.
Industrial relations risk
LGL cannot guarantee that it will not in the future face strikes, work stoppages, work
slowdowns, grievances, complaints, claims of unfair practices or other industrial activity.
Any such activity can cause production delays, increased costs and negative effects on LGL’s
ability to deliver on production forecasts. As a result, operating results may suffer.
|
|
|
|
|
7
Profile of LGL continued
|
|
70
|
LGL has limited financial resources
While LGL currently believes that it has, or will have, access to resources sufficient to finance
its operations and capital expenditure requirements including the MOPU project, the adequacy of
LGL’s financial resources will depend upon its ability to generate sufficient revenues from gold
production and to keep its costs and other expenditures within its current estimates. If LGL is
unable to generate such revenues and keep its costs and expenditures within such estimates, or if
unexpected conditions or developments occur, LGL could require more funds than are currently
available to it.
LGL has undertaken negotiations with a number of banks, including those with which LGL has in place
existing bank debt facilities, with the intent of establishing new, and refinancing LGL’s existing,
bank debt facilities. These negotiations were advanced to credit approval stage but have been
suspended pending the outcome of the Scheme.
LGL’s operations are subject to environmental obligations
As a mining company, LGL is required to comply with regulatory frameworks designed to protect the
environment. While LGL is in compliance with its environmental obligations, there is no guarantee
that an event may not occur to jeopardise LGL’s ability to mine.
LGL’s mining and exploration rights may be suspended or terminated
As a mining company, LGL is reliant on various governments renewing its existing mining and
exploration rights.
LGL is vulnerable to currency risks and foreign exchange controls
The PNG kina is subject to exchange controls. No assurance can be given that LGL will be able to
convert its US dollar receipts or any PNG kina funds it has into other currencies at rates
comparable to those at which funds were remitted to PNG in the past or at all.
Although LGL reports in a single currency (US dollars), its costs and revenues are exposed to the
fluctuations of a number of different currencies. Costs and capital expenditures incurred at the
Lihir operation are denominated in US dollars, Australian dollars and PNG kina. Capital
expenditures and future operating costs at the Mount Rawdon operation and the corporate office are
principally incurred in Australian dollars. Capital expenditures and operating costs at the Bonikro
operation are principally incurred in US dollars, West African CFA, Australian dollars and the
European euro. Revenues from the Lihir and Bonikro mines are in US dollars. Revenues from the Mount
Rawdon mine are determined by metals prices denominated in US dollars but are currently received in
Australian dollars. LGL’s non-US dollar costs and capital expenditures may be subject to changes
beyond its control due to fluctuations in these and other currency exchange rates
7.9 LGL financial information
Set out below is a summary of recent financial information relating to LGL from its financial
reports for the years ended 31 December 2009 and 31 December 2008. The LGL 2009 annual report was
released to ASX on 25 March 2010 and the LGL 2008 annual report was released to ASX on 23 March
2009. Those reports contain details of the accounting policies applied by LGL and a detailed
discussion and analysis by LGL’s management of the financial results for the respective periods.
Copies of LGL’s financial reports are available on ASX’s website at www.asx.com.au
and LGL’s website at www.lglgold.com.
The LGL financial information is presented in an abbreviated form and does not contain all the
disclosure provided in an annual report prepared in accordance with the PNG Companies Act.
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
71
|
(a) Basis of preparation
Financial information for the years ended 31 December 2009 and 31 December 2008 has been audited
by PricewaterhouseCoopers Securities Ltd and prepared in accordance with the PNG Companies Act,
and complies with applicable financial reporting standards and other mandatory professional
reporting requirements approved for use in PNG by the Accounting Standard Board (
ASB
). This
financial information has been prepared in accordance with IFRS issued by the International
Accounting Standards Board (
IASB
). IFRS has been adopted by the IASB as the applicable financial
reporting framework.
(b) Statement of financial position
Set out below are LGL’s consolidated statements of financial position as at 31
December 2009 and 31 December 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
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$M
|
|
|
|
|
2009
|
|
|
2008
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
111.4
|
|
|
|
102.1
|
|
|
Provisions
|
|
|
26.9
|
|
|
|
18.5
|
|
|
Borrowings and finance facilities
|
|
|
0.7
|
|
|
|
0.3
|
|
|
Derivative financial liabilities
|
|
|
—
|
|
|
|
33.5
|
|
|
Deferred settlement payable
|
|
|
—
|
|
|
|
10.8
|
|
|
Liabilities classified as held for sale
|
|
|
7.0
|
|
|
|
—
|
|
|
Total current liabilities
|
|
|
146.0
|
|
|
|
165.2
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
46.5
|
|
|
|
37.5
|
|
|
Borrowings and finance facilities
|
|
|
50.2
|
|
|
|
0.2
|
|
|
Derivative financial liabilities
|
|
|
—
|
|
|
|
18.9
|
|
|
Deferred income tax liability
|
|
|
145.6
|
|
|
|
142.5
|
|
|
Total non-current liabilities
|
|
|
242.3
|
|
|
|
199.1
|
|
|
Total liabilities
|
|
|
388.3
|
|
|
|
364.3
|
|
|
NET ASSETS
|
|
|
3,238.7
|
|
|
|
2,935.8
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
Contributed equity
|
|
|
3,420.9
|
|
|
|
3,080.0
|
|
|
Reserves
|
|
|
(74.2
|
)
|
|
|
(305.9
|
)
|
|
(Accumulated loss)/retained earnings
|
|
|
(139.7
|
)
|
|
|
129.8
|
|
|
Total equity attributable to owners of the Company
|
|
|
3,207.0
|
|
|
|
2,903.9
|
|
|
Non-controlling interests
|
|
|
31.7
|
|
|
|
31.9
|
|
|
Total equity
|
|
|
3,238.7
|
|
|
|
2,935.8
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
73
|
(c) Statement of comprehensive income
Set out below are LGL’s consolidated statements of comprehensive income for the years ended 31
December 2009 and 31 December 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED ENTITY
|
|
|
|
|
US$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
|
(d) Statement of cash flows
Set out below are LGL’s consolidated statements of cash flows for the years ended 31
December 2009 and 31 December 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(e) Subsequent events
Refer to LGL’s 2009 annual report (available on ASX’s website at www.asx.com.au and
LGL’s website at www.lglgold.com) for details of events subsequent to 31 December 2009
in addition to the sale of the Ballarat project discussed immediately below.
Sale of the Ballarat project
On 7 May 2010, LGL completed the sale of the Ballarat project in Victoria, Australia to
Castlemaine Goldfields Limited for A$4.5 million in cash plus an additional 2.5% royalty
interest (calculated on net smelter return) in future production, capped at A$50 million.
7.10 Possible effect of the Minerals Resource Rent Tax on LGL
LGL expects that the currently proposed Minerals Resource Rent Tax will, if implemented, have no
impact on LGL, as it will not apply to gold projects.
7.11 Litigation
LGL is not currently involved in any material litigation, disputes or proceedings and is not
aware of any potential material litigation, disputes or proceedings other than:
(a) T Smith (Victorian Workcover Authority) v Ballarat Goldfields Pty Ltd
On 25 January 2010, Ballarat Goldfields Pty Ltd (
BGF
) received a Charge-Sheet and Summons
(Corporate Accused) to appear at the Magistrates’ Court of Victoria at Ballarat in relation to an
action commenced by the Victorian Workcover Authority (
VWA
) arising from a vehicle fatality which
occurred at the Ballarat gold mine on 11 December 2008. BGF has retained solicitors and counsel to
act on its behalf in this matter. The VWA has also charged the employer of the deceased.
(b) Claim by Strang Aniokaka Limited (SAL) and Strang International Pty Limited (SIPL) against LGL
SAL and LGL were parties to a materials handling and stevedoring services contract for LGL’s Lihir
Island operations. LGL sought tenders for the services provided by SAL but subsequently terminated
the tender process. Following a notice of termination by LGL, SAL (as contractor) ceased to provide
services to LGL on 30 June 2009. LGL bought SAL’s equipment and engaged a labour hire company to
provide labour for the services. SAL alleged that LGL was not entitled to terminate the contract
when it did but has not progressed that allegation. SAL has purported to assign its rights against
LGL to SIPL. SAL and SIPL have subsequently filed an application in the Federal Court, Sydney for
preliminary discovery of documents from LGL. The claims by SAL and SIPL which form the basis of the
order for preliminary discovery are allegations that LGL engaged in misleading and deceptive
conduct and induced a breach of duty of care between shareholders of SAL relating to the tender
process. LGL is opposing or will seek to limit the scope of SAL’s and SIPL’s application for
preliminary discovery which is anticipated to be heard on 16 August 2010.
In addition to the above matters, companies in the LGL Group are recipients of or defendants in
certain claims, suits and complaints made, filed or pending. In the opinion of the LGL 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 LGL Group if disposed of unfavourably, or are at a stage which
does not permit a reasonable evaluation of the likely outcome of the matter.
7.12 Hedging
LGL’s operational and investment activities expose it to various commodity price risks and
foreign exchange risks, which LGL manages in accordance with its established risk management
policy framework.
In commodity markets, LGL is predominantly exposed to gold price risk but there is also some price
risk arising from the use of petroleum products and, to a lesser extent, from the generation of
carbon emission reductions.
Since LGL is a US dollar denominated functional currency entity, its international operations are
exposed to various foreign currency price risks which arise from non-US dollar denominated
operating and capital purchases. Primarily, these operating and capital purchases are denominated
in PNG kina, Australian dollars, European euros and West African CFA.
(a) Gold
LGL does not currently engage in hedging of gold sales revenues. With the elimination of its
previously established gold hedges by May 2007, and the subsequent closure in June 2009 of
hedging inherited through the merger with Equigold NL, as of the date of this Scheme Booklet, LGL
does not have any gold hedges in place.
(b) Petroleum products
As at the date of this Scheme Booklet, LGL has hedged limited portions of diesel and heavy fuel
oil purchases over a two-year hedge horizon to protect LGL against rising oil prices.
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Profile of LGL continued
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(c) Foreign currency
In foreign exchange markets, LGL hedges all known material foreign currency commitments in respect
of major capital projects. All known material foreign currency commitments directly related to the
Million Ounce Plant Upgrade are therefore currently fully hedged. These commitments are denominated
in European euros, Australian dollars and PNG kina. LGL also hedges a portion of operating expenses
of the Lihir Island site that are denominated in PNG kina.
All of the above risks are identified, quantified, evaluated and, where considered prudent, managed
in accordance with the approved policy framework. In all cases where hedging is implemented,
standard vanilla financial derivatives are utilised. Forward currency contracts are utilised to
hedge the risk of changes in foreign exchange rates and fuel swaps are utilised to hedge the risk
of changes in fuel prices.
7.13 LGL Board
Dr Ross Garnaut
AO BA, PhD
Chairman, Independent Director
Chairman and member of the LGL Board since 1995, Dr Garnaut is Chairman of
PNG Sustainable Development Program Ltd, a director of Ok Tedi Mining Ltd
and a director of the Lowy Institute of International Policy. From 2003
until 2010, he was a trustee and Chairman of the Board of Trustees of the
International Food Policy Research Institute. He is a Distinguished
Professor of Economics at the Australian National University and
Vice-Chancellor’s Fellow at the University of Melbourne. He was formerly
Chairman of the Bank of Western Australia Ltd and Chairman of the Primary
Industry Bank of Australia Ltd.
Dr Garnaut is Chairman of the LGL Board’s Remuneration and Nomination
Committee and a member of its Audit and Sustainable Development
Committees.
Mr Graeme Hunt
BMet, MBA, FAusIMM
Managing Director and Chief Executive Officer
Prior to his appointment as LGL Managing Director and CEO in April 2010,
Mr Hunt spent 34 years with BHP Billiton Limited. A metallurgist by
training, Mr Hunt held a variety of senior management positions over the
course of his career at BHP. He served as President of the global Iron Ore
division from 1999 to 2006, and President of the global Aluminium division
in 2006 and 2007. Mr Hunt’s most recent role at BHP was as President of
Uranium, including responsibility for the Olympic Dam Expansion. As
President of Iron Ore, Mr Hunt presided over a major program of building
and utilising strategic options for increasing value through expanding
production from a huge resource, which continues today.
Mr Bruce Brook
BCom, BAcc, FCA, MAICD
Independent Director
Appointed December 2005. A chartered accountant with extensive experience
in the mining industry, as well as experience in the financial services
and manufacturing industries. He has held senior finance positions at Gold
Fields Limited of South Africa, Rio Tinto Limited, Pacific Dunlop Limited,
ANZ Banking Group and WMC Limited, where he was Chief Financial Officer.
Mr Brook has served as a State Councillor for the Institute of Chartered
Accountants in Australia (
ICAA
), National President of the Group of 100
and Chairman of the ICAA/ASX liaison group. He is also a non-executive
director of Snowy Hydro Limited, Boart Longyear Limited and Programmed
Maintenance Services Limited, and is also a director of the Export Finance
& Insurance Corporation and Deep Exploration Technologies Cooperative
Research Centre Limited. Mr Brook is a member of the Financial Reporting
Council, the Salvation Army Audit Committee and the Finance Committee of
the University of Melbourne. He has previously been a non-executive
director of Consolidated Minerals Limited (2005–2008) and Energy
Developments Limited (2009–2010).
Mr Brook is Chairman of the LGL Board’s Audit Committee.
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Dr Peter Cassidy
BSc (Eng), PhD, DIC, ARSM, CEng, FAusIMM, FIMMM,
FAICD Independent Director
Appointed to the LGL Board in January, 2003. Dr Cassidy is a metallurgical
engineer with 40 years of experience in the mining industry in Australia,
PNG, the USA and South East Asia. He was Managing Director and Chief
Executive Officer of Goldfields Limited from 1995 until his retirement in
2002. Dr Cassidy is also a non-executive director of the Minerals and
Metals Group. He was previously a non-executive director of AurionGold
Limited (2002–2003), Oxiana Limited (2002–2008), Sino Gold Mining Limited
(2002–2009), Energy Developments Limited (2003–2009), Zinifex Limited
(2004–2008), OZ Minerals Limited (2008–2009) and Eldorado Gold Corporation
(2010).
Dr Cassidy is Chairman of the LGL Board’s Safety and Technical
Committee and a member of its Remuneration and Nomination Committee.
Dr Mike Etheridge
PhD, FTSE, FAIG, FAICD
Independent Director
Dr Etheridge is a geologist with over 35 years’ experience in exploration,
mining, consulting and research. Until 2004, Dr Etheridge was Chairman of
SRK Consulting (Australasia), having co-founded its predecessor Etheridge
Henley Williams in 1990. Dr Etheridge is an Adjunct Professor at Macquarie
University, where he has been leading an industry collaborative research
project into improving the management of risk and value in mineral
exploration. Dr Etheridge is currently Chairman of ABM Resources NL.
Dr Etheridge is a member of the LGL Board’s Safety and Technical
Committee.
Lady Winifred Kamit
BA, LLB
Independent Director
Appointed
to the LGL Board in October 2004. Lady Kamit is currently Senior
Partner at Gadens Lawyers in Port Moresby, and is a Councilor of the
Institute of National Affairs. She is also a director of New Britain Palm
Oil Limited, Nautilus Minerals Niugini Limited, Steamships Trading Company
Limited, South Pacific Post Limited, Bunowen Services Limited, Post
Courier Limited, Allied Press Limited and Anglicare (Stop Aids) PNG. Lady
Kamit has held senior positions in the PNG Public Service, including a
three-year appointment as Commissioner of the Public Services Commission.
Lady Kamit is Chairperson of the LGL Board’s Sustainable Development
Committee and a member of its Remuneration and Nomination Committee.
Mr Geoff Loudon
MSc, FAusIMM
Independent Director
Appointed a director in 1995 with considerable experience in extractive
industries and operating in PNG. Formerly Chief Executive and later
Chairman of Niugini Mining Limited, which discovered the Lihir Island
deposit in joint venture with Kennecott Explorations Australia Limited. He
is currently also Chairman of the L&M Group, L&M Petroleum Limited, and
Nautilus Minerals Inc and a director of Port Moresby City Mission Limited.
Mr Loudon is a member of the LGL Board’s Safety and Technical and
Sustainable Development Committees.
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Mr
Alister Maitland
B Com, FAICD, FAIM, SF Fin
Independent Director
Appointed in 2007. Mr Maitland has extensive experience in financial
management, executive stewardship and corporate governance. He is a former
Executive Director of the ANZ Banking Group Ltd and served in New Zealand,
the United Kingdom and Australia. Among other positions, he was Chief
Economist, Managing Director of New Zealand and Executive Director
International. Mr Maitland was Adjunct Professor and Council member of
Global Sustainability at RMIT. Mr Maitland is currently Chairman of
Folkestone Ltd, and a non-executive director of Maybank Corporation
Berhad.
Mr Maitland is a member of the LGL Board’s Audit Committee.
7.14 Material changes in LGL’s financial position since last accounts published
Within the knowledge of the LGL Board, and other than as disclosed in this Scheme Booklet (in
particular, in this section 7), the financial position of LGL has not materially changed since 31
December 2009, being the date of the balance sheet for the full year accounts of LGL for the
financial year ended 31 December 2009.
LGL’s Financial Report for the full year ended 31 December 2009 was released on 18 February 2010.
This report is available from ASX’s website at www.asx.com.au and LGL’s website at
www.lglgold.com.
7.15 Continuous disclosing entity
As a company listed on ASX and a “disclosing entity” under the Australian Corporations Act, LGL is
subject to regular reporting and disclosure obligations. Broadly, these obligations require LGL to
announce price sensitive information as soon as it becomes aware of the information, subject to
exceptions for certain confidential information and incomplete proposals. LGL’s recent
announcements are available from ASX’s website at www.asx.com.au and LGL’s website at
www.lglgold.com. Further announcements concerning developments at LGL will continue to be
made available on these websites after the date of this Scheme Booklet.
Copies of documents lodged with ASIC in relation to LGL may be obtained from, or inspected at,
an ASIC office. A fee may be payable to inspect or obtain copies of these documents.
LGL is currently subject to reporting and disclosure obligations with the SEC under the US Exchange
Act. Copies of LGL’s documents filed with or submitted to the SEC can be obtained from the SEC’s
website at www.sec.gov. Although Newcrest will be deemed to succeed to LGL’s registration
under the US Exchange Act when the Scheme becomes Effective, Newcrest has advised that, provided it
satisfies the applicable requirements under the US Exchange Act and the rules and regulations under
that Act, it intends to terminate such registration under the US Exchange Act as soon as
practicable following the time the Scheme becomes Effective. See section 9.3(c) for additional
information.
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8.1 Background
Newcrest is a major Australian headquartered explorer for, and producer of, gold. In addition to
gold production, Newcrest also produces a significant amount of copper and some silver. Newcrest is
Australia’s largest gold producer and one of the world’s top ten gold mining companies by
production, reserves and market capitalisation. As at 21 July 2010, it had a market capitalisation
of A$16.1 billion.
Newcrest has a substantial and long-life reserve and resource base. As at 30 June 2009, it had gold
reserves of 42.8 M ounces, copper reserves of 4.67 M tonnes, gold resources of 80.0 M ounces and
copper resources of 14.36 M tonnes. During the financial year ended 30 June 2009, Newcrest produced
1,631,183 ounces of gold and 89,877 tonnes of copper. For the financial year ended 30 June 2009,
Newcrest generated total sales revenue of A$2,530.8 million, operating EBITDA of A$1,039.4 million
and underlying profit of A$483.1 million. Newcrest’s
statutory profit after tax for the year ended
30 June 2009 was A$248.1 million, which included a non-cash loss of A$235.0 million relating to
Newcrest’s gold hedge close-out during the financial year ended 30 June 2008.
Newcrest’s current
activities include seven operating mines, including the recently completed Ridgeway Deeps block
cave (Cadia Hill, Ridgeway, Telfer Open Pit, Telfer Underground, Hidden Valley, Cracow and
Gosowong) and two development projects (Cadia East, and Gosowong Expansion). Newcrest uses a range
of efficient and low cost bulk mining methods together with selective underground mining methods
for higher grade epithermal operations. In addition, Newcrest is evaluating three other major
prospects with significant metal endowments, namely Wafi-Golpu in PNG, Namosi in Fiji and
O’Callaghans in Western Australia and is currently exploring for gold and gold-copper deposits in
Australia, Indonesia, Fiji and PNG.
Newcrest has experience in developing and commissioning both large-scale mines, such as Cadia Hill,
Ridgeway, Telfer and Hidden Valley, and small-scale mines that capitalise on high-grade deposits
such as Gosowong and Cracow.
Newcrest dates back to 1966, when Newmont Mining Limited established an Australian subsidiary,
Newmont Australia Limited. The present company, Newcrest Mining Limited, was incorporated in
Victoria on 20 June 1980 as Newmont Holdings Pty Ltd. In 1990, Newmont Australia Limited acquired
Australmin Holdings Ltd, and subsequently merged with BHP Gold Limited in 1990 and changed its name
to Newcrest Mining Limited. Newcrest has been listed on ASX since 1987 (as Newmont Australia
Limited until 1990) and in September 2008 it was included in the S&P ASX Top 20 companies. In
addition, Newcrest maintains a “level 1” ADR program in the United States. See section 8.23 for
additional information.
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The figure below illustrates the location of Newcrest’s major operations, development projects and
exploration activity.
8.2 Strategic intentions
Newcrest pursues a strategy of delivering competitive shareholder returns by:
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maintaining a focus on gold;
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building a portfolio of low-cost, predominantly long-life gold assets, through exploration and
acquisition in known gold regions (focus on South East Asia);
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optimising performance at each phase of the gold mining value chain (exploration, projects and
operations);
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utilising its technical expertise across mining, transportation and metallurgical processes;
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constantly improving environmental performance, community involvement and safety outcomes; and
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developing our people in technical, commercial and leadership aspects of the industry.
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8 Profile of Newcrest continued
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8.3 Corporate structure
A simplified Newcrest group structure is set out below. A full list of subsidiaries can be obtained
from Newcrest’s 2009 Annual Report.
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Note
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1
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Other group companies include corporate and exploration entities.
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Under the proposed Scheme, LGL will become a direct subsidiary of Newcrest.
8.4 Major assets
(a) Operations
Cadia Hill
The Cadia Hill open pit mine (
Cadia Hill
) is located in central western New South Wales,
Australia, 20 kilometres south-west of the city of Orange and 250 kilometres west of the city of
Sydney. Cadia Hill is 100% owned by Newcrest and is one of the largest open pit gold-copper mines
in Australia.
Cadia Hill produces approximately 17 Mtpa of plant feed ore and current total material movement of
approximately 33 Mtpa. Newcrest estimates that total material movement will decline over the coming
years, due to the reduction in waste removal requirements that will occur as the pit nears
completion. The pit is currently approximately 650 metres below the original surface. Refer to
section 8.4(b) for further detail in relation to the development of Cadia East.
As at 30 June 2009, Cadia Hill contained resources of 5.9 M ounces of gold and 0.51 M tonnes of
copper at an average grade of 0.43 g/t and 0.12% copper and reserves of 2.6 M ounces gold and 0.20
M tonnes copper at average grade of 0.61 g/t gold and 0.15% copper.
Production for the year ended June 2009 was 297,889 ounces and 28,083 tonnes of gold and copper,
respectively, at a net cash cost of A$499 per ounces of gold, and for the six months ended 31
December 2009 production was 127,998 ounces and 14,158 tonnes of gold and copper, respectively, at
a net cash cost of A$225 per ounce of gold.
Cadia Hill has a forecast mine life to early 2013.
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Ridgeway
The Ridgeway gold-copper mine (
Ridgeway
) is located approximately three kilometres north-west of
Cadia Hill. The two mines share a number of infrastructure facilities and services, enabling the two
concentrators to be efficiently operated as a single complex. Ridgeway is 100% owned by Newcrest.
The Ridgeway deposit, discovered in November 1996, lies approximately 500 metres below the
surface. In April 2002, Ridgeway operations were officially opened with a successful commissioning
of the underground sub-level cave mine, ore handling facilities and a new concentrator with a
nominal throughput rate of 4 Mtpa. The underground mining rate and concentrator throughput have
since been increased to 6 Mtpa.
Ridgeway has transitioned from the original sub-level cave operation to a recently commissioned
block cave beneath the sub-level cave. Mining of the sub-level cave mine was essentially completed
in the quarter ended March 2010 and mining transitioned to the lower level block cave, Ridgeway
Deeps, which was completed under budget and three months ahead of schedule at a cost of A$505
million.
As at 30 June 2009, Ridgeway contained resources of 3.8 M ounces gold and 0.59 M tonnes copper at
an average grade of 0.77 g/t and 0.39% copper and reserves of 2.7 M ounces gold and 0.38 M tonnes
copper at average grade of 0.84 g/t gold and 0.39% copper.
Production for the year ended June 2009 was 234,298 ounces and 28,889 tonnes of gold and copper,
respectively, at a net cash cost of (A$4) per ounce of gold, and for the six months ended 31
December 2009 production was 99,785 ounces and 13,164 tonnes of gold and copper, respectively, at a
net cash cost of A$74 per ounce of gold.
Telfer
Telfer was the founding project for Newmont
Australia Limited after its discovery in 1971 and became the cornerstone of Newcrest following its
creation. The original gold mine operated from 1977 to 2000 and produced almost 6 M ounces of gold.
In October 2000, mining operations were suspended due to escalating costs, caused primarily by the
prevalence of cyanide soluble copper encountered in the ore at the base of the Telfer open pit.
A comprehensive feasibility study was completed in October 2002, which established an optimum
strategy for the mining and processing of ore from the surface and Telfer Deeps ore (which is below
the main pit) from underground. Instead of viewing the copper as an impediment in the extraction
process, as had previously been the case, the project sought to optimise the economic value of the
deposit by the production of copper as a by-product.
The Telfer gold-copper operation was officially re-opened in July 2005, after two years of
construction. The mine is located in the Great Sandy Desert in the Paterson Province of Western
Australia, Australia, approximately 450 kilometres east-south-east of Port Hedland. The mine is
approximately 1,300 kilometres by air and 1,900 kilometres by road from Perth. Telfer is 100% owned
by Newcrest.
The operation comprises two mines, Telfer Open Pit and Telfer Underground. Telfer Open Pit
comprises the Main Dome open pit and the West Dome open pit. Open pit mining currently takes place
in the Main Dome open pit. The underground mine is located beneath the Main Dome open pit. The ore
from the mining operations is combined in a large, twin train, flotation treatment plant.
As at 30 June 2009, Telfer (excluding O’Callaghans) contained resources of 19.6 M ounces gold and
0.76 M tonnes copper at an average grade of 0.96 g/t gold and 0.12% copper and reserves of 14.1 M
ounces gold and 0.53 M tonnes copper at average grade of 0.91 g/t gold and 0.11% copper.
Production for the year ended June 2009 was 629,108 ounces and 32,905 tonnes of gold and copper,
respectively, at a net cash cost of A$708
1
per ounce of gold and for the six months
ended 31 December 2009 production was 347,539 ounces and 17,826 tonnes of gold and copper,
respectively, at a net cash cost of A$552 per ounce of gold.
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Note
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1
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Telfer’s 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 Energy’s Varanus Island gas
plant in June 2008.
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Cracow
The Cracow gold mine (
Cracow
) is owned jointly by Newcrest (which holds a 70% interest) and
Catalpa Resources (which holds a 30% interest). Cracow is located in central Queensland, Australia,
approximately four kilometres from the township of Cracow and approximately 500 kilometres
north-west of the city of Brisbane. Newcrest manages the mining operations and exploration in the
district.
In 2004, Newcrest and its then joint venture partner completed initial development of the
underground mine and refurbishment and upgrading of the existing treatment plant. The first
production of gold occurred in November 2004.
As at 30 June 2009, Cracow contained resources of
0.84 M ounces gold and 0.62 M ounces silver at an average grade of 8.2 g/t gold and 6.0 g/t silver
and reserves of 0.23 M ounces gold and 0.15 M ounces silver at average grade of 7.2 g/t gold and
4.8 g/t silver.
1
Production for the year ended 30 June 2009 was 99,204 ounces at a net
cash cost to Newcrest of A$519 per ounce of gold and for the six months ended 31 December 2009
production was 53,081 ounces at a net cash cost to Newcrest of A$490 per ounce of gold.
2
Gosowong
The Gosowong gold mine (
Gosowong
) is located on Halmahera Island, Indonesia. It is
operated by PTNHM, which is owned jointly by Newcrest (which holds an 82.5% interest) and PT Aneka
Tambang, a public company listed on the Indonesia Stock Exchange (which holds a 17.5% interest).
Development of the Kencana K1 deposit represents the third mine at the Gosowong site, the first two
being the Gosowong open pit mine and the Toguraci open pit mine (
Toguraci
).
Development of the
Kencana mine commenced in 2005, upon approval of the feasibility study and the environmental impact
statement by the Indonesian Minister of Mines. Site preparation, construction of the access road
and pre-stripping activities were then undertaken. First gold production occurred in March 2006. The
Gosowong processing plant has a capacity of approximately 575,000 tonnes per year (following the
commissioning of the Vertimill in June 2009) and processes ore from Kencana K1, K2 and K-Link,
high-grade underground mineralisation deposits averaging 24 grams of gold per tonne.
During the year ended 30 June 2005, the K2 orebody was discovered at the Kencana system. The Kencana
K2 orebody is located approximately 200 metres south-west of the original Gosowong orebody and is
approximately 100 metres deeper. Development for K2 is progressing, with the K2 ventilation shaft
completed ahead of schedule and production from K2 having commenced.
As at 30 June 2009, Gosowong contained resources of 2.8 M ounces gold and 2.2 M ounces silver at an
average grade of 24 g/t gold and 18 g/t silver and reserves of 2.4 M ounces gold and 1.6 M ounces
silver at average grade of 24 g/t gold and 16 g/t silver.
3
Gold production for the year
ended June 2009 was 400,220 ounces at a net cash cost of A$336 per ounce of gold and for the six
months ended 31 December 2009 gold production was 182,256 ounces at a net cash cost of A$340 per
ounce of gold.
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Notes
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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%).
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2
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The figures shown represent 100% interest unless otherwise stated. Cracow is an unincorporated
joint venture between Newcrest (70%) and Catalpa Resources (30%).
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3
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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%).
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Hidden Valley
Hidden Valley is a gold and silver project located approximately 90 kilometres south-west of Lae in
Morobe Province, PNG. Regionally, the goldfields district of the Morobe Province covers a portion
of the Papuan Orogenic belt, which hosts a number of world-class gold and copper-gold deposits
including Porgera and Ok Tedi.
Hidden Valley is part of the Morobe Mining JV (
MMJV
) which is owned 50% by Newcrest and 50% by
Harmony Gold Mining Company.
Construction and commissioning of the Hidden Valley plant, including the silver flotation circuit,
were delayed because of heavy rainfall, gearbox failures and plant modifications, but are now
completed. The plant is now expected to reach its original design capacity and throughput in the
June 2010 quarter. Electricity supply at Hidden Valley is currently sourced from 19 diesel
generator sets located on site. MMJV has contracted with PNG Power Limited for a permanent supply
of electricity through the Yonki Toe of Dam hydro scheme, expected to become the permanent source
of electricity supply in late 2010.
Hidden Valley is expected to produce over 250 k ounces of gold and 3.6 M ounces of silver per year
over a projected 14 year mine life. Exploration potential in the immediate mine area is high and
Newcrest is confident that the mine life can be extended.
As at 30 June 2009, Hidden Valley contained Resources of 5.4 M ounces gold and 84.0 M ounces silver
at an average grade of 1.8 g/t gold and 32 g/t silver and reserves of 2.8 M ounces gold and 45 M
ounces silver at average grade of 2.1 g/t gold and 37 g/t silver.
1
Gold production for
the six months ended 31 December 2009 was 49,364 ounces (all capitalised).
2
(b) Development projects
In accordance with Newcrest’s strategy of enhancing existing operations, it currently has a suite
of new mine-based development projects in construction at Cadia East and Gosowong. Newcrest is also
considering developing an emerging suite of development projects at Wafi-Golpu (PNG), Namosi
(Fiji), O’Callaghans (Western Australia, Telfer) and Toguraci Underground (Indonesia, Gosowong),
which are discussed in further detail below.
Newcrest’s development and project team focuses on the development, feasibility, design and
construction of Newcrest’s mining projects. The team develops business cases and mine plans and
estimates the costs, timing and resources required to begin both extraction and processing of the
ore bodies that the exploration and development team has identified. The team works closely with the
minerals and operations teams to ensure the project delivers the planned outcomes. Overviews of
Newcrest’s projects are provided below.
Cadia East
On 9 April 2010, the Newcrest Board approved the development of the Cadia East gold and copper
deposit following receipt of New South Wales Government planning approval in January 2010 and the
subsequent completion of other regulatory requirements in relation to the proposed development.
The Cadia East deposit is a porphyry zone of gold-copper mineralisation adjacent to the eastern
edge of the Cadia Hill ore body and extending up to 2.5 kilometres east. The system is up to 600
metres wide and extends to approximately 1.9 kilometres below the surface. It was discovered before
Ridgeway. It is one of the world’s largest gold deposits, comprising a Mineral Resource of 2,347 M
tonnes containing 33.2 M ounces of gold and 6.59 M tonnes of copper, along with a current Ore
Reserve of 18.7 M ounces of gold and 3.16 M tonnes of copper. It will underpin production from the
Cadia Valley for at least the next 30 years.
The project is based on the construction of an underground mine adjacent to the existing Cadia
Hill open pit mine, and an expansion of the existing Cadia Valley processing plant capacity from 24
Mtpa to 26 Mtpa. It will be Australia’s largest underground mine and one of the largest underground
mines in the world.
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Notes
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1
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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.
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2
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The figures shown represent 100% unless otherwise stated. Newcrest and Harmony Gold each hold a
50% interest in the Morobe Mining JV.
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The project will enable production from Cadia Valley operations to increase to a range of 700 k
ounces to 800 k ounces of gold and 75 k tonnes to in excess of 100 k tonnes of copper per year over
the first 10 years. Cash costs over the first 10 years of production are expected to be below A$100
per ounce, with a total production cost of less than A$250 per ounce. Both these costs are after
by-product credits that conservatively allow for a drop in the copper price to US$2.00/lb from 2016
with an exchange rate of US$1/A$0.75.
The estimated capital cost of the project is A$1.91 billion, with the majority of the capital
expenditure to be incurred by the end of the 2012 calendar year. It will comprise underground mine
development which includes a new underground crushing and ore handling system, modifications to the
existing processing plant and further development of bulk underground mining technologies. First
production is expected in the second half of the 2012 calendar year. Commissioning will be
completed during the 2013 calendar year as the operation ramps-up to full production.
Gosowong
Newcrest Board approval to develop the Gosowong expansion project was received during the December
quarter 2008. The project involves extension of the existing Kencana underground mine into the K
Link and K2 ore bodies and increasing process plant throughput to 65 tph (currently 50 tph). The
project scope includes additional mine development, ventilation works, processing facility
upgrades, increased tailings storage capacity and upgrades to general site infrastructure.
The development capital cost of the project is estimated at US$179 million including early
commitment capital. The expansion project is planned to increase gold production to an average
annualised rate of over 450 k ounces.
In the six months ended 31 December 2009, approximately A$45
million was spent on development expenditure at Gosowong.
(c) Exploration
Discovery of new ore bodies remains an important element in Newcrest’s strategy to maximise
shareholder returns over the long term. Newcrest has a strong discovery record in the gold mining
industry and has had success in discovering major gold deposits in the past 15 years.
Newcrest’s exploration strategy is focused on brownfields exploration of known gold mining or
mineral districts in Australia, Indonesia, Fiji and PNG and focuses on deeper drilling. A key
objective of Newcrest’s exploration strategy is to control large mineral districts in order to
secure long-term mining operations, while enhancing the potential for repeat discoveries.
The principal targets for Newcrest’s exploration activities are large porphyry gold-copper,
epithermal gold and sediment hosted gold deposits. An extensive greenfield and brownfield
exploration program is maintained as part of Newcrest’s long-term growth objective. Newcrest’s
current focus is on Gosowong in Indonesia, Telfer in Western Australia, Namosi in Fiji and
Wafi-Golpu and other exploration tenements in PNG.
Namosi
The Namosi tenement, which is located about 30 kilometres west of Fiji’s capital city, Suva, has
been periodically explored over the past 40 years. It is centred on a district that is highly
prospective for copper-gold porphyry system.
The potential for gold and base metals at Namosi was
established in the 1960s, and exploration led to the eventual discovery of the Waisoi deposits.
Between 1991 and 1995, Placer Pacific defined a large, low grade, porphyry copper-gold deposit at
Waisoi as an open pit copper gold resource and conducted a feasibility study.
In late 2007, Newcrest signed a definitive joint venture agreement with Nittetsu Mining Co., Ltd
and Mitsubishi Materials Corporation to establish the Namosi joint venture to explore for porphyry
copper-gold and epithermal-style gold mineralisation in the Namosi region of Fiji. Newcrest owns
69.94% of the Namosi joint venture and is the manager of the joint venture’s exploration
activities.
|
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|
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Lihir Gold Limited Scheme Booklet
|
|
87
|
Newcrest’s work on the Namosi tenement has focused on two key areas:
|
•
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|
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.
|
Wafi-Golpu
The Wafi-Golpu project is located in the Morobe Province of PNG, approximately 65 kilometres
south-west of the town of Lae. Wafi-Golpu is a major exploration project that forms part of the
MMJV.
Recent work conducted by the MMJV has included a significant amount of additional drilling at
Wafi-Golpu, ongoing regional exploration, and concept studies on deposit knowledge and possible
development scenarios. Results from this work, including but not limited to very strong gold and
copper results from deep drilling at Golpu, support an exploration target for the Wafi-Golpu
project area of in excess of 20 M ounces of gold and 4 M tonnes of copper based on a tonnage range
between 600 and 1,000 M tonnes. This targets growth of epithermal deposits to between 100 and 200 M
tonnes at a grade range between 1.5 and 2.0 grams per tonne plus porphyry deposits to a range of
500 and 800 M tonnes at grades between 0.7 and 1.1% copper and 0.5 to 0.7 g/t gold.
1
Reported Measured, Indicated and Inferred Mineral Resources (100%) as at 30 June 2009 for
Wafi-Golpu-Nambonga total approximately 300 M tonnes containing 10.2 M ounces of gold and 1.8 M
tonnes of copper. This comprises an extensive body of gold-only epithermal style mineralisation
(Wafi) and deeper porphyry related copper-gold mineralisation (Golpu and Nambonga). The Wafi
epithermal mineralisation includes oxide, transitional and sulphide ore types with individual ore
zones reported at relatively high cut-off grades. Studies show that the resource is quite sensitive
to these cut-offs with only minor improvements in margin required to increase the inventory
substantially. Exploration also demonstrates that these mineralised zones are spatially related to
a central diatreme and that the mineralised zones remain open at depth.
Deep drilling undertaken and reported in recent quarters demonstrates that the Golpu porphyry
deposit may be significantly larger than the reported resource. Results show strongly mineralised
porphyry at depth and to the north with grades persisting well into metasediment wall-rocks.
Several other porphyry style targets in earlier stages of exploration with encouraging preliminary
data also exist in the project area.
(d) Newcrest leadership in underground mining methods
Newcrest strategic business overview
Newcrest is recognised as a global leader in the development and operation of low-cost, long-life
gold and gold-copper underground mines. Newcrest’s technical and operational capability in each
part of the mining value chain allows it to pursue varied growth opportunities and maintain a
strong project pipeline.
Over recent years Newcrest has placed significant focus on investing in strategic research and
development of world-leading underground bulk-mining technologies.
Strategic research and development focus
Newcrest’s research and development comprises a broad cross-functional project portfolio from early
concept studies to full-scale trials. Trough such studies and trials, Newcrest has advanced the
technical development of caving and other mining methods to achieve its strategic, cost and
resource targets.
Examples of Newcrest’s development focus
include:
|
•
|
|
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
|
8.5 Production and cost profile
The table below sets out recent production history for Newcrest’s mines.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
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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.
|
Gold production for the 2010 financial year is expected to be at the lower end of 1.81—1.91
M ounces with probable outcomes settling in the range of 1.81 M ounces plus 1% minus 3%.
Newcrest has publicly disclosed production guidance and resources and reserves data in respect of
its operations in the following recent presentations:
|
•
|
|
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.
|
Copies of these presentations are available from Newcrest’s website at www.newcrest.com.au and
ASX’s website at www.asx.com.au.
Further announcements and presentations concerning Newcrest’s updated production guidance and
resources and reserves data will continue to be made after the date of this Scheme Booklet, and can
be obtained from Newcrest’s website and ASX’s website. In particular, Newcrest is expected to make
the following disclosures to the market following the date of this Scheme Booklet but prior to the
Scheme Meeting:
|
•
|
|
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
|
8.6 Mineral Resources and Ore Reserves
The following tables present Newcrest’s most recent statement of Mineral Resources and Ore
Reserves as at 30 June 2009, as released in Newcrest’s 2009 Annual Report or, in the case of
O’Callaghans, as subsequently released to ASX on 12 February 2010. Newcrest’s Mineral Resources
stated in this Scheme Booklet are inclusive of Ore Reserves.
Mineral Resources — gold and copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 O’Callaghans.
|
Mineral Resources — silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
O’Callaghans Mineral Resource (Telfer Province, WA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
Ore Reserves — gold and copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Ore Reserves — silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Ore Reserves and Mineral Resources for Newcrest included herein are presented in accordance
with the JORC Code.
The information in this Scheme Booklet that relates to Exploration Results, Mineral Resources and
Ore Reserves with regard to Newcrest is based on information compiled by C. Moorhead. C. Moorhead
is Newcrest’s Executive General Manager Minerals, and is not independent for Nl 43-101 purposes. C.
Moorhead is a Member of the Australasian Institute of Mining and Metallurgy, a Competent Person as
defined under the JORC Code, and a Qualified Person for the purposes of Nl 43-101 in Canada. C.
Moorhead consents to the inclusion in this Scheme Booklet of the matters based on his information
in the form and context in which it appears.
Investors should note that it is a requirement of the Listing Rules of ASX that the reporting of
Ore Reserves and Mineral Resources in Australia comply with the JORC Code, whereas mining companies
in other countries may be required to report their mineral reserves and/or resources in accordance
with other guidelines. Investors should note that while Newcrest’s Ore Reserve and Mineral Resource
estimates comply with the JORC Code, they may not comply with the relevant guidelines in other
countries.
For Nl 43-101 purposes, if presented in accordance with the CIM Definition Standards on Mineral
Resources and Mineral Reserves adopted by the CIM Council, the Mineral Reserve and Mineral
Resource presentation would be materially the same.
8.7 Capital structure and ownership
As at the 20 July 2010, Newcrest’s capital comprises:
|
•
|
|
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
|
As at 20 July 2010, the top 20 Newcrest Shareholders held approximately 89.1% of Newcrest
Shares as indicated in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Based on publicly available information as at 20 July 2010, Newcrest had received notifications
from the following shareholders in relation to substantial holdings in Newcrest in accordance with
section 671B of the Australian Corporations Act:
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
8.8 Dividend history and policy
Newcrest reviews its results each half year and determines an appropriate level of dividend, taking
into account the level of profits for the half year and full year, anticipated cash commitments and
cash available for payment of dividends. From 2001 to 2007, Newcrest paid an annual dividend of 5
cents per Newcrest Share. In 2008 and 2009, Newcrest paid an annual dividend of 10 cents and 15
cents per Newcrest Share respectively. Since 2006, Newcrest’s dividends have been unfranked.
Newcrest declared an interim unfranked dividend of A$0.05 per Newcrest Share for the half year
ended 31 December 2009, which was paid to Newcrest Shareholders on 16 April 2010. The unfranked
dividend has been paid from foreign sourced income, and has therefore been exempt from Australian
withholding tax. Newcrest also maintains a non-discounted dividend reinvestment plan.
Newcrest’s focus is on delivering overall value creation and returns to its shareholders, including
through the payment of dividends. The capacity to pay dividends, and where possible to increase
them, is balanced with the need for Newcrest to fund its emerging projects to ensure its future
growth.
8.9 Recent Newcrest Share price performance
The following chart shows the closing price of Newcrest Shares on ASX over the past 12 months:
The closing price of Newcrest Shares on ASX on 21 July 2010 (being the last ASX Trading Day prior
to the date of this Scheme Booklet) was A$33.31.
During the 12 months ended 21 July 2010:
|
•
|
|
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.
|
During the three months ended 21 July 2010:
|
•
|
|
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.
|
The last recorded sale price for Newcrest Shares on ASX before the Announcement was A$32.06 on 3
May 2010.
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
93
|
8.10 Newcrest financial information
Set out below is a summary of recent financial information relating to Newcrest from its financial
reports for the years ended 30 June 2009 and 30 June 2008 and for the half year ended 31 December
2009.
The Newcrest financial information is presented in an abbreviated form and does not contain all
the disclosure provided in an annual report prepared in accordance with the Australian
Corporations Act.
The Newcrest 2009 annual financial report was released to ASX on 17 August 2009, the 2008 annual
financial report was released to ASX on 19 August 2008 and the 2009 half year financial report was
released to ASX on 12 February 2010. Those reports contain details on the accounting policies
applied by Newcrest and a detailed discussion and analysis by Newcrest’s management of the
financial results for the respective periods. A copy of the Newcrest 2009 half year financial
report and 2009 Annual Report will be provided free of charge to anyone who requests a copy. Copies
of Newcrest’s 2009 Annual Report, 2008 Annual Report and 2009 half year financial report are also
available on Newcrest’s website: www.newcrest.com.au.
The following section sets out summaries of certain historical financial information concerning
Newcrest. It reflects historical information that does not take into account the effects of the
implementation of the Scheme. In relation to the effects of the implementation of the Scheme, refer
to section 9.
(a) Basis of preparation
Financial information for the years ended 30 June 2009 and 30 June 2008 has been audited by Ernst &
Young and prepared in accordance with IFRS, other authoritative pronouncements of the Australian
Accounting Standards Board, Urgent Issues Group Interpretations and the Australian Corporations
Act. The financial information for the half year ended 31 December 2009 has been reviewed by Ernst
& Young but not audited.
Newcrest currently presents its financial reports in Australian dollars. As LGL reports its
financial information in US dollars, the following sections set out Newcrest’s balance sheet,
income statement and cash flow statement in both Australian dollars and US dollars.
The balance sheet and income statement have been translated into US dollars in accordance with the
provisions of AASB 121, which concerns the Effects of Changes in
Foreign Exchange Rates. AASB 121
requires assets and liabilities to be translated at the closing exchange rates at each balance
sheet date and income and expenses to be translated at exchange rates at the date of the
transactions (with monthly average rates being used for each period for practical purposes). The
cash flow statement has been translated on a basis consistent with the income statement.
The balance sheets have, therefore, been translated based on the following spot exchange rates:
31 December 2009: $0.89445; 30 June 2009: $0.80990; and 30 June 2008: $0.96210.
|
|
|
|
|
8
Profile of Newcrest continued
|
|
94
|
(b) Balance sheet
Set out below are Newcrest’s consolidated balance sheets as at 31 December 2009, 30 June 2009
and 30 June 2008 respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AS AT 31 DECEMBER 2009
|
|
|
AS AT 30 JUNE 2009
|
|
|
AS AT 30 JUNE 2008
|
|
|
|
|
A$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
|
(c) Income statement
Summarised below are Newcrest’s consolidated income statements for the half year ended 31
December 2009 and the years ended 30 June 2009 and 30 June 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(d) Statement of cash flows
Set out below are Newcrest’s consolidated cash flow statements for the half year ended 31
December 2009 and the years ended 30 June 2009 and 30 June 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(e) Material changes in the financial position of Newcrest
Within the knowledge of the directors of Newcrest, the financial position of Newcrest has not
materially changed since 31 December 2009, being the date of the last reviewed balance sheet of
Newcrest.
8.11 Possible effects of the Minerals Resource Rent Tax on Newcrest
On 2 May 2010 the Australian Government proposed a number of changes to the Australian taxation
system seeking to impose additional taxes on the Australian mining industry. This was to be
implemented through the introduction of a 40% Resource Super Profits Tax on Australian resource
projects and would have applied to Newcrest’s Australian-based mines. The proposed tax changes also
included a reduction over time of the Australian corporate tax rate from 30% to 28%.
The Australian Government announced on 2 July 2010 that it would replace the proposed Resource
Super Profits Tax with a Minerals Resource Rent Tax, and that it would apply only to Australian
iron ore and coal projects. As such the Minerals Resource Rent Tax will not apply to any of
Newcrest’s existing or proposed operations (including LGL’s Australian operations). This is a
positive development for Newcrest.
With the change from the proposed Resource Super Profits Tax to the Minerals Resource Rent Tax, the
Australian Government announced that the proposed reduction in the Australian corporate tax rate
would be to 29% (rather than 28%), and commence from 1 July 2013. The proposed reduction in the
Australian corporate tax rate is also a positive development for Newcrest.
Consistent with what is stated above, Grant Samuel has concluded that the proposed Minerals
Resource Rent Tax would have no impact on the value of Newcrest.
8.12 Rights attaching to New Newcrest Shares
The New Newcrest Shares issued as consideration under the Scheme will be fully paid and rank
equally with existing Newcrest Shares.
A summary of the rights and liabilities attaching to New Newcrest Shares is set out below. This
summary is not exhaustive, nor does it constitute a definitive statement of the rights and
liabilities attaching to New Newcrest Shares, which can involve complex questions of law arising
from the interaction of Newcrest’s Constitution, statutory and common law requirements and the
requirements, of the Listing Rules of ASX.
A copy of the Newcrest Constitution is available for inspection at Newcrest’s registered office
during normal business hours, and a copy can also be downloaded from Newcrest’s website at
www.newcrest.com.au.
(a) Voting rights
At a general meeting, subject to a number of specified exceptions, each Newcrest Shareholder
present in person or by duly appointed representative, proxy or attorney having the right to vote
on the resolution has on a vote by:
(i) a show of hands, one vote; and
(ii) a poll, one vote for each fully paid Newcrest Share held.
(b) General meetings and notices
Newcrest may, by resolution of the Newcrest Board, call a general meeting, to be convened at the
time and place(s) and in the manner determined by the Newcrest Board. Each Newcrest Shareholder is
entitled to receive notice of general meetings of Newcrest and to receive all notices, financial
statements and other documents required to be sent to Newcrest Shareholders under the Newcrest
Constitution, the Australian Corporations Act or the Listing Rules of ASX.
(c) Dividends
The Newcrest Board may determine that a dividend or interim dividend is payable to Newcrest
Shareholders and fix the amount, time and method of payment.
Subject to the rights of, or any restrictions on, Newcrest Shareholders under any special
arrangement as to dividends, dividends are payable on a Newcrest Share in proportion to the amount
paid up on that Newcrest Share. All New Newcrest Shares will be issued fully paid.
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8
Profile of Newcrest continued
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98
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(d) Variation of class rights
The rights attached to any class of Newcrest Shares, unless otherwise provided for by the terms of
issue, may only be varied or cancelled with the consent in writing of the holders of three-quarters
of the issued shares in the relevant class, or with the sanction of a special resolution passed at
a meeting of the holders of the shares in that class. However, Newcrest may vary rights attached to
Newcrest Shares by the issue of new shares having different rights to the Newcrest Shares, without
Newcrest Shareholder approval being specifically required for the variation.
(e) Further issues of Newcrest Shares
Except as provided by contract or the Newcrest Constitution, all unissued Newcrest Shares are under
the control of the Newcrest Board, which may grant options on the Newcrest Shares or issue or
otherwise dispose of the Newcrest Shares on the terms and conditions and for the consideration it
thinks fit. Without affecting any special rights conferred on any Newcrest Shareholder, any
Newcrest Share may be issued with preferred, deferred or other special rights, obligations or
restrictions, whether in regard to dividends, voting, return of share capital, payment of calls or
otherwise, as the Newcrest Board may determine.
(f) Winding up
If Newcrest is wound up, the liquidator may divide among all or any of the Newcrest Shareholders in
kind any part of Newcrest’s assets.
The division may be carried out as the liquidator thinks fit, subject to the rights of Newcrest
Shareholders with special rights in a winding up. If a division is made otherwise than in
accordance with the legal rights of a Newcrest Shareholder, and such shareholder is prejudiced by
that division, that shareholder has a right to dissent. Any dissenting Newcrest Shareholder will
have ancillary rights as if the determination of the division were a special resolution passed
under the Australian Corporations Act relating to the sale or transfer of a company’s assets by a
liquidator in a voluntary winding-up.
(g) Buy-backs
Newcrest may buy shares in itself on the terms and at the times determined by the Newcrest
Directors, to the extent and in the manner permitted by the Australian Corporations Act.
(h) Transfer of Newcrest Shares
Newcrest Shares, when listed on ASX, are transferable by:
|
•
|
|
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;
|
|
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•
|
|
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.
|
The Newcrest Board may, subject to the requirements of the Australian Corporations Act and the
Listing Rules of ASX, refuse to register any transfer of Newcrest Shares in the following
circumstances:
|
•
|
|
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.
|
Except in the case of a proper ASTC transfer, a transferor of Newcrest Shares is deemed to remain
the holder of such shares until the name of the transferee is entered in the register of members of
Newcrest. Every instrument of transfer must be lodged with Newcrest together with any other
evidence which the Newcrest Board may require to prove the title of Newcrest Shares.
|
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Lihir Gold Limited Scheme Booklet
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99
|
(i) Amendment of Newcrest Constitution
The Australian Corporations Act provides that the constitution of a company may be modified or
repealed by a special resolution passed by the members of the company (e.g. passed by at least
75% of the votes cast by members entitled to vote on the resolution). The Newcrest Constitution
does not provide for any further requirements to be complied with to effect a modification of,
or to repeal, the Newcrest Constitution.
8.13 Ranking of New Newcrest Shares
The New Newcrest Shares to be allotted pursuant to the Scheme will be ordinary fully paid shares
and, with effect from their date of issue, will rank pari passu in all respects between themselves
and with the Newcrest Shares on issue prior to the Implementation Date.
8.14 Differences in rights attaching to New Newcrest Shares from LGL Shares
There are no material differences between the material provisions in the Newcrest Constitution
and the LGL Constitution regarding the rights attaching to Newcrest Shares and LGL Shares
respectively. The rights attaching to Newcrest Shares and LGL Shares are summarised in sections
8.12 and 14.7 respectively. However, there are differences in the rights of LGL Shareholders
and Newcrest Shareholders because Newcrest is incorporated in Australia and is subject to
Australian law while LGL is incorporated in PNG, and subject to PNG law. LGL Shareholders
should carefully consider section 15.21, where Newcrest has provided a summary of certain
significant differences between the applicable Australian and PNG legal and regulatory regimes.
8.15 Litigation
Newcrest is not currently involved in any material litigation, disputes or proceedings and is
not aware of any potential litigation, disputes or proceedings other than:
|
(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
|
8.16 Hedging
Newcrest does hedge copper, diesel and certain capital commitments. Newcrest’s copper revenue
hedging is to remove short-term price volatility adjustments that occur from the price at the date
of shipment to final price after an agreed period with the smelter. This is generally for a period
of one to three months and is known as the quotation period adjustment. Newcrest hedges foreign
currency capital expenditure into each project’s functional currency to ensure Newcrest
Board-approved capital expenditure is not materially impacted. Finally, Newcrest looks to hedge
diesel and concentrate shipping transport costs for the 12 months ahead at agreed budget rates.
(a) Gold put options
Newcrest purchased gold put options when it was unwinding its hedgebook to provide partial
cash flow certainty if the gold price fell below A$800 per ounce. As at 31 December 2009 Newcrest
had 1.25 M ounces of gold put options remaining (equivalent to an average of 500,000 ounces per
year over two and a half years commencing January 2010). The strike price is A$800 per ounce.
(b) Copper quotational-period exposures
Newcrest locks in the copper price via simple vanilla swaps for certain copper/gold
concentrate shipments at the time of sale to minimise the impact of quotational-period adjustments
in sales. Copper quotational pricing periods can be up to four months post shipment (generally one
to three months), potentially creating a long period of price uncertainty. Gold prices are not
locked in at the time of shipment due to the shorter quotational period for gold (usually one
month).
(c) Capital equipment foreign exchange exposures
Newcrest hedges non-functional-currency capital commitment exposures to provide some budget
certainty in the functional currency.
(d) Diesel exposures
Short-term diesel exposure hedging is undertaken in line with budget to fix the Australian
dollar diesel costs. These are undertaken via simple vanilla swaps.
8.17 Funding sources
The Cash Consideration for the transaction will be funded via a combination of Newcrest’s
cash on hand and via Newcrest’s committed and undrawn bilateral facilities of US$1,100 million,
with maturities ranging between December 2012 and February 2013 (please refer to the table below).
These facilities are for general corporate purposes and are available for drawdown two days after
lodging a drawdown notice, following satisfaction of standard conditions precedent including:
|
(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.
|
The minimum Cash Consideration to be provided if the Scheme is
implemented is A$533 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
COMMITTED FACILITY
|
|
|
|
|
|
BANK
|
|
US$ 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
|
8.18 Newcrest Board
Donald Mercer
Non-Executive Chairman
Bachelor of Science (Hons) and Master of Arts (Econ)
Mr Mercer was appointed Non-Executive Chairman of Newcrest on 26 October 2006
and is Chairman of the Human Resources and Remuneration Committee. He is also
Chairman of Air Liquide Australia Limited.
Mr Mercer is a former Managing Director and Chief Executive Officer of ANZ
Banking Group and is a former Chairman of the Australian Institute of Company
Directors Limited, The State Orchestra of Victoria, Australia Pacific Airports
Corporation Limited and Orica Limited.
Ian Smith
Managing Director and Chief Executive Officer
Bachelor of Engineering (Hons) from the University of New South Wales, Bachelor
of Financial Administration from the University of New England
Mr Smith was formerly the Global Head of Operational and Technical Excellence
of Rio Tinto plc, based in London, and prior to that was the Managing Director
— Aluminium Smelting within the Rio Tinto Group. He commenced as CEO of
Newcrest on 14 July 2006 and was appointed Managing Director on 19 July 2006.
Mr Smith is Chairman of the Minerals Council of Australia, President of the
Australian Mines and Metals Association and a member of the Australian
Institute of Company Directors.
Gregory Robinson
Director Finance
Bachelor of Science (Hons) Geology from Monash University and MBA from
Columbia University
Mr Robinson is responsible for the Group’s Finance function and leads
Newcrest’s strategy, planning and business
development activities. Prior to joining Newcrest, he was with the BHP Billiton
Group for the period 2001 – 2006 where he held the positions of Project Director
of the Corporation Alignment Project, Chief Finance and Chief Development
Officer, Energy and Chief Financial Officer, Petroleum. He was also a member of
the Energy Executive Committee and Group Executive Committee. Before joining
BHP Billiton, he was Director of Investment Banking at Merrill Lynch & Co and
headed the Asia Pacific Metals and Mining Group.
Timothy Poole
Non-Executive Director
Bachelor of Commerce from the University of Melbourne and a Chartered Accountant
Mr Poole is a former Managing Director of Hastings Fund Management. He is a
member of the Audit and Risk Committee and a member of the Human Resources and
Remuneration Committee.
Other directorships:
Mr Poole is a director of Lifestyle Communities Limited, Victoria Racing Club
Limited, Westbourne Capital Pty Ltd and Westbourne Credit Management Limited.
He was formerly Chairman of Asciano Limited. Mr Poole is also a member of the
Investment Committee of the industry superannuation fund AustralianSuper and a
member of the LEK Consulting Advisory Board.
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|
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8
Profile of Newcrest continued
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|
102
|
John Spark
Non-Executive Director
Bachelor of Commerce and Fellow of the Institute of Chartered Accountants
Mr Spark is a registered company auditor and former Managing Partner of Ferrier
Hodgson, Melbourne. He is Chairman of the Audit and Risk Committee and a member
of the Safety, Health and Environment Committee.
Other directorships:
Mr Spark is the Deputy Chairman of Ridley Corporation Limited and a former
director of ANL Limited and Baxter Group Limited.
Richard Knight
Non-Executive Director
Bachelor of Science (Engineering), Master of Science (Mine Management) and
Chartered Engineer
Mr Knight has extensive experience in the international mining industry. He is
a former Executive Director of North Limited, was Chairman and CEO of the Iron
Ore Company of Canada and was CEO of Energy Resources of Australia Limited. He
is Chairman of the Safety, Health & Environment Committee and a member of the
Audit and Risk Committee.
Other directorships:
Mr Knight is a former director of OZ Minerals Limited, Zinifex Limited, St
Barbara Limited, Portman Limited, Northern Orion Resources Inc and Asia Pacific
Resources.
Richard Lee
Non-Executive Director
Bachelor of Chemical Engineering (Hons) from the University of Sydney and
Master of Arts (Econ) as a Rhodes
Scholar, from Oxford University
Mr Lee is a former Chief Executive of NM Rothschild Australia Group. He is a
member of the Audit and Risk Committee and a member of the Human Resources and
Remuneration Committee.
Other directorships:
Mr Lee is Chairman of Salmat Limited, C. Czarnikow Limited and the Australian
Institute of Company Directors. He is a director of CSR Limited, Australian
Rugby Union Limited and Ridley Corporation Limited.
Vince Gauci
Non-Executive Director
Bachelor of Engineering (Mining)
Mr Gauci has over 40 years’ experience in the global mining industry and was
formerly Managing Director of MIM Holdings Limited. He is a member of the
Safety, Health & Environment Committee and the Human Resources and Remuneration
Committee.
Other directorships:
Mr Gauci is currently the Chairman of Runge Ltd, a director of Liontown
Resources Ltd and Chairman of the Broken Hill Community Foundation. He was
appointed to the board on 10 December 2008.
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|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
103
|
8.19 Senior Management
Stephen Creese
General Counsel & Company Secretary
Bachelor of Law (Hons) and Bachelor of Arts
Stephen was appointed General Counsel & Company Secretary in November 2009. He
is responsible for the Group’s legal and secretarial function. Prior to joining
Newcrest, Stephen was with the Rio Tinto group for 29 years, where he worked in
various legal and commercial roles, including that of General Counsel of Rio
Tinto Limited between 1995 and 2008 and, more recently, as Managing Director of
Rio Tinto Australia. Stephen is also a part-time member of the Australian
Takeovers Panel and the independent chair of the National Employment Services
Association.
Geoff Day
Chief Operating Officer, Offshore Operations
Bachelor of Applied Science (Chemistry) and Master of Applied Science
(Chemistry)
Geoff joined Newcrest as our Executive General Manager Operations in November
2008 following several years in the UK with Rio Tinto. He has over 20 years’
operational and technical experience in the resources sector in Australia, PNG,
Fiji, US, Africa and the UK. As well as being responsible for all Newcrest’s
offshore operations, Geoff also manages health, safety, risk, business
excellence and environment across the Group.
Ron Douglas
Company Executive General Manager Projects
Bachelor of Engineering.
Ron was appointed Executive General Manager Projects in May 2007. He is
responsible for development opportunities through all stages of project
development from concept study to construction. Prior to joining Newcrest Ron
was Chief Executive Officer with Australian Solomons Gold Limited, and previous
to that General Manager with
the Rio Tinto Group, including as Managing Director of Anglesey Aluminium Metal
Ltd. Ron has over 25 years’ operational performance and capital development
experience within the mining sector in Australia, UK, US, South East Asia and
Africa.
Greg Jackson
Chief Operating Officer, Australian Operations
Bachelor of Engineering (Mining)
Greg was appointed Chief Operating Officer, Australian Operations in January
2010. Prior to joining Newcrest, Greg was with the Rio Tinto group for 29 years
where he worked in various operational and project roles including Vice
President Construction & Engineering, Diavik Diamond Mines between 2004 and
2008 and more recently as Chief Advisor Major Projects for the RT Technology
and Innovation Group. As well as being responsible for all Newcrest’s
Australian operations, Greg also manages the company’s technical mining
services, asset management and planning across the Newcrest Group.
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8
Profile of Newcrest continued
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104
|
Colin Moorhead
Executive General Manager Minerals
Bachelor of Science (Hons) Geology
Colin was appointed Executive General Manager Minerals in January 2008. He is
responsible for all geology and exploration activities within Newcrest
including Resources and Reserves. He was previously General Manager Technical
Services for the Newcrest Group. Colin began his career with BHP Gold over 20
years ago and has extensive geology experience with roles at Newcrest’s three
major mining provinces -Telfer, Cadia and Gosowong.
Debra Stirling
Executive General Manager People and Communications
Bachelor of Arts, Government and Journalism
Debra was appointed Executive General Manager People and Communications in
January 2008. She is responsible for the Newcrest Group’s human resources,
corporate affairs and investor relations activities. Prior to joining Newcrest,
Debra was Vice President, Corporate Affairs and Investor Relations with Rinker
Group Limited. Debra has 20 years of senior management experience with Rinker,
CSR and Coles Myer.
8.20 Corporate governance
Newcrest’s vision is to be the ‘Miner of Choice’ — to maintain its position as a leading
producer of gold, creating shareholder wealth in a manner which also benefits its employees and the
communities and environment in which it operates. The Newcrest Board believes that adherence by
Newcrest and its people to the highest standards of corporate governance is critical in order to
achieve its vision.
The corporate governance practices in place at Newcrest, as at the date of this document described
below, includes information required under the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (August 2007).
(a) Newcrest Board
On behalf of the shareholders, the Newcrest Board:
|
•
|
|
sets Newcrest’s strategic goals and objectives; and
|
|
|
|
•
|
|
oversees the management and performance of Newcrest’s business.
|
The Newcrest Board charter defines the Newcrest Board’s role and responsibilities in relation to
strategic, financial, operational and governance matters. It makes it clear that the role of the
Newcrest Board is not to manage Newcrest but to set, on behalf of the shareholders, the strategic
direction of Newcrest and to review, oversee and monitor the management and performance of the
business by Newcrest’s senior executive team.
These and other functions of the Newcrest Board, have been formalised through the adoption of a
formal board charter. The Newcrest Board charter can be found at www.newcrest.com.au/corporate.asp.
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|
Lihir Gold Limited Scheme Booklet
|
|
105
|
In the context of the Newcrest Board charter, Newcrest’s senior executive team is charged with
responsibility and authority for the day-to-day management of Newcrest and its operations. Its role
is formally set out, and agreed with the Newcrest Board, in a Statement of Management Authorities
and Responsibilities which is supported by a comprehensive framework of approval and authority
limits.
The Newcrest Board currently comprises eight directors — two executive directors and six
non-executive directors. The Newcrest Board has determined that, as a general rule, a non-executive
director will not serve on the Newcrest Board for more than 10 years.
The Newcrest Board regularly reviews its membership to ensure that it offers the range of
business skills and expertise demanded by Newcrest’s operations.
To facilitate the execution of its responsibilities, the Newcrest Board operates three standing
committees. The operation of the committees provides a forum for more detailed analysis of key
issues. In addition, the Newcrest Board operates an ad hoc executive committee which is convened as
required.
The current committees of the Newcrest Board are as follows:
|
•
|
|
Audit and Risk Committee;
|
|
|
|
•
|
|
Human Resources and Remuneration Committee;
|
|
|
|
•
|
|
Safety, Health and Environment Committee; and
|
|
|
|
•
|
|
Newcrest Board Executive Committee.
|
Each of these committees, except the Board Executive Committee, has its own charter.
(b) Responsible and ethical behaviour
Newcrest has a formal code of conduct, which all Newcrest Directors, employees and contractors are
required to observe. The code of conduct sets out standards for appropriate ethical and
professional behaviour for directors and employees of Newcrest, and confirms the values that
underpin all of Newcrest’s relationships with its stakeholders.
(c) Risk management and internal controls
Newcrest has a detailed risk management and internal control framework incorporating policies and
procedures, which set out the roles, responsibilities and guidelines for identifying and managing
material business risks.
The Newcrest Board is responsible for satisfying itself that management has developed a sound
system of risk management and internal controls. The Newcrest Board reviews the effectiveness
of management’s implementation of risk management and of the
internal control systems at least annually. The audit and risk committee assists the board with
respect to oversight of risk management policy and of effective internal controls and risk
management processes.
The design and implementation of the risk management and internal control systems in relation
to material business risks are the responsibility of management.
(d) Shareholder communication, continuous disclosure and market communications
Newcrest has a formal continuous disclosure policy in place to ensure that this occurs, a copy of
which is available at www.newcrest.com.au/corporate.asp. Pursuant to the policy, Newcrest
information considered to be material is announced immediately through ASX and key presentations
given by Newcrest personnel to investors and institutions are also lodged with ASX. The Newcrest
company secretary has primary responsibility for coordinating disclosure in accordance with the
policy.
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Profile of Newcrest continued
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106
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All key communications are placed immediately on the Newcrest website (www.newcrest.com.au)
and, when necessary, provided directly to all Newcrest Shareholders.
(e) Newcrest Board and executive performance
The Newcrest Board undertakes an annual review of its own performance effectiveness and that of its
committees and individual directors. This process is led by the chairman based on a formal
questionnaire and evaluation provided to each Newcrest Board member. The outcomes of the evaluation
are reviewed and considered by the Newcrest Board and changes effected where required.
Newcrest has in place a performance appraisal system for executives that is designed to encourage
performance.
(f) Directors’ fees and executive remuneration
Newcrest’s Human Resources and Remuneration Committee deals with all matters relating to
Newcrest’s remuneration policy, executive and employee remuneration levels and remuneration
matters generally. A copy of the Human Resources and Remuneration Committee charter is
available on the website at www.newcrest.com.au/corporate.asp.
Total annual remuneration paid to all non-executive Newcrest Directors may not exceed the
maximum amount authorised by the shareholders in a general meeting (currently A$1,800,000),
which includes fees payable to any Newcrest Director pursuant to the provisions of Newcrest’s
Constitution, for additional services which in the Newcrest Board’s opinion are outside the
scope of the ordinary duties of a director, including serving on board committees.
The Newcrest Board has a formal remuneration policy in place which defines and directs Newcrest’s
remuneration practices.
The Remuneration Policy recognises the different levels of contribution within management to the
short-term and long-term success of Newcrest. A key element of the Remuneration Policy is the
principle of reward for performance, with a significant proportion of each senior manager’s
remuneration placed ‘at risk’. Every employee undergoes a formal performance appraisal each year
which is used, in part, to determine that employee’s remuneration in the year ahead.
(g) Sustainability
Sustainability is an important part of Newcrest’s vision to develop successful mining operations
through balancing economic prosperity, environmental quality and social responsibility. Newcrest is
a signatory to the AMI Code for Environmental Management (2000). A Sustainability Report detailing
Newcrest’s environmental and social performance is prepared each year. A copy of the 2009
Sustainability Report can be found on the website at www.newcrest.com.au/sus_report.asp.
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Lihir Gold Limited Scheme Booklet
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107
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8.21 Safety, health, environment and community
(a) Safety and health
Having good safety performance and mature hazard management frameworks is fundamental to the
achievement of Newcrest’s business objectives.
Both state and federal legislation and regulations in Australia establish detailed workplace safety
regimes. Similar legislation and regulations with respect to health and safety apply in countries
outside of Australia where Newcrest operates, including in Indonesia, PNG and Fiji.
Newcrest’s compliance approach is incorporated in the charter of the Safety, Health and Environment
Committee of the Newcrest Board, which states that the Committee’s objective is to ensure that
Newcrest has established appropriate practices in the areas of safety, health and environmental
management in all of its activities and appropriate compliance and reporting systems.
Newcrest has in place a number of internal management systems and standards, including:
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•
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ongoing identification, review and development of safety and health management
systems and the establishment of robust hazard controls around safety and health
risks;
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•
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leadership development programs to enable all managers, superintendents and supervisors
to create the desired organisational safety culture; and
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•
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development of an interdependent safety culture where all employees are required to ‘look out
for each other’ while at work.
|
(b) Environment
Newcrest’s environmental compliance approach is incorporated in the charter of the Safety, Health
and Environment Committee of the Newcrest Board, which states that the Committee’s objective is to
ensure that Newcrest has established appropriate practices in the area of environmental management
in all of its activities and appropriate compliance and reporting systems.
Newcrest operates in accordance with its Environment and Community policies and is a signatory to
the Mineral Council of Australia’s ‘Enduring Value’ framework. Newcrest has a number of specific
environmental standards for key aspects of its operations. Each operation has an environmental
management system which has been developed in accordance with the ISO 14001 Environmental
Management Systems Standard. In October 2008, Newcrest became a signatory to the International
Cyanide Management Code.
Newcrest reports its performance on these matters through its annual Sustainability Report, which
complies with the Global Reporting Initiative (
GRI
) guidelines. The 2009 Sustainability Report is
available on Newcrest’s website at www.newcrest.com.au/sus_report.asp.
(c) Community
Each of Newcrest’s operations has a community development program based on site-specific community
agreements and commitments with local communities at all of its operating sites. Cadia Valley,
Gosowong and Telfer Gosowong and Hidden Valley all have site-based community professionals,
supported by the Head of Environment and Community and the Principal Community Relations Advisor,
both based in Melbourne.
The Telfer community relations department has developed a close relationship with the indigenous
Martu people in the region. Newcrest has just initiated a process of negotiation to put in place an
Integrated Land Use Agreement
(ILUA)
as a life of mine agreement with the Traditional Owners of the
land. This ILUA will replace previous community agreements which have expired but which are being
honoured by Newcrest while the ILUA negotiations take place. Agreements are also in place with five
other indigenous peoples covering the infrastructure corridor to Port Hedland. A memorandum of
understanding for a community partnership program has been signed with the Town of Port Hedland.
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Profile of Newcrest continued
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108
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Cadia Valley has a well developed community relations strategy and, as a result, enjoys a
strong supportive working relationship with its surrounding stakeholders. A Community Consultative
Committee is in place and oversees the application and distribution of community development funds
for the district. There are no native title issues at Cadia Valley.
At Cracow,
an Indigenous Land Use Agreement was concluded with the Wulli Wulli people in November
2002. This agreement provides for a number of benefits to all parties, including employment
opportunities, high school scholarships, traineeships, storage of cultural items and artifacts,
financial contributions and annual report meetings. Cracow also contributes to the local community
infrastructure, including by providing sporting facilities.
As of 1997, Gosowong has made a commitment to provide 1% of annual revenue into what is termed a
Corporate Social Responsibility (
CSR
) fund; in 2009, this equated to approximately US$3.5 million.
This fund is applied to community development initiatives across five sub-districts surrounding the
mine development area, with a total impacted population of some 30,000 persons. Funds are
apportioned on a per capita basis to each sub-district, and each village has a three person
committee which establishes project priorities. Gosowong provides support and assistance with the
implementation of these projects and programmes.
Newcrest acquired a 50% interest in the Morobe Mining Joint Venture in PNG in 2008. In relation to
the Hidden Valley mine, a Compensation Agreement is in place with the affected landowners and a
Sustainable Development Plan aimed at providing a wide-ranging community development program for
the mine affected and wider district communities has now been completed.
Newcrest has an advanced exploration prospect in Fiji and agreements are in place with local land
owners regarding access to and compensation for exploration activities.
8.22 Continuous disclosing entity
As a company listed on ASX and a ‘disclosing entity’ under the Australian Corporations Act,
Newcrest is subject to regular reporting and disclosure obligations. Broadly, these obligations
require Newcrest to announce material price-sensitive information as soon as it becomes aware of
the information, subject to exceptions for certain confidential information and incomplete
proposals. Newcrest’s recent announcements are available from Newcrest’s website at
www.newcrest.com.au and ASX’s website at www.asx.com.au.
Newcrest has made the following announcements to ASX since the release of its annual report for the
year ended 30 June 2009:
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20 July 2010
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Appendix 3B
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8 June 2010
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Update on proposed merger between Newcrest and Lihir
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11 May 2010
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Presentation — Merrill Lynch Global Metals Mining Conference
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10 May 2010
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Letter to Shareholders
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5 May 2010
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Appointment of Additional Company Secretary
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4 May 2010
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Presentation in relation to the Newcrest and Lihir Merger
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4 May 2010
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LGL: Newcrest and Lihir Merger Presentation
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4 May 2010
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Newcrest and Lihir enter into Merger Implementation Agreement
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4 May 2010
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Newcrest and LGL enter into Merger Implementation Agreement
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22 April 2010
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Presentation — March Quarterly Report
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22 April 2010
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March Quarterly Report
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20 April 2010
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Appendix 3B
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20 April 2010
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Letter to Chairman of Lihir Gold Limited
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Lihir Gold Limited Scheme Booklet
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109
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12 April 2010
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Letter to Shareholders
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9 April 2010
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Newcrest Board approves Cadia East Development
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1 April 2010
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Presentation — Newcrest Proposed Combination with Lihir
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1 April 2010
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Newcrest Proposed Combination with Lihir
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1 April 2010
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Newcrest Confirms a Proposed Combination with Lihir
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1 April 2010
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LGL rejects acquisition proposal from Newcrest Mining Ltd
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26 March 2010
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Dividend Reinvestment Plan
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24 March 2010
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Presentation — Credit Suisse Asian Investment Conference
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1 March 2010
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Presentation — BMO Global Metals and Mining Conference
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26 February 2010
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Appendix 3B
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26 February 2010
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Change of Director’s Interest Notice
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12 February 2010
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O’Callaghans Mineral Resource — Competent Person’s Statement
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12 February 2010
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Newcrest’s Half Year Results Presentation
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12 February 2010
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Financial Results Release
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12 February 2010
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Newcrest’s Half Year Results Announcement
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28 January 2010
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Presentation — December Quarterly Report
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28 January 2010
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December Quarterly Report
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21 January 2010
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Appendix 3B
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18 January 2010
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ASIC Form 484 — Cancellation of Shares
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8 January 2010
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Planning approval received for Newcrest’s Cadia East project
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6 January 2010
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Daily share buy-back notice -Appendix 3E
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5 January 2010
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Appendix 3E — Daily share buy-back notice
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23 December 2009
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Telfer Gold Mine — operations resume
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22 December 2009
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Severe Tropical Cyclone Laurence — Telfer Gold Mine
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15 December 2009
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Change in substantial holding
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10 December 2009
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Change of Company Secretary
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4 December 2009
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New senior appointment at Newcrest to support growth
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29 October 2009
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AGM Results
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29 October 2009
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AGM 2009
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22 October 2009
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Presentation — September Quarterly Report
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22 October 2009
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September Quarterly Report
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21 October 2009
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Appendix 3B
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8 October 2009
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New Senior Appointment
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Profile of Newcrest continued
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Further announcements concerning developments at Newcrest will continue to be made after the
date of this Scheme Booklet in the ordinary course of Newcrest’s business. Historical ASX
announcements and copies of half yearly and annual financial results (and accompanying releases)
are also available from the Newcrest website.
In addition, Newcrest is required to lodge various documents with ASIC. Copies of documents lodged
with ASIC by Newcrest may be obtained from, or inspected at, an ASIC office. Newcrest will provide
free of charge, to anyone who requests it before the Scheme Meeting, a copy of: the Newcrest
Constitution; the annual financial report of Newcrest for the year ended 30 June 2009 (being the
annual financial report most recently lodged with ASIC before this
document was provided to ASIC);
the half year financial report for the period ended 31 December 2009 lodged with ASIC; the
quarterly report for the three months ended 31 March 2010; and any continuous disclosure notice
given to ASX by Newcrest after the lodgement with ASIC of the annual report of Newcrest for the
year ended 30 June 2009 referred to above and before provision of this document to ASIC. The 2009
Annual Report and notices provided to ASX by Newcrest over the past year can be downloaded from
ASX’s website (www.asx.com.au), while copies of any of the documents referred to above can be
obtained free of charge by writing to:
The Company Secretary
Newcrest Mining
Limited
Level 8, 600 St Kilda Road
Melbourne, Victoria 3004 Australia
8.23 Newcrest ADR program
Newcrest has an unrestricted ADR facility which permits investors to invest in Newcrest
through a US traded security. Each ADR represents one Newcrest Share and trades on the US
over-the-counter market under the symbol “NCMGY”.
8.24 Statements in Scheme Booklet
The directors of Newcrest have reasonable grounds to believe, and do believe, that:
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(a)
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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
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(b)
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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
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(c)
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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.
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PROFILE OF THE MERGED GROUP
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The Lihir Island process plant.
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9
Profile of the Merged Group continued
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This section contains a summary of the operations and financial information of the Merged Group.
9.1 Overview of the Merged Group
The Merged Group will be known as Newcrest and will have a geographically diversified portfolio of
10 mines across the Asia Pacific region and West Africa:
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•
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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));
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•
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Lihir Island in PNG (see sections 7.2(a) and 7.2(b));
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•
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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));
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two recently commissioned medium-scale operations at Bonikro (Côte d’Ivoire) and Hidden
Valley (PNG) with brownfields growth potential (see sections 7.2(a), 7.2(c) and 8.4(a));
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two smaller-scale mines at Mount Rawdon and Cracow, both located in central Queensland (see
sections 7.2(a) and 8.4(a));
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•
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one of the world’s highest-grade gold mines at Gosowong in Indonesia (see section 8.4(a));
and
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•
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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)).
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In addition, the Merged Group will have significant greenfield growth potential in Côte
d’Ivoire and PNG.
|
Pro forma geographic breakdown of gold production for 12 months ended 31 December 2009
Source: LGL and Newcrest company announcements.
Based on guidance provided by Newcrest and LGL, the Merged Group will have a strong growth
profile with gold production expected to be 3.75 M ounces by 2014.
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•
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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.
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•
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LGL is aiming to produce 1.45 M ounces of gold per annum on average for the five years from
2012 to 2016.
1
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Note
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1
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Refer to LGL’s market release dated 1 March 2010.
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Lihir Gold Limited Scheme Booklet
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113
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The Merged Group will be Asia Pacific’s leading gold major and the fourth largest gold
producer in the world by market capitalisation.
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GOLD
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COPPER
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SILVER
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(MOZ)
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(MT)
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(MOZ)
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Reserves
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73.2
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4.7
|
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26.7
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Resources
|
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132.2
|
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14.4
|
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48.8
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|
The Merged Group will have its registered head office in Melbourne, Australia with corporate offices in Port Moresby, Brisbane and Perth. The total
workforce, including short and long-term contractors, is estimated at around 13,000 people. This number is not calculated based on full time equivalent
provisions. The Merged Group will be listed on ASX. Newcrest has also stated its intention to seek a listing of its shares on POMSoX.
9.2 Capital structure and ownership
As at 21 July 2010, Newcrest had 483,499,363 ordinary shares on issue. If the Scheme is implemented, Newcrest will issue a maximum amount of
280,988,130
1
additional shares to acquire a 100% interest in LGL pursuant to the Scheme.
The limited mix and match structure is being provided by Newcrest so that LGL Shareholders will have the opportunity to request to vary the composition
of their Scheme Consideration. Please refer to section 5.4 for further details.
If the Scheme is implemented, the overall interest of LGL Shareholders in the Merged Group will be between approximately 35.5%
2
and
36.8%
2
, depending on how Scheme Participants elect to receive their Scheme Consideration.
As described in section 8.7, as at 21 July 2010 Newcrest had three substantial shareholders, the largest of which had an interest of 14.7%. As at 21
July 2010, the top three shareholders in Newcrest and LGL held in aggregate 36.6% and 26.7% in the companies respectively. Depending on how Scheme
Participants elect to receive their Scheme Consideration, a similar range of concentration may be observed in the register of the Merged Group.
9.3 Newcrest’s intentions for the Merged Group following implementation of the Scheme
(a) Overview
The statements of intention in this section 9.3 are based on the information concerning LGL, its business and the general business environment which is
known to Newcrest at the time of preparation of this Scheme Booklet. Final decisions will only be reached by Newcrest in light of increased knowledge
through full access to the LGL business and material information and circumstances at the relevant time. Accordingly, the statements set out in this
section 9.3 are statements of current intentions only which may change as new information becomes available or circumstances change.
(b) Conduct of business and other corporate matters
Newcrest currently intends that the business of LGL will be conducted in substantially the same manner as it is presently being conducted. Newcrest will
review the key policies and standards of LGL as quickly as possible and look to integrate them into the Newcrest processes. Newcrest will maintain and
further develop LGL’s relationships with governments and local communities. Newcrest will also continue the focus on environmental performance, safety
improvement and personnel development. Newcrest currently has internal training programs that are aimed at aligning its people around vision, strategy
and company values, while lifting leadership capability and competencies. These training programs will be extended to include LGL employees.
Newcrest will conduct a strategic review of the combined portfolio of the Newcrest and LGL assets with a view to maximising value for shareholders in the
Merged Group. This will include ensuring appropriate priorities for the operation of the sites, allocation of capital and the focus of exploration
spending. Further, Newcrest will review and integrate the various technical and commercial functional teams that support the exploration, operations,
projects and corporate processes and initiatives.
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Notes
|
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1
|
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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.
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2
|
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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.
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9
Profile of the Merged Group continued
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114
|
Subject to that review, it is Newcrest’s current intention to continue to operate the Lihir Island,
Mount Rawdon and Bonikro mines and to maintain existing development and exploration programs (in
particular the Million Ounce Plant Upgrade). For operations, it is Newcrest’s intention to retain
the existing mine names. Over time the business processes at these operations will be aligned with
Newcrest operations.
(c) Stock exchange listings
After the Scheme becomes Effective, Newcrest Shares will continue to be listed on ASX, and
Newcrest’s “level 1” ADR program will remain in place (see section 8.23 for further information
about Newcrest’s ADR program). Newcrest intends to seek a listing of its shares on POMSoX. However,
LGLADSs will be delisted from NASDAQ upon implementation of the Scheme, and 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. In addition, although Newcrest will be deemed to succeed to LGL’s
registration with the SEC under the US Exchange Act when the Scheme becomes Effective, Newcrest has
further advised that, provided it satisfies the applicable requirements under the US Exchange Act
and the rules and regulations thereunder, it intends to terminate such registration under the US
Exchange Act as soon as practicable following the time the Scheme becomes Effective. If Newcrest is
able to terminate the registration of its shares under the US Exchange Act, it will not be subject
to reporting obligations under, and other requirements of, the US Exchange Act and the rules and
regulations thereunder, and will continue to maintain the exemption from registration under the
US Exchange Act (and the reporting obligations thereunder) pursuant to Rule 12g3-2(b) under the US
Exchange Act. See section 15.15 for additional information.
(d) Synergies
Newcrest intends to investigate and pursue the operational and other synergies that may be
available to the Merged Group. As discussed in section 6.1(d)(vi), cash cost savings from potential
short-term synergies are estimated at A$85 million per year pre-tax. The combined cash operating
base of the Merged Group should give rise to natural synergies in areas including logistics and
supply chain, fleet and equipment utilisation, and productivity improvements. Additionally, the
highly complementary skills of the Merged Group, in areas including open pit mining, bulk
underground mining and selective underground mining, metallurgical expertise in flotation and
refractory ore processing and exploration, will provide a solid base for the long-term optimisation
of the combined portfolio of assets.
(e) LGL’s corporate and management functions
Newcrest currently intends to restructure the board of LGL and to seek the resignation of the
existing directors of LGL and appoint in their place nominees of Newcrest. Similarly, Newcrest will
review and reconstitute the boards of LGL’s subsidiaries.
Following the implementation of the Scheme, Newcrest intends to review the composition of its own
board. Following that review, Newcrest may increase the number of board members from its existing
eight members by up to two members on an interim transitional basis, but intends to maintain a
board comprising no more than a maximum of nine members on an ongoing basis.
The senior management team for the Merged Group will comprise the Newcrest senior management team
set out in section 8.19. Newcrest intends to integrate LGL’s corporate head office functions (such
as treasury, group accounting, finance, taxation, company secretarial and legal) with those of
Newcrest. This, together with a review of LGL’s other offices, may lead to the closure or
consolidation of offices where the services or support can be provided more efficiently. Newcrest
will maintain a corporate representative office in Port Moresby. Newcrest also remains committed to
a major corporate office in Brisbane.
It is expected that the existing LGL mine sites will continue to operate with substantially
the same workforce. Overall employment levels of the Merged Group will be reviewed as part
of the strategic review of the Merged Group’s portfolio of assets, as described in section
9.3(b) above.
The growth profile of the Merged Group will provide employees of both LGL and Newcrest with
enhanced career opportunities. Employees will be able to develop their skills across more
geographic regions, with a greater choice of mining disciplines and technical processes.
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Lihir Gold Limited Scheme Booklet
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115
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The first choice for addressing duplication issues will be partly through natural
turnover, but there may be redundancies of employees who cannot be placed elsewhere
within the Merged Group. Any redundancies will be in accordance with the terms of existing
employment contracts.
Other than as set out in this section 9 and elsewhere in this Scheme Booklet, it is the present
intention of Newcrest:
|
•
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to continue the business of LGL;
|
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•
|
|
not to make any major changes to the business of LGL; and
|
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•
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not to redeploy any of the major fixed assets of LGL.
|
9.4 Merged Group pro forma financial information
Set out on the following pages is an 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 shown in section 8.10(b)) and the audited consolidated balance sheet of LGL
as at 31 December 2009 (as shown in section 7.9), including pro forma adjustments and
reclassifications to account for the acquisition of LGL by Newcrest as though it had occurred on 31
December 2009.
The Merged Group pro forma financial information is presented in an abbreviated form and does
not contain all the disclosure provided in an annual report prepared in accordance with the
PNG Companies Act or Australian Corporations Act.
The compilation of the Merged Group pro forma financial information has been reviewed by
PricewaterhouseCoopers Securities Ltd, whose Investigating Accountant’s Report is contained in
section 13 of this Scheme Booklet. Shareholders should note the scope and limitations of the
Investigating Accountant’s Report.
(a) Basis of preparation
The basis on which the unaudited consolidated pro forma balance sheet has been compiled is set out
below:
|
•
|
|
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.
|
Merged Group’s pro forma consolidated balance sheet as at 31 December 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(b) Pro forma assumptions and adjustments
The Newcrest unaudited consolidated balance sheet as at 31 December 2009 has been
extracted from the Half-Year Financial Report and translated to US dollars based on the
spot exchange rate of $0.89445 as at 31 December 2009.
The proposed acquisition by Newcrest of LGL will be accounted for under IFRS using the
purchase method of accounting. The results of the operations of LGL will be included in the
consolidated financial statements of Newcrest from the date of acquisition. Certain
adjustments have been reflected in the unaudited pro forma consolidated balance sheet above to
illustrate the effects of purchase accounting.
For the purposes of preparing the unaudited pro forma consolidated balance sheet, Newcrest has made
certain assumptions. The unaudited pro forma consolidated balance sheet assumes the completion of a
business combination whereby 2,369 million shares of LGL at 31 December 2009 are acquired for total
consideration of US$9,297.8 million, comprising 268.0 million shares of Newcrest, and US$875.0
million in cash. For the purpose of the unaudited pro forma balance sheet, Newcrest has assumed
that the Cash Consideration Cap will be reached. The final amount of the Cash Consideration will
depend on decisions relating to the exercise of LGL executive share rights, if any, and Scheme
Consideration elections made by Scheme Participants.
The measurement of the purchase consideration in the unaudited pro forma consolidated balance sheet
is based on a Newcrest Share price of A$35.92, representing the closing price of Newcrest Shares on
ASX on 28 June 2010. Under IFRS, the acquisition date is the date on which Newcrest effectively
obtains control of LGL. Newcrest shall measure the cost of the transaction as the aggregate of the
fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by Newcrest, in consideration for control of LGL. Consequently, the value of the
purchase consideration for accounting purposes will differ from the amount assumed in the unaudited
pro forma balance sheet due to any future changes in the market price of Newcrest Shares.
The unaudited pro forma consolidated balance sheet assumes the cost of acquisition will be as
follows:
|
|
|
|
|
|
|
|
|
US$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$0.875.
|
Based on publicly available information and high level due diligence conducted to date,
Newcrest has formed a preliminary assessment of the fair value of all identifiable assets and
liabilities to be acquired and the impact of applying purchase accounting. Fair values have been
determined using a higher discount rate and lower gold prices than the method employed using the
gold futures methodology (a valuation method used by the Independent Expert).
The tax bases of LGL’s assets acquired and liabilities assumed as part of the implementation of the
Scheme do not reflect fair value. A deferred tax liability will be recognised to reflect the
difference between the assigned values and the tax bases. After reflecting the pro forma purchase
adjustments, the excess of the purchase consideration over the adjusted book values of LGL’s assets
and liabilities has been presented as goodwill.
This goodwill reflects the unique financial characteristics of gold assets, where they generally
trade at a significant premium to underlying discounted cash flows. In addition to the gold
premium, the goodwill represents the value implicit in the ability to sustain and/or grow the
Merged Entity by increasing reserves and resources through exploration and the requirement to
record a deferred tax liability for the difference between the assigned values and the tax bases of
assets acquired and liabilities assumed in a business combination.
|
|
|
|
|
|
|
|
|
9
Profile of the Merged Group continued
|
|
118
|
Goodwill has been calculated as follows (including reference to pro forma adjustments):
|
|
|
|
|
|
|
|
|
US$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
|
|
Once the Scheme has been implemented, the fair value of all identifiable assets and
liabilities acquired will be finalised, including a formal assessment of the fair value of
inventories, plant and equipment, intangible assets, derivatives and deferred tax balances.
The unaudited pro forma consolidated balance sheet reflects the following adjustments as if the
acquisition had occurred on 31 December 2009:
|
(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 LGL’s 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
Newcrest’s 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.
|
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(ix)
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An increase in the non-controlling interests of US$17.2 million to reflect fair value.
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(x)
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Reclassifications made to the financial presentation of the LGL balance sheet:
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(A)
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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 Newcrest’s
accounting policies.
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(B)
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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.
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9.5 Risks associated with an investment in the Merged Group
LGL Shareholders should be aware that, in addition to the risks in relation to LGL Shareholders’
current investment in LGL (refer to section 7.8), there are risks associated with an investment
in the Merged Group, and there can be no guarantee that all of the benefits anticipated by the
LGL Directors and the Newcrest Directors will be achieved. This outline of risks is a summary
only and should not be considered exhaustive. LGL Shareholders should carefully consider the
following risks, as well as other information contained in this Scheme Booklet before deciding
how to vote on the Scheme. This section does not take into account the investment objectives,
financial situation, taxation position or particular needs of LGL Shareholders.
(a) Share market conditions
If the Scheme is implemented, Newcrest has applied for the New Newcrest Shares to be listed on
ASX and Newcrest intends to seek a listing of its shares on POMSoX.
There are general risks associated with an investment in shares trading on a particular share
market which may affect the value of Newcrest Shares and the initial and ongoing value of the
Scheme Consideration. Broader market factors affecting the price of Newcrest Shares are
unpredictable and may be unrelated or disproportionate to the financial or operating performance of
the Merged Group. Such factors may include the domestic and international economic outlook, global
political and economic stability, interest and inflation rates, foreign exchange rates and investor
sentiment.
(b) Issue of New Newcrest Shares
Newcrest will issue a significant number of New Newcrest Shares as consideration under the Scheme.
Newcrest is providing a limited mix and match facility to LGL Shareholders (see section 5.4 for
further details) to provide LGL Shareholders that do not wish to receive New Newcrest Shares the
opportunity to minimise the number of New Newcrest Shares they receive as Scheme Consideration.
Despite this, it is possible that some Scheme Participants who receive New Newcrest Shares may not
wish to retain those shares, and may sell their New Newcrest Shares on the market soon after
receiving them. If a significant number of shareholders do so, this may have an immediate adverse
impact on the market price of Newcrest Shares.
(c) Gold and copper prices
Newcrest’s performance is dependent on the market prices of gold and copper, which are volatile
and are affected by numerous factors beyond Newcrest’s control. Factors that tend to put downward
pressure on the prices of gold and copper include:
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sales and/or leasing of gold by governments and central banks;
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sales by producers in forward transactions and other hedging transactions;
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global and regional recessions or reduced economic activity and/or inflationary expectations;
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decreased demand for industrial uses, use in jewellery or investment;
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high supply from production, disinvestment or scrap; and
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Newcrest does hedge copper, diesel and certain capital commitments, as described in section 8.16.
Other than this, the Merged Group has no current intention to enter into forward contracts,
options or any other derivative instrument to protect itself against low gold or copper prices with
respect to its gold and copper production. Accordingly, the Merged Group will be exposed to the
impact of any fall in the gold and/or copper price. If gold and/or copper prices decrease, the
Merged Group will realise reduced revenues. Conversely, if gold and/or copper prices increase, the
Merged Group will realise the positive impact of the increase.
(d) Exchange rate fluctuations
The Merged Group will operate internationally and will be exposed to foreign exchange risk arising
from various currency exposures, primarily with respect to the Australian dollar, United States
dollar and PNG kina, and to a lesser extent the Indonesian rupiah, the West African CFA and the
Fiji dollar.
Predominantly all of the Merged Group’s revenue will be denominated in US dollars, while
expenditures will be mostly denominated in a combination of US dollars and the relevant operation’s
local currency. As the Australian operations will continue to have an Australian dollar functional
currency, the Merged Group’s balance sheet will be impacted by movements in the US$/A$ exchange
rate.
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(e) Economic and financial risks
Changes in the economic climate in which the Merged Group will operate and in economic factors such
as economic growth, interest and inflation rates, government regulation and taxation, employment
levels, consumer sentiment, market volatility and monetary policy could adversely impact the value
of Newcrest Shares or the performance of the Merged Group.
(f) Indebtedness following the implementation of the Scheme and need for further capital
Newcrest’s level of indebtedness (which comprises current and non-current interest bearing loans
and borrowings) as at 31 December 2009 was A$408.5 million (less cash and cash equivalents of A$271
million, resulting in net debt of A$136.9 million) and its gearing level was 3%. To fund the
aggregate Cash Consideration, up to the Cash Consideration Cap, Newcrest will draw on its available
cash from its existing bilateral loan facilities of US$1,100 million, which are committed and
undrawn and with maturity dates ranging between December 2012 and February 2013.
The Maximum Cash Consideration should result in pro-forma gearing of under 10% and
indebtedness of under A$1,000 million. Although this forecast level of indebtedness is
conservative and within investment grade expectations, there is a risk that Newcrest will not
be able to refinance these facilities at maturity or refinance on similar terms, including
price, covenants and security.
Higher levels of indebtedness resulting from Newcrest’s inability to generate cash flow from
operations could adversely impact Newcrest’s operations and financial performance.
Please see section 8.17 for further information about Newcrest’s sources of funding.
Newcrest’s operating cash flows may not be sufficient to sustain its operations, and Newcrest may
from time to time be required to draw down under its available debt facilities or to seek to fund
these requirements through asset divestitures, further equity or debt issues, or additional bank
debt. In these circumstances, if Newcrest is unable to obtain additional funding on acceptable
terms or at all, its financial condition and ability to continue operating may be adversely
affected.
(g) Rights may be affected by law or regulation
Any existing and new mining operations, development projects and exploration that the Merged Group
carries out in the various jurisdictions in which it will operate will be subject to various
national and local laws, policies and regulations governing the prospecting, developing and mining
of reserves, taxation, exchange controls, investment approvals, employee relations and other
matters.
If the Merged Group is not able to obtain or maintain necessary permits, authorisations, agreements
or licences to implement planned projects or continue its operations under conditions or within
time frames that make such plans and operations economic, or if legal or fiscal regimes or the
governing political authorities change materially, the Merged Group’s results of operations or
financial position could be adversely affected. No guarantee can be given that the necessary
permits, authorisations, agreements or licences will be issued to the Merged Group or, if they are
issued, that they will be renewed, or that the Merged Group will be in a position to comply with
all conditions that are imposed. In addition, nearly all mining projects require government
approval, and there can be no certainty that these approvals will be granted to the Merged Group in
a timely manner, or at all.
Once the Scheme has been implemented, the Merged Group will be subject to the laws of several
jurisdictions. Any changes to government legislation, regulations or policies, in any of those
jurisdictions (including at both the federal and state level, if applicable) may have an adverse
impact on the Merged Group’s results, operations or financial position.
(h) Local community relations
Community agreements that deliver developmental outcomes, supplemented by regular stakeholder
engagement and consultation, are crucial to the maintenance of a ‘social licence’ from the host
community around all projects. No assurance can be provided that situations will not arise at any
given site or location that generate community concern and potentially cause operational
disruptions until resolved.
(i) Litigation
The Merged Group may be exposed to potential legal and other claims or disputes in the future, with
respect to its operations. Refer to sections 7.11 and 8.15 for further information.
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(j) Industrial relations
Industrial disruptions, work stoppages and accidents in the course of operations can result in
production losses and delays and may adversely affect the Merged Group’s performance.
(k) Change of control restrictions
Members of the LGL Group are party to certain contracts which contain change of control clauses
that may be triggered by the Scheme. It is a condition of the Merger Implementation Agreement that
certain consents, waivers and releases of liability that are required under the Key Material
Contracts are obtained (on terms no more onerous than those applying to LGL) and not withdrawn
(and, where given conditionally, subject to conditions acceptable to Newcrest) prior to the
Scheme becoming Effective. In addition, LGL must use its best endeavours to obtain other consents,
waivers and releases of liability triggered under other material contracts. Nevertheless, there is
a risk that counterparties to contracts may seek to terminate these agreements with members of the
LGL Group or seek to impose more onerous terms.
LGL has reviewed all the Key Material Contracts and has determined that no change of control
clauses are triggered by the Scheme and, as such, no consents, waivers or releases of liability are
required under the Key Material Contracts.
(l) Composition of the Scheme Consideration
LGL Shareholders who elect to receive the Maximum Cash Consideration or the Maximum Share
Consideration as their Scheme Consideration will not know at the time of election the exact
combination of cash and New Newcrest Shares that they are entitled to receive. As a result, LGL
Shareholders may not be able to accurately assess the effect of the Scheme on their tax and
investment situation until after the Implementation Date.
(m) Carrying value of assets
Newcrest evaluates the carrying value of recorded assets to determine whether current events and
circumstances indicate such carrying amount may no longer be recoverable. This evaluation involves
a comparison of the estimated fair value of Newcrest’s reporting units to their carrying values.
Newcrest’s fair value estimates are based on numerous assumptions and it is possible that actual
fair value could be significantly different from these estimates. In the absence of any mitigating
valuation factors, Newcrest’s failure to achieve its valuation assumptions or declines in the fair
value of its reporting units may, over time, result in impairment changes.
(n) Mineral title risk
While Newcrest has investigated title to all of its mineral properties and, to the best of its
knowledge, title to all of its properties is in good standing, the properties may be subject to
prior unregistered agreements or transfers, and title may be affected by undetected defects. There
may be valid challenges to the title of Newcrest’s properties, which, if successful, could impair
development and/or operations. Newcrest cannot give any assurance that title to its properties will
not be challenged.
9.6 Production and operation risks of the Merged Group
The risks inherent in gold mining that are currently faced by LGL (refer to section 7.8) will
also be faced by the Merged Group. Gold mining involves significant degrees of risk, including
those related to mineral exploration success, unexpected geological or mining conditions, the
development of new deposits, climatic conditions, equipment and/or service failures and other
general operating risks. Many of these risks are outside the ability of management to control.
The following specific operational risks may also affect the Merged Group:
(a) Newcrest cannot make assurances that it will meet its goals for production and operating costs
Estimated production levels and operating costs for the current financial year are estimated based
on Newcrest’s experience in operating its mines. These estimates are subject to numerous
uncertainties, many of which are beyond Newcrest’s control. Newcrest cannot make assurances that
its actual production levels will be achieved at estimated levels, or at all, or that its costs
will not be materially higher than anticipated.
(b) Development plans may not be realised
Newcrest anticipates significant capital expenditures over the next several years in connection
with the development of new projects, including Cadia East and Million Ounce Plant Upgrade. Costs
associated with capital expenditures have escalated on an industry-wide basis over the last several
years and there is no assurance that they will not continue to escalate. This may have a
material adverse impact on Newcrest’s costs to develop Cadia East and Million Ounce Plant Upgrade
or other new mines and/or the timing and success of such developments.
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(c) Exploration and new project uncertainty
Newcrest’s ability to sustain or increase its current level of production in the longer term is in
part dependent on the success of its exploration activities in locating new deposits and replacing
gold and copper reserves depleted by production, the development of new projects and the expansion
of existing mining operations.
Exploration activities are highly speculative, involve many risks and as such are often
unsuccessful. Such activities also require substantial expenditure. Once gold mineralisation is
discovered, it will usually take several years to define a deposit and determine whether a resource
exists and then numerous additional years to determine what, if any, of these resources can be
declared as reserves. During this time the economic feasibility of production may change due to
fluctuations in gold and/or copper prices, as well as other factors that affect revenue, cash and
total operating costs.
No assurance can be given that Newcrest’s planned development and expansion projects will
result in additional reserves or that Newcrest will be successful in developing additional
mines.
In addition, there are a number of risks and uncertainties associated with the block caving mining
method, including that a deposit may not cave as anticipated and the wide spans needed in panel
caving give rise to a risk of unplanned ground movement due to changes in stresses in the
surrounding rock. Block caving is used to mine Ridgeway Deeps and Newcrest is also proposing to use
the block caving mining method at Cadia East. There are a number of risks and uncertainties
associated with block caving mining, including that Cadia East may not cave as anticipated and the
wide spans needed in block panel caving give rise to a risk of unplanned ground movement due to
changes in stresses in the surrounding rock.
(d) Increased costs could adversely affect the Merged Group’s profitability
Costs at any particular mining location are frequently subject to variations from one year to the
next due to a number of factors, such as changing ore grade, metallurgy and revisions to mine plans
in response to physical shape and location of the ore body. In addition, costs are affected by the
price and availability of commodities such as fuel and electricity. Such commodities are subject to
volatile price movements, including increases that could make production at certain operations less
profitable. In particular, recent increases in commodity prices and labour costs have led to
increases in capital project and operating related costs, such as the costs of concrete, fuel,
steel, heavy equipment tyres and contract personnel.
Further material increases in costs could have a material adverse effect upon the
profitability of existing mining operations and the returns anticipated from new mining
projects and could make certain mines or projects uneconomic.
(e) Key personnel
The Merged Group will be dependent upon a number of key management personnel and executives to
manage the day-to-day requirements of the business. The loss of the services of one or more of such
key management personnel could have an adverse effect on the Merged Group. The Merged Group’s
ability to manage its mining operations and its exploration and development activities will depend
in large part on the efforts of these individuals. The Merged Group will face competition for
qualified personnel, and there can be no assurance that it will be able to attract and retain such
personnel.
(f) Integration and synergies
There are integration risks associated with a merger of this size. While Newcrest expects that
value can be added for shareholders of the Merged Group by combining the Newcrest and LGL
businesses, the risk exists that any integration or strategy implementation may take longer than
expected or that the extraction of efficiencies and potential synergies does not occur or may incur
additional costs, which will impact the Merged Group’s financial performance.
Newcrest expects to manage this risk by careful planning and the use of internal staff and
external experts and consultants as required.
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(g) Water
The effects of changes in rainfall patterns, water shortages and changing storm patterns and
intensities may adversely impact the costs, production levels and financial performance of the
Merged Group’s operations. There is no guarantee that there will be sufficient future rainfall to
support the Merged Group’s future water demands in relation to its sites and operations, and this
could adversely affect production and the Merged Group’s ability to develop or expand projects and
operations in the future. In addition, there can be no assurance that the Merged Group will be able
to obtain alternative water sources on commercially reasonable terms or at all in the event of
prolonged drought conditions. Conversely, some of the Merged Group’s sites and operations may be
subject from time to time to severe storms and high rainfall leading to flooding and associated
damage which may result in delays to or loss of production and development of some of its sites,
projects and operations.
(h) Environment
The Merged Group’s business will be subject to extensive environmental laws and regulations in the
various jurisdictions in which it operates. Failure to comply with environmental laws and
regulations could result in monetary penalties or closure of the Merged Group’s operations, either
permanently or temporarily. These regulations establish limits and conditions on its ability to
conduct these operations. The cost of compliance with environmental laws and regulations is
significant and is expected to continue to be significant.
The Merged Group will be required to rehabilitate the lands that it mines once mining operations
have been completed in accordance with applicable environmental laws and regulations. Estimates of
the total ultimate closure and rehabilitation costs are significant and based principally on
current legal and regulatory requirements that may change materially. Environmental liabilities are
accrued when they are known, probable and can be reasonably estimated. Increasingly, regulators are
seeking security in the form of cash collateral or bank guarantees in respect of environmental
obligations, which could have an adverse effect on the Merged Group’s financial condition.
Environmental laws and regulations are continually changing and are generally becoming more
restrictive. A number of governments or governmental bodies have introduced or are contemplating
regulatory change in response to the potential impacts of climate change, including mandatory
renewable energy targets or potential carbon trading regimes. If the Merged Group’s environmental
compliance obligations were to change as a result of changes in the laws and regulations, or if
unanticipated environmental conditions were to arise at any of the Merged Group’s projects or
developments, its expenses and provisions may increase to reflect these changes. If material, these
expenses and provisions could adversely affect the Merged Group’s results of operations and
financial condition.
(i) Political conditions
Substantial gold and copper deposits are scarce and a commitment to operate only within totally
stable political environments could severely limit the potential for good financial performance in
the future. Newcrest will consider further international developments, either alone or in a joint
venture with others, on an individual risk basis.
(i) PNG
PNG has an established history of large-scale mining. Ownership of minerals is vested in the
State by virtue of section 5 of the
Mining Act 1992
(PNG).
Resource development is generally welcomed by both government and landowners as a means to
improve living conditions. However, the limited administrative capacity of government and the
prominent position of customary landowners provide additional management challenges for
developers.
There have been seven general elections in PNG since independence in 1975. On six occasions there
has been an orderly change of government and on the seventh occasion the Government was returned in
an orderly manner. More frequent changes of government have occurred between elections by means of
motions of no confidence on the floor of Parliament.
The introduction of preferential voting and legislation, designed to preserve the integrity of
political parties in the early 2000s, has since resulted in greater political stability in PNG
at the national level.
Sir Michael Somare was the first Prime Minister to serve a full term of five years (from 2002 to
2007), and he was
re-elected in 2007.
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This pattern of political stability at the national level appears likely to continue. However,
elections in the provinces are sometimes marred by malpractice and occasional violence.
Approximately 97% of the land in PNG is held by customary owners. This land is available for
mineral exploration and extraction
under the Mining Act 1992
(PNG), subject to compensation
arrangements being made with the customary owners.
Customary ownership is not formally recorded and must generally be determined by genealogical
enquiries and social mapping. As a result, determining the correct owners is a difficult task and,
where there is a mining project involved, often remains a subject of dispute for many years.
From time to time, mining operations have been interrupted by landowners seeking to negotiate
improved terms or to have their claims recognised.
Environmental effects of mining are often the basis for disputation. In some instances, overseas
interest groups have become involved and have focused adverse international publicity on the
developer.
In the extreme case of Bougainville Copper Limited, its Panguna mine was forced to close in 1989 by
civil disturbance which developed into an armed rebellion. The province of North Solomons now has a
semi-autonomous status within PNG.
The
Compensation (prohibition of Foreign Legal Proceedings) Act 1995
(PNG) prohibits the pursuit in
foreign courts of compensation claims arising from mining or petroleum projects in PNG.
The
Investment Promotion Act
1992(PNG) prohibits expropriation of the property of a foreign
investor except in accordance with law, for a public purpose and with payment of compensation as
defined by law.
PNG is also a party to the Treaty on Co-operation and Development with Australia. Article 7
provides that neither party shall take any measures of expropriation, nationalisation or any other
dispossession against the investments of nationals of the other party, except:
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where it is for a public purpose under due process of law;
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the measures are non-discriminatory; and
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there is prompt, adequate and effective compensation.
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PNG is party to similar bilateral treaties with the People’s Republic of China, Germany and the
United Kingdom. There are no examples of expropriation in the mining and petroleum sectors since
independence in 1975.
(ii) Indonesia
The Gosowong gold mine on Halmahera Island, Indonesia is operated by PTNHM, which is owned jointly
by Newcrest (which holds an 82.5% interest) and PT Aneka Tambang (which holds a 17.5% interest).
The Gosowong mine was established under a 1997 Contract of Work with the Government of Indonesia
and commenced operating in 1999.
Indonesia has democratic processes under which an elected President and Vice-President govern the
country with the assistance of a cabinet. There are also several elected legislative bodies — the
House of Representatives, the Regional Representative Council, and provincial and local
legislatures.
In addition, Indonesia has undergone a decentralisation process under which more authority and
responsibility have been transferred to provincial and local governments. A larger number of laws
and regulatory requirements have been implemented at the national, provincial and local levels.
Any existing and new mining operations, development projects and exploration that the Merged Group
carries out in Indonesia will be subject to various national, provincial and local laws, policies
and regulations governing the prospecting, developing and mining of reserves, taxation, exchange
controls, investment approvals, employee relations and other matters. If the Merged Group is not
able to obtain or maintain necessary permits, authorisations or agreements to implement planned
projects or continue its operations under conditions or within time frames that make such plans and
operations economic, or if legal or fiscal regimes or the governing political authorities change
materially, the Merged Group’s operations and financial position could be adversely affected.
Indonesia passed a new Mining Law in January 2009. Under the transitional provisions of the new
law, Contracts of Work remain valid until the expiry of the contract, being 2029 in the case of the
Gosowong contract. However, the transitional provisions also specify that existing contracts be
“adjusted” to take into account the new Mining Law. PTNHM, which holds the Gosowong Contract of
Work, has agreed to enter into good faith negotiations with
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the Indonesian Ministry of Energy and Mineral Resources as representative of the Government of the
Republic of Indonesia, which is the counter-party to the Gosowong Contract of Work. These
negotiations are taking place under Article 23(3) of the Contract of Work, being the general
consultation provision, which involves a consideration of whether, in the light of all relevant
circumstances, the financial or other provisions of the contract need revision to ensure that the
agreement operates equitably and without major detriment to the
interests of either party. Article 23(3) requires the parties to the Contract of Work to agree to any revision to the contract
arising from this process. As these negotiations have only recently commenced, it is not possible
to predict what adjustments, if any, may be made to the fiscal or other terms of the Gosowong
Contract of Work.
(iii) Côte d’Ivoire
The Bonikro Mine is located in the southern area of Côte d’Ivoire in west Africa. The current
government has delayed elections on several occasions over the past five years. Determining who is
eligible to vote is at the heart of the impasse over elections. Demonstrations are held
intermittently about the lack of elections. Several violent anti-government demonstrations were
held during February 2010. The mine at Bonikro has not been impacted.
Attaining a democratically elected government is an important step in the process of
receiving debt relief from the IMF.
The State is an investor, partner or regulator in many industries.
There are large areas in the north of the country that do not recognise the current
government. There remains a risk of violence, with ethnic and sectarian problems simmering in
a relatively peaceful environment. Lower level disruption is likely through demonstrations and
industrial action.
Risks associated with a non-democratically elected government include the potential for
nationalisation of private assets without adequate compensation. There is also a risk that a new
government could review decisions such as the grant of mining tenements.
(iv) Fiji
Newcrest became a joint venture partner in an exploration project in the Namosi Province of
Fiji in January 2008. Newcrest has a 69.94% interest in the Namosi Joint Venture.
Following a coup in 2006, Commodore Bainimarama became Prime Minister of an interim government
and Parliament was suspended.
In April 2009, the Fiji Court of Appeal handed down a decision declaring the (then) interim
government unlawful, after which the interim government resigned. The President of Fiji then
announced that he had abrogated the 1997 Constitution, appointed himself as head of State,
confirmed the continuation of all existing laws, and handed executive authority back to the interim
Prime Minister, Commodore Bainimarama, and his Cabinet.
Electoral reform is scheduled to be undertaken in 2012 and elections scheduled to be held in 2014.
The Australian Government has imposed travel restrictions on members of the interim government and
the military. Fiji has been suspended from the Commonwealth and the Pacific Islands Forum. Trade
relations have not been affected.
Risks associated with the current political and constitutional situation in Fiji include change of
law (which could impact tenements and approvals, taxation arrangements, and enforceability of legal
rights) and nationalisation of private assets without adequate compensation.
(v) Australia
The Commonwealth of Australia is an economically and politically stable constitutional
democracy with a parliamentary system of government at both federal and state levels. Australia has
a highly developed mining and commodities industry and legal and regulatory framework for minerals
exploration, extraction and production. Mining and exploration tenements and leases are granted and
administered under the applicable laws of each Australian state and territory, rather than the laws
of the Australian Government.
(j) Insurance
Newcrest maintains insurance to protect primarily against catastrophic events which could have a
significant adverse effect on its operations and profitability. However, Newcrest’s insurance does
not cover all potential risks associated with its business. Newcrest may elect not to insure
against certain risks, due to the high premiums associated with insuring against those risks or for
various other reasons, including an assessment that the risks are remote. Further, Newcrest
may not be able to obtain insurance coverage at acceptable premiums. The occurrence of events for
which it is not insured may adversely affect Newcrest’s cash flows and overall profitability.
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Surveyor in the Bonikro mine, Côte d’lvoire.
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10.1 Australian taxation implications
(a) Introduction
This section provides a general summary of the Australian tax consequences of the Scheme for
certain LGL Shareholders.
The following summary is based upon Australian taxation law and administrative practice in effect
at the date of this Scheme Booklet. It does not anticipate changes in the taxation law after this
time, or take into account the taxation law of countries other than Australia. Overseas LGL
Shareholders should consider the tax consequences of the Scheme under the laws of their countries
of residence as well as under Australian law.
This summary is not intended as an authoritative or comprehensive analysis of the taxation laws of
Australia and does not consider any specific facts or circumstances that may apply to particular
LGL Shareholders and does not purport to be a complete analysis of all the potential Australian
income tax consequences of the Scheme.
There may also be other Australian tax implications from the Scheme for LGL Shareholders that
are resident of Australia for Australian tax purposes, including stamp duty consequences.
LGL Shareholders are urged to consult their own tax advisers regarding Australian tax consequences
for them of the Scheme in light of their personal circumstances.
The Australian tax consequences of the transfer of Scheme Shares to Newcrest will depend on a
number of factors. This discussion addresses only those LGL Shareholders that:
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are resident of Australia for Australian tax purposes;
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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;
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are not employees of LGL for Australian tax purposes;
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are not “life insurance companies”;
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are not “temporary residents” for Australian tax purposes; and
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•
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are not “significant stakeholders” or “common stakeholders”.
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The comments in this section may also be relevant to LGL Shareholders who do not meet the above
conditions.
LGL has sought a class ruling from the Australian Taxation Office
(ATO)
to confirm the capital
gains tax consequences for Scheme Participants who transfer their Scheme Shares to Newcrest
pursuant to the Scheme. The class ruling, when issued, will be available to view via the website of
the ATO at www.ato.gov.au and, following completion of the Scheme, on either or both of the
LGLwebsiteatwww.lglgold.com and/or the Newcrest website at www.newcrest.com.au.
(b) Disposal of Scheme Shares held on capital account
A capital gain or loss will arise for Scheme Participants, on the transfer of their Scheme
Shares to Newcrest, depending on the difference between:
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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
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•
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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).
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A Scheme Participant will make a capital gain if the capital proceeds from the transfer of their
Scheme Shares to Newcrest exceed the cost base of those shares, or a capital loss if the value of
the capital proceeds is less than the cost base.
In calculating the capital proceeds for the transfer of Scheme Shares, the market value of the New
Newcrest Shares
provided as consideration for the transfer should be the market value of the Newcrest Shares worked
out as at the time that the Scheme is implemented and New Newcrest Shares are allotted to Scheme
Participants.
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Australian, PNG, US and UK taxation implications continued
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Any Interim Dividend declared by LGL prior to the Implementation Date should not be included in the
capital proceeds for the purposes of determining a capital gain or capital loss on the transfer of
the Scheme Shares. This is on the basis that the declaration and payment of the Interim Dividend is
in the ordinary course of LGL’s business and is not contingent on shareholder approval of the
Scheme or the Scheme being implemented.
(c) Full or partial scrip-for-scrip roll-over relief — New Newcrest Shares
(i) Capital gain partially disregarded
Scrip-for-scrip roll-over relief enables a shareholder to choose to disregard any capital gain they
would have made from exchanging shares in one company for shares in another company (for example,
as part of a takeover or merger), but only to the extent that the shareholder receives replacement
shares (and not to the extent that they receive cash for the disposal of shares).
Whether full or partial scrip-for-scrip roll-over relief is available in a particular case
will depend on whether the relevant arrangement satisfies certain requirements and also
whether the particular shareholder satisfies certain requirements.
A Scheme Participant may, to the extent to which it receives New Newcrest Shares in consideration
for the transfer of its Scheme Shares to Newcrest, be entitled to full or partial scrip-for-scrip
roll-over relief if the following conditions are satisfied:
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(A)
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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”;
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(B)
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the Scheme Participant would otherwise make a capital gain on the transfer of its Scheme
Shares to Newcrest;
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(C)
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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);
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(D)
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Newcrest and members of Newcrest’s wholly owned group obtain a holding of at least 80% of the
voting
shares in LGL as a result of the Scheme; and
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(E)
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the Scheme Participant chooses to obtain the roll-over.
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In relation to (C above, Ineligible Overseas Shareholders, to the extent the Scheme Consideration
they would otherwise receive includes New Newcrest Shares, will have the New Newcrest Shares issued
to the Sale Agent for sale on-market (at the prevailing share price) with remittance of net
proceeds to them. As this is a feature of a kind contemplated in subsection 619(3) of the
Australian Corporations Act (albeit that the Scheme is not governed by the Australian Corporations
Act), the terms of the Scheme should be regarded as being on substantially the same terms for all
shareholders.
LGL has sought a class ruling from the ATO to confirm whether full or partial scrip-for-scrip
roll-over relief is available to Australian resident Scheme Participants who transfer their Scheme
Shares to Newcrest pursuant to the Scheme. We expect that the ATO’s ruling will confirm that, if
certain requirements are satisfied as noted above, Australian resident Scheme Participants should
be able to choose to disregard any capital gain that results to them from the transfer of their
Scheme Shares to Newcrest pursuant to the Scheme, to the extent that the capital gain is
attributable to the Scheme Shares for which they receive replacement New Newcrest Shares. In
contrast, any capital gain should be taxable to the extent it is attributable to the cash received.
A Scheme Participant does not need to document its choice to claim the partial
scrip-for-scrip roll-over relief for Australian tax purposes, other than to complete its
income tax return in a manner that is consistent with that choice.
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(ii) New Newcrest Shares received
The cost base of the New Newcrest Shares obtained by Scheme Participants as consideration for
the transfer of Scheme Shares to Newcrest is worked out by attributing, on a reasonable basis,
the cost base of the original Scheme Shares that were exchanged for New Newcrest Shares under
the Scheme.
The New Newcrest Shares will be treated as being acquired on the date the original Scheme Shares
were replaced pursuant to the Scheme.
The cost base of the New Newcrest Shares can be worked out by the following formula:
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= Cost base of Scheme Shares at time of event
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Market value of New Newcrest Shares received
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Market value of New Newcrest Shares plus cash
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consideration
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(iii) Capital gain from cash not disregarded
Where a Scheme Participant chooses partial scrip-for-scrip roll-over, any capital gain that would
arise to the Scheme Participant that is referable to the receipt of cash consideration is not
disregarded.
The capital gain or capital loss from the cash portion of the consideration received for a Scheme
Participant’s transfer of Scheme Shares to Newcrest is determined by attributing to the cash
proceeds a reasonably attributable portion of the cost base of the original Scheme Shares for which
the cash consideration is received.
The part of the cost base of the Scheme Shares that is reasonably attributable to the cash
consideration can be calculated as follows:
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= Cost base of Scheme Shares at time of event
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Cash consideration
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Market value of New Newcrest Shares plus
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cash consideration
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The treatment of any capital gain from the cash consideration received is outlined below.
(d) No scrip-for-scrip roll-over relief
Where a capital gain is not disregarded, that is, where a Scheme Participant does not qualify for
full or partial scrip-for-scrip roll-over relief or chooses not to apply the scrip-for-scrip
roll-over relief treatment to a capital gain, or when considering a capital gain relating to any
cash consideration received, the following treatment should apply.
(i) Capital gain
If a holder is an individual or trustee (including of a complying superannuation fund) and has
held its Scheme Shares for at least one year, the discount capital gain provisions may apply.
This means that:
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(A)
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if the holder is an individual or trustee, any capital gain made in relation to its Scheme
Shares is reduced by 50%; or
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(B)
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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%.
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The discount capital gain provisions do not apply to shareholders and trust beneficiaries that are
companies. If a holder makes a discount capital gain, any of its available capital losses should be
applied to reduce the undiscounted capital gain before either the one-half or one-third (as
applicable) discount is applied.
(ii) Capital loss
If a holder makes a capital loss this may be used to offset capital gains it derives in the same
or subsequent years of income (subject to satisfying certain conditions) but cannot be offset
against ordinary income, nor carried back to offset net capital gains arising in earlier income
years.
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Australian, PNG, US and UK taxation implications continued
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(iii) Replacement New Newcrest Shares
The cost base of the New Newcrest Shares received by a holder should include the market value of
the part of its Scheme Shares for which it receives New Newcrest Shares (and not cash) pursuant to
the Scheme. The part of the market value of the LGL Shares exchanged that is reasonably
attributable to the New Newcrest Shares received can be calculated as follows:
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= Market value of Scheme Shares transferred
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Market value of New Newcrest Shares
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Market value of New Newcrest Shares plus cash
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consideration
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The holder will be treated as acquiring the replacement New Newcrest Shares at the time
the replacement New Newcrest Shares are issued to it.
(e) GST
The transfer of Scheme Shares to Newcrest under the Scheme should not give rise to a GST
obligation for any Scheme Participants who are registered or required to be registered for GST.
However, for those Scheme Participants, there may be consequences in relation to claiming input tax
credits on any GST included on costs (such as legal and adviser costs) that have been incurred in
respect of advice that has been sought on the Scheme.
(f) Stamp duty
No Australian stamp duty will be payable by the Scheme Participants on the transfer of their Scheme
Shares to Newcrest or the issue or allotment of Newcrest Shares. Any applicable stamp duty will be
payable by Newcrest.
10.2 PNG taxation implications
(a) Income tax on capital gain
There is no capital gains tax in PNG. As a consequence, if a Scheme Participant holds Scheme Shares
on capital account, no PNG income tax will be payable on any capital gain realised by the Scheme
Participant (whether a PNG resident or a non-resident) on the disposal of the Scheme Shares, and no
deduction will be available in respect of any capital loss.
(b) GST
The transfer of Scheme Shares to Newcrest under the Scheme should not give rise to a GST
obligation for any Scheme Participants who are registered or required to be registered for GST
in PNG.
(c) Stamp duty
No PNG stamp duty will be payable by the Scheme Participants on the transfer of their Scheme Shares
to Newcrest. Any applicable stamp duty will be payable by Newcrest. There will be no PNG stamp duty
applicable to the issue and allotment of the New Newcrest Shares.
10.3 United States taxation implications
United
States Internal Revenue Service Circular 230 Notice: To ensure compliance with Internal
Revenue Service Circular 230, you are hereby notified that: (a) any discussion of US federal tax
issues contained or referred to in this Scheme Booklet or any document referred to herein is not
intended or written to be used, and cannot be used by Scheme Participants for the purpose of
avoiding penalties that may be imposed on them under the United States Internal Revenue Code; (b)
such discussion is written for use in connection with the promotion or marketing of the
transactions or matters addressed herein; and (c) Scheme Participants should seek advice based on
their particular circumstances from an independent tax adviser.
(a) General
The following is a general discussion of certain United States federal income tax consequences to a
United States Scheme Participant (as defined below). This summary is based upon the provisions of
the
Internal Revenue Code of 1986,
as amended (US) (the
Code),
applicable current and proposed
United States Treasury Regulations, judicial authority, and
administrative rulings and practice, all of which are subject to change, possibly on a retroactive
basis.
You are a “United States Scheme Participant” if you are, for United States federal income tax
purposes, a beneficial owner of Scheme Shares (including LGL ADRs on issue as of the record date)
and you are: a citizen or resident of the United States, a domestic corporation, an estate whose
income is subject to United States federal income tax regardless of its source, or a trust if a
United States court can exercise primary supervision over the trust’s administration and one or
more United States persons are authorised to control all substantial decisions of the trust.
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This discussion does not address all aspects of United States federal income taxation that may be
relevant to you in light of your specific circumstances, or if you are subject to special treatment
under the United States federal income tax laws (for example, if you are a life insurance company,
dealer or broker in securities or currencies, trader in securities that elects to use a
mark-to-market method of accounting for securities holdings, tax-exempt organisation, financial
institution, United States expatriate, foreign corporation or non-resident alien individual, if you
hold the common stock as part of a hedging, “straddle,” conversion or other integrated transaction,
if you acquired common stock in connection with the exercise of employee stock options or otherwise
as compensation for services, if your functional currency is not the US dollar, or if you own,
directly or by attribution, 10% or more, by voting power or value, of the outstanding shares of LGL
or Newcrest). In addition, this discussion does not address any aspect of foreign, state or local,
estate and gift taxation or alternative minimum tax that may be applicable to a United States
Scheme Participant and does not discuss United States federal income tax consequences to you if you
are not a United States Scheme Participant. You are urged to consult your own tax adviser to
determine the particular tax consequences to you (including the application and effect of any
state, local or foreign income and other tax laws) of the exchange of the Scheme Shares pursuant to
the Scheme.
If a partnership (including any entity treated as a partnership for US federal income tax purposes)
beneficially owns Scheme Shares, the US federal income tax treatment of a partner in a
partnership generally will depend upon the status of the partner and the activities of the
partnership. Partners in a partnership that beneficially owns Scheme Shares should consult their
own tax advisers as to the US federal, state and local, and foreign tax consequences of the Scheme.
The receipt by a United States Scheme Participant of cash or New Newcrest Shares (including
Newcrest ADRs) pursuant to the Scheme will be a taxable transaction for United States federal
income tax purposes. If you are a United States Scheme Participant, you should generally recognise
capital gain or loss for United States federal income tax purposes equal to the difference between
the US dollar value of your amount realised and your tax basis, determined in US dollars, in your
Scheme Shares. The amount realised should be the US dollar value of cash that you receive pursuant
to the Scheme, determined at the spot AUD/USD rate on the Implementation Date (regardless of
whether the cash is in fact converted into US dollars), if any, plus the US dollar fair market
value of the New Newcrest Shares that you receive pursuant to the Scheme, if any. Generally, any
gain or loss resulting from currency exchange fluctuations during the period from the
Implementation Date to the date you convert any cash received into US dollars should be treated as
ordinary income or loss. Capital gain of a non-corporate United States Scheme Participant that is
recognised before 1 January 2011 is generally taxed at a maximum rate of 15% where the holder has a
holding period greater than one year. The gain or loss should generally be income or loss from
sources within the United States for foreign tax credit limitation
purposes. The duductibility of a
capital loss recognised on the exchange is subject to limitations.
For United States federal income tax purposes, you should acquire an initial tax basis in New
Newcrest Shares equal to the US dollar fair market value of your New Newcrest Shares received
as of the Implementation Date. Your holding period for New Newcrest Shares should begin on
the day after the Implementation Date.
(b) Backup withholding and information reporting.
Unless you are an exempt recipient, payments to you that are made pursuant to the Scheme within the
United States or through certain United States related financial intermediaries may be subject to
information reporting and US federal backup withholding tax if you fail to supply a correct
taxpayer identification number or otherwise fail to comply with applicable US information reporting
or certification requirements. Any amount withheld from a payment to you under the backup
withholding rules is allowable as a credit against your US federal income tax, provided that the
required information is furnished to the US Internal Revenue Service
(IRS).
The foregoing discussion of certain material United States federal income tax consequences is
included for general information purposes only and is not intended to be, and should not be
construed as, legal or tax advice to you. No ruling from the IRS or legal opinion has been
requested, or will be obtained, regarding the US federal income tax considerations applicable to
you with respect to the Scheme. This summary is not binding on the IRS, and the IRS is not
precluded from taking a position that is different from, and contrary to, the positions taken in
this summary.
You are urged to consult your own tax adviser to determine the particular tax consequences to
you (including the application and effect of any state, local or foreign income and other tax
laws) of the receipt of cash or New Newcrest Shares in exchange for Scheme Shares pursuant to
the Scheme.
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Australian, PNG, US and UK taxation implications continued
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10.4 United Kingdom taxation implications
The following paragraphs, which are intended as a general guide only, are based on current UK tax
legislation and the practice of HM Revenue & Customs
(HMRC).
They summarise certain limited aspects
of the UK tax treatment of the implementation of the Scheme and they relate only to the position of
corporate and individual LGL Shareholders who are beneficial owners of their LGL Shares, who hold
their LGL Shares as a capital investment (other than under an individual savings account) and
(except insofar as express reference is made to the treatment of non-UK residents) who are
resident, and if individuals, domiciled and ordinarily resident, in the United Kingdom for taxation
purposes
(UK Scheme Participant).
They do not apply to LGL Shareholders who have (or are deemed to
have) acquired their shares by virtue of an office or employment, or shareholders who are or will
be officers or employees of LGL or Newcrest or a company forming part of LGL Group or Newcrest
Group. If you are in any doubt as to your taxation position or if you are subject to tax in any
jurisdiction other than the UK, you should consult an appropriate professional adviser immediately.
(a) Tax consequences of the Scheme
A UK Scheme Participant’s liability to UK tax on capital gains will depend on the
individual circumstances of LGL Shareholders and on the form of consideration received.
(i) Cash
To the extent that a UK Scheme Participant receives cash for their Scheme Shares under the Scheme,
that UK Scheme Participant will, except in the circumstances set out in the next paragraph, be
treated as disposing of Scheme Shares which may, depending on the UK Scheme Participant’s
individual circumstances (including the availability of exemptions, reliefs or allowable losses),
give rise to a liability to UK tax on capital gains.
Subject to the provisions set out in the second paragraph under sub-heading (ii) below, if a UK
Scheme Participant receives Mixed Consideration and the amount of cash received is small in
comparison with the value of their Scheme Shares, the UK Scheme Participant will not be treated as
having disposed of the shares in respect of which the cash was received. Instead, an amount equal
to the amount of such cash will be deducted from the allowable cost of their New Newcrest Shares.
Under current HMRC practice, any cash payment of £3,000 or less, or (if greater) which is 5% or
less of the market value of a UK Scheme Participant’s holding of Scheme Shares, will generally be
treated as small for these purposes.
Subject to the provisions set out in the second paragraph under sub-heading (ii) below, in all
other cases where a Scheme Participant receives cash in addition to New Newcrest Shares for their
Scheme Shares, the UK Scheme Participant will be treated as having made a part disposal of their
Scheme Shares, with the chargeable gain being computed on the basis of an apportionment of the
allowable cost of the holding by reference to the amount of cash received and the market value of
the New Newcrest Shares at the time of acquisition. The proportion of the allowable cost so
apportioned will not be available in respect of any future disposal of the New Newcrest Shares.
(ii) Acquisition of New Newcrest Shares
To the extent that a UK Scheme Participant receives New Newcrest Shares in exchange for their
Scheme Shares and does not hold (either alone or together with persons connected with them) more
than 5% of, or of any class of, shares in or debentures of LGL, they will not be treated as having
made a disposal of their Scheme Shares. Instead, the New Newcrest Shares will be treated as the
same asset as those Scheme Shares and as acquired at the same time and for the same consideration
as those Scheme Shares.
The same UK tax treatment will apply to any UK Scheme Participant who holds (either alone or
together with persons connected with them) more than 5% of, or of any class of, shares in or
debentures of LGL and exchanges Scheme Shares for New Newcrest Shares, provided that the exchange
is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of
which a main purpose is the avoidance of liability to UK tax on capital gains. Such UK Scheme
Participants are advised, however, that no application for clearance in this regard has been made
to HMRC (under Section 138 of the
Taxation of Chargeable Gains Act
1992(UK)) by LGL or Newcrest in
relation to the Scheme. Any such UK Scheme Participants who are in any doubt as to their taxation
position should consult an appropriate professional adviser.
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NDEPENDENT EXPERT’S REPORT
Process plant at Lihir island, pepua New Guinea.
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11
Independent expert’s report continued
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GRANT SAMUEL
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GRANT SAMUEL & ASSOCIATES
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LEVEL
6
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15 July 2010
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1 COLLINS STREET MELBOURNE VIC 3000
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T: +61 3 9949 8800 / F: +61 3 99949 8838
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The Directors
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www.grantsamuel.com.au
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Lihir Gold Limited
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Level 7, Pacific Place
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Champion, Parade and Musgrave Streets
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Port Moresby
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Papua New Guinea
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Dear Directors
Proposed Acquisition by Newcrest Mining Limited
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1
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Introduction
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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
Guinea’s 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
d’lvoire, West Africa. LGL had a market capitalisation at 13 July
2010 of approximately A$10.2 billion.
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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”).
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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.
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Newcrest is Australia’s largest gold producer and one of the
world’s top ten gold mining companies by production, reserves and
market capitalisation. Newcrest’s 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.
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The directors of LGL have engaged Grant Samuel
&
Associates Pty
Limited (“Grant Samuel”) to prepare an independent expert’s report
setting out whether, in its opinion, the Proposal is in the best
interests of LGL shareholders.
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1
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Excludes any shares issued as a result of vesting of LGL executive share rights.
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GRANT SAMUEL & ASSOCIATES PTY LIMITED
ABN 28 050 036 372 AFS LICENCE NO 240985
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GRANT SAMUEL
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This letter contains a summary of Grant Samuel’s opinion and
main conclusions and is extracted from Grant Samuel’s full report.
A copy of this letter and the full report will accompany the
Scheme Booklet to be sent to LGL shareholders.
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Summary of Opinion
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In Grant Samuel’s opinion the Proposal is in the best interests of
LGL shareholders, in the absence of a superior proposal.
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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.
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The combination of Newcrest and LGL (the “merged Newcrest”) will
create one of the world’s 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 Samuel’s view, LGL
shareholders will receive a meaningful premium.
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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 Samuel’s 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.
|
|
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|
|
|
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 LGL’s flagship Lihir
Island operation.
|
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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
Samuel’s 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 Island’s status as one of the world’s
largest gold deposits, with gold reserves of 28.8 million ounces.
It reflects the expected improvements in Lihir Island’s operating
performance following the completion of the Million Ounce
Processing Upgrade (“MOPU”) project, including increased annual
gold production
|
2
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11
Independent expert’s report continued
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136
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GRANT SAMUEL
n
n
n
|
|
|
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 mine’s 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).
|
|
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However, far more reliable evidence as to value is available.
Since LGL’s 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 LGL’s 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 LGL’s
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.
|
|
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|
|
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 LGL’s sale process) would generally be
preferred and the Consideration would be deemed fair.
|
|
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|
|
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.
|
|
|
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|
|
The merger of Newcrest and LGL will have a number of other
advantages and disadvantages for LGL shareholders. It will provide
project diversification (given LGL’s current focus on Lihir
Island), although this diversification could also be achieved at
an investor level through portfolio allocation. It will provide
exposure to Newcrest’s growth projects, particularly at Cadia East
and Wafi-Golpu in Papua New Guinea. On the other hand, it will
dilute LGL’s status as a pure gold developer, given Newcrest’s
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
Newcrest’s Cadia East underground mine, which will have capital
costs of around A$2 billion and will mine a very
|
3
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Lihir Gold Limited Scheme Booklet
|
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137
|
GRANT SAMUEL
n
n
n
|
|
|
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 LGL’s 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 LGL’s 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 Samuel’s 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.
|
|
|
§
|
|
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
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11
Independent expert’s report continued
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138
|
GRANT SAMUEL
n
n
n
|
|
|
|
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
world’s largest gold companies. It will be:
|
|
|
§
|
|
the world’s fourth largest gold company
by market capitalisation. It will be marginally smaller
than Newmont, with only Barrick and Goldcorp significantly larger; and
|
|
|
|
|
§
|
|
the world’s 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$15 billion.
|
|
|
|
|
|
The following chart illustrates the market capitalisation,
reserve base and production levels of the merged Newcrest by
comparison with the world’s major gold companies:
|
|
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|
|
|
Source: Grant Samuel analysis
|
|
|
|
Note: Production corresponds to the mid-point of each company’s guidance for
the 2010 financial year. The size of the
bubbles represents market capitalisations as at 13 July 2010 expressed in US$.
|
|
|
|
The merged Newcrest will have attractive investment
characteristics. It will have cash costs of production
comparable to those of Barrick, Goldcorp andNewmont (although
Goldcorp’s 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
|
|
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2
|
|
Based on share prices and exchange rates at 13 July 2010.
|
5
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Lihir Gold Limited Scheme Booklet
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139
|
GRANT SAMUEL
n
n
n
|
|
|
potential to significantly grow reserves in the short to
medium term. Its operations will centre on three of the
world’s largest gold mining operations: Lihir Island, Cadia
Valley and Telfer:
|
|
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|
|
Source: LGL
|
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|
Notes:
|
|
1.
|
|
Barrick owns 50%.
|
|
|
|
2.
|
|
Barrick owns 60% and Goldcorp owns 40%.
|
|
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|
3.
|
|
Barrick owns 75% and Kinross owns 25%.
|
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|
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.
|
|
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|
|
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
Newcrest’s 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.
|
|
|
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|
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
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11
Independent expert’s report continued
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|
140
|
GRANT SAMUEL
n
n
n
Relative Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (000’s oz)
|
|
|
1,166
|
|
|
|
1,631
|
|
|
|
42
|
%
|
|
- nine months to 31 March 2010 (000’s 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 Newcrest’s 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 LGL’s
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 Samuel’s 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
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Lihir Gold Limited Scheme Booklet
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|
141
|
GRANT SAMUEL
n
n
n
|
|
|
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 Government’s announcement on 2 July 2010 that it will not proceed with the RSPT
and 13 July 2010, Newcrest’s 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 market’s 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
|
|
|
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11
Independent expert’s report continued
|
|
140
|
GRANT SAMUEL
n
n
n
|
|
|
|
|
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;
|
|
|
|
|
§
|
|
Newcrest’s 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$4.20-4.32 per LGL share.
|
|
|
|
§
|
|
While it is likely that the underperformance of Newcrest shares relative to other gold
companies has reduced the effective premium provided by the Consideration, the premium
remains significant.
|
|
|
|
|
|
Based on the volume weighted average price (“VWAP”) for Newcrest and LGL shares for various
periods prior to the announcement on 1 April 2010 that Newcrest had made an acquisition
proposal, the Consideration represented the following premium to the LGL pre announcement
share price:
|
9
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
143
|
GRANT SAMUEL
n
n
n
Proposal — Implied Premiums
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LGL
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Newcrest
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VWAP
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VWAP
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VWAP
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Consideration Range Premium
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Date/Period
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(A$)
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(A$)
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Premium
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A$4.20
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A$4.32
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1 day
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3.05
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32.93
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36
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%
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38
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%
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42
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%
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5 days
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3.06
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33.37
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37
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%
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37
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%
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41
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%
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1 month
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3.03
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33.55
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39
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%
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39
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%
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43
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%
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3 months
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2.99
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33.41
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40
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%
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41
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%
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45
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%
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Source: Bloomberg and Grant Samuel analysis
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The value attributed to the Consideration of A$4.20-4.32 implied a premium to LGL’s VWAP
before the announcement on 1 April 2010 of Newcrest’s initial takeover proposal in the range
37%-45%, depending on the time frame for measurement of the premium. On this basis, the
apparent premium provided by the Consideration is attractive.
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However, movements in the gold market since the announcement of Newcrest’s initial takeover
proposal mean that premium estimates based on historical share prices are misleading. Between
31 March 2010 and 13 July 2010, the S&P TSX Global Gold Index increased by 12%. By contrast,
the Newcrest share price (in US$ terms) increased by only around 2%. This underperformance of
approximately 10% means that it is likely that the effective premium has fallen.
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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 Newcrest’s 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 LGL’s 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 Samuel’s view the premium
remains significant.
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§
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Grant Samuel has valued LGL in the range A$4.28-4.83 per share.
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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$1,200-1,240 per ounce and would change for different gold prices.
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10
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11
Independent expert’s report continued
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140
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GRANT SAMUEL
n
n
n
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The valuation is summarised below:
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LGL-Valuation Summary
5
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Value Range
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US$ Million
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A$ Million
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Low
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High
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Low
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High
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Lihir Island
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7,500
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8,500
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8,721
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9,884
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Bonikro and exploration (90% interest)
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595
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|
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645
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692
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750
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Mount Rawdon
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340
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390
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395
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453
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|
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Head office costs (net of savings)
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(100
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)
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(80
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)
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(116
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)
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(93
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)
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Enterprise Value
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8,335
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9,455
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9,692
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10,994
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LGL’s adjusted net cash
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393
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393
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457
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457
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Value of equity
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8,728
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9,848
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10,149
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11,451
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Shares on issue (millions)
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2,369
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2,369
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Value per share (AS)
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4.28
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4.83
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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.
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Grant Samuel appointed AMC as technical specialist to review LGL’s gold assets. AMC’s
role included a review of reserves and resources, development plans, production
schedules, operating costs, capital costs and exploration potential. AMC prepared
valuations of LGL’s exploration interests. AMC’s report is attached to Grant Samuel’s
report.
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Grant Samuel’s financial analysis was based on valuation scenarios prepared in
conjunction with AMC, reflecting AMC’s 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$0.86. The
financial models for LGL’s mining operations projected US$ cash flows from 1 January
2010 onwards. Present values were estimated using a range of discount rates.
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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.
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§
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Assessment of the value of the Lihir Island gold mine is key to the valuation of LGL.
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The Lihir Island gold mine accounts for more than 90% of LGL’s reserves and resources
and around 80% of LGL’s expected production for 2010. Accordingly, judgements regarding
the value of Lihir Island are key to the overall valuation of LGL.
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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 world’s 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 Island’s 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
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5
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Numbers might not add due to rounding.
|
11
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|
Lihir Gold Limited Scheme Booklet
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|
145
|
GRANT SAMUEL
n
n
n
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|
|
ounce by 2012. AMC’s 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.
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|
|
|
Grant Samuel’s 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 world’s major gold companies. In addition, Grant Samuel has judgementally
considered such factors as:
|
|
|
§
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|
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 Samuel’s financial analysis;
|
|
|
|
|
§
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|
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);
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§
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the optionality inherent in very long life mining operations; and
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§
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the sovereign risk associated with the mine’s 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 mine’s
location is likely to make the mine less attractive than if it was located (for example)
in North
America.
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|
Grant Samuel’s valuation of the Lihir Island gold mine in the range US$7.5-8.5 billion
implies the following multiples of reserves, resources and production:
|
Lihir Island — Implied Valuation Parameters (US$/oz)
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Variable
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|
Implied Multiple
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|
Multiples of
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(Moz)
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|
Low
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High
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Gold resources
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|
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48.5
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|
|
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155
|
|
|
|
175
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|
|
Gold reserves
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|
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28.8
|
|
|
|
260
|
|
|
|
295
|
|
|
Gold production 2009
|
|
|
0.85
|
|
|
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8,788
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|
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9,960
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|
|
|
|
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 Island’s
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.
|
|
§
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|
The valuation of LGL also reflects an apparent de-rating of gold equities relative to
physical gold.
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|
|
|
Grant Samuel’s 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 expert’s report continued
|
|
146
|
GRANT SAMUEL
n
n
n
|
|
|
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 Samuel’s 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
|
GRANT SAMUEL
n
n
n
|
§
|
|
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 Samuel’s 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 Samuel’s 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.
|
|
§
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|
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 LGL’s 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 LGL’s 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 LGL’s 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 LGL’s 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 expert’s report continued
|
|
148
|
GRANT SAMUEL
n
n
n
|
§
|
|
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 Samuel’s 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 Newcrest’s
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 LGL’s 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 Samuel’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
However, there is objective market-based evidence on which to base a conclusion as to
the fairness of the Consideration. Since LGL’s 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 Samuel’s 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 expert’s 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 expert’s 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.
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The opinion is made as at the date of this letter and reflects circumstances and conditions as at that date.
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Yours faithfully
GRANT SAMUEL & ASSOCIATES PTY LIMITED
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Financial Services Guide
and
Independent Expert’s Report
in relation to the Proposal by
Newcrest Mining Limited
Grant Samuel & Associates Pty Limited
(ABN 28 050 036 372)
25 June 2010
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GRANT SAMUEL
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GRANT SAMUEL & ASSOCIATES
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LEVEL 6
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1 COLLINS STREET MELBOURNE VIC 3000
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T: +61 3 9949 8800 / F: + 61 3 99949 8838
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www.grantsamuel.com.au
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Financial Services Guide
The Scheme of Arrangement in Lihir Gold Limited (“LGL”) will be effected pursuant to
Part XVI of the Papua New Guinea Companies Act. Although there is no requirement for an
independent expert’s 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 & Associates Pty Limited
(“Grant Samuel”) to prepare an independent expert’s report as if it were required under
Section 411 of the Corporations Act.
Grant Samuel holds Australian Financial Services Licence No. 240985 authorising it to
provide financial product advice on securities and interests in managed investments schemes
to wholesale and retail clients.
The Corporations Act requires Grant Samuel to provide this Financial Services Guide (“FSG”)
in connection with its provision of an independent expert’s report (“Report”) which is
included in a document (“Disclosure Document”) provided to members by the company or other
entity (“Entity”) for which Grant Samuel prepares the Report.
Grant Samuel does not accept instructions from retail clients. Grant Samuel provides no
financial services directly to retail clients and receives no remuneration from retail
clients for financial services. Grant Samuel does not provide any personal retail financial
product advice to retail investors nor does it provide market-related advice to retail
investors.
When providing Reports, Grant Samuel’s client is the Entity to which it provides the Report.
Grant Samuel receives its remuneration from the Entity. In respect of the Report for LGL in
relation to the proposal by Newcrest Mining Limited (“Newcrest”) to acquire all of the
ordinary shares in LGL via a court approved scheme of arrangement (“the LGL Report”), Grant
Samuel will receive a fixed fee of A$1.9 million plus reimbursement of out-of-pocket
expenses for the preparation of the Report (as stated in Section 9.3 of the LGL Report).
No related body corporate of Grant Samuel, or any of the directors or employees of Grant
Samuel or of any of those related bodies or any associate receives any remuneration or other
benefit attributable to the preparation and provision of the Report.
Grant Samuel is required to be independent of the Entity in order to provide a Report. The
guidelines for independence in the preparation of Reports are set out in Regulatory Guide
112 issued by the Australian Securities & Investments Commission on 30 October 2007. The
following information in relation to the independence of Grant Samuel is stated in Section
9.3 of the LGL Report:
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“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 expert’s report if such a report was required:
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Newcrest — August 2005 and December 2009; and
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LGL — October 2008.
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These engagements did not result in the
commissioning of an independent expert’s report and Grant Samuel did not provide either
party with views on valuation. The engagements did not affect Grant Samuel’s independence
or its ability to prepare an independent expert’s 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.
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In addition, Grant Samuel group executives hold parcels of less than 46,000
shares in LGL and 600 shares in Newcrest.
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Grant Samuel had no part in the
formulation of the Proposal. Its only role has been the preparation of this
report.
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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 Samuel’s 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.
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Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the
ASIC on 30 October 2007.”
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Grant Samuel has internal complaints-handling mechanisms and is a member of the Financial
Ombudsman Service, No. 11929. If you have any concerns regarding the LGL Report, please
contact the Compliance Officer in writing at Level 19, Governor Macquarie Tower, 1 Farrer
Place, Sydney NSW 2000. If you are not satisfied with how we respond, you may contact the
Financial Ombudsman Service at GPO Box 3, Melbourne VIC 3001 or 1300 780 808. This service
is provided free of charge.
Grant Samuel holds professional indemnity insurance that satisfies the compensation
requirements of the Corporations Act, 2001.
Grant Samuel is only responsible for the Report
and this FSG. Complaints or questions about the Disclosure Document should not be directed
to Grant Samuel which is not responsible for that document. Grant Samuel will not respond in
any way that might involve any provision of financial product advice to any retail investor.
GRANT SAMUEL & ASSOCIATES PTY LIMITED
ABN 28 050 036 372 AFS LICENCE NO 240985
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GRANT SAMUEL
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Table of Contents
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1 Terms of the Proposal
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1
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2 Scope of the Report
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3
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2.1 Purpose of the Report
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3
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2.2 Basis of Evaluation
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3
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2.3 Sources of the Information
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5
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2.4 Limitations and Reliance on Information
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6
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3 Profile of LGL
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9
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3.1 Overview
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9
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3.2 Financial Performance
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3.3 Financial Position
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15
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3.4 Cash Flow
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3.5 Group Hedging
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3.6 Taxation Position
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17
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3.7 Capital Structure and Ownership
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18
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3.8 Share Price Performance
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19
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4 Profile of Newcrest
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21
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4.1 Background
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21
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4.2 Financial Performance
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26
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4.3 Financial Position
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28
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4.4 Cash Flow
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29
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4.5 Group Hedging
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30
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4.6 Taxation Position
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30
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4.7 Capital Structure and Ownership
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30
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4.8 Share Price Performance
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32
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5 Profile of the Merged Newcrest
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34
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5.1 Overview
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34
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5.2 Capital Structure and Ownership
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37
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5.3 Resources, Reserves and Production
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38
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5.4 Synergies
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5.5 Pro Forma Financial Position
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6 Valuation of the Consideration
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6.1 Summary
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6.2 Approach
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6.3 Newcrest and LGL Trading Relativities
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6.4 Proposed Resources Super Profits Tax
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44
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6.5 Newcrest’s Share Price Performance
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44
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6.6 Broker Forecasts
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46
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6.7 Trading Multiples
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48
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6.8 Share Trading Volumes
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50
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6.9 Impact of the Proposal
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50
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7 Valuation of LGL
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51
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7.1 Summary
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51
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7.2 Valuation Approach
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7.3 Lihir Island
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60
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7.4 Bonikro
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67
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7.5 Mount Rawdon
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70
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7.6 Corporate Costs
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72
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7.7 Net cash
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72
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8 Evaluation of the Proposal
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Lihir Gold Limited Scheme Booklet
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GRANT SAMUEL
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8.1 Summary and Conclusion
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73
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8.2 Approach
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75
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8.3 Merger Analysis
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8.4 Premium for Control
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77
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8.5 Takeover Analysis
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8.6 Other Advantages, Disadvantages and Risks
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80
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8.7 Ineligible Foreign Shareholders
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81
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8.8 Taxation Issues
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81
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8.9 Shareholder Decision
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81
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9 Qualifications, Declarations and Consents
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9.1 Qualifications
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83
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9.2 Disclaimers
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9.3 Independence
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9.4 Declarations
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9.5 Consents
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9.6 Other
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85
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Appendices
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1 Profile of LGL Assets
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2 Profile of Newcrest Assets
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3 Valuation Evidence from Comparable Listed Companies
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4 Valuation Concepts for Gold Projects
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5 Report by AMC Consultants Pty Ltd
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GRANT SAMUEL
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THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
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Lihir Gold Limited Scheme Booklet
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GRANT SAMUEL
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1
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Terms of the Proposal
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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”).
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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”).
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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.
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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 Guinea’s 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 d’Ivoire, West
Africa. The company also holds a suite of exploration tenements, including extensive
exploration interests in Côte d’Ivoire. LGL has a 100% stake in all its operations except the
Bonikro assets (90%) and the exploration permits in Côte d’Ivoire (98%).
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Newcrest is Australia’s largest gold producer and one of the world’s top ten gold mining
companies by production, reserves and market capitalisation. Newcrest’s 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.
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The Proposal is conditional on certain conditions precedent being satisfied or waived including:
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§
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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”);
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§
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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);
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§
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no order or legislative restraint, whether permanent or temporary, being issued by a
Governmental Agency that restricts the implementation of the Proposal; and
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§
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no regulated event or material adverse change affecting either party.
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1
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Excludes any shares issued as a result of vesting of LGL executive sharerights.
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GRANT SAMUEL
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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.
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Lihir Gold Limited Scheme Booklet
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GRANT SAMUEL
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2.1
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Purpose of the Report
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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 expert’s 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 expert’s
report.
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Accordingly, the directors of LGL have engaged Grant Samuel & Associates Pty Limited
(“Grant Samuel”) to prepare an independent expert’s 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.
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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.
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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.
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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.
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2.2
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Basis of Evaluation
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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”.
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The Australian Securities & Investments Commission (“ASIC”) has issued Regulatory Guide
111, which establishes guidelines in respect of independent expert’s reports. ASIC
Regulatory Guide 111 differentiates between the analysis required for control transactions
and other transactions. In
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GRANT SAMUEL
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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.
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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 company’s 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:
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the offeror’s existing shareholding;
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other significant shareholdings;
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the probability of an alternative offer; and
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the liquidity of the market for the target company’s shares.
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A takeover offer could be considered “reasonable” if there were valid reasons to accept the offer
notwithstanding that it was not “fair”.
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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 company’s 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.
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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”.
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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:
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the estimated underlying value of LGL, based on theoretical valuation analysis;
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§
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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
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§
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the estimated value of the Consideration, based on the price at which Newcrest shares have
traded since the announcement of the Proposal.
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4
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Lihir Gold Limited Scheme Booklet
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GRANT SAMUEL
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A proposal that, under takeover analysis, was “fair and reasonable” or “not fair but
reasonable” would be in the best interests of shareholders.
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|
|
|
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 expert’s report continued
|
|
160
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 LGL’s 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 Samuel’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
AMC Consultants Pty Ltd (“AMC”) was appointed as technical specialist to review the operations and
exploration assets of LGL for Grant Samuel. AMC’s 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 LGL’s 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 LGL’s 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 expert’s report continued
|
|
162
|
GRANT SAMUEL
n
n
n
|
|
§
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
3.1
|
|
Overview
|
|
|
|
|
|
|
LGL is a pure gold company, incorporated in Papua New Guinea but with its principal listing
on the ASX. The company’s 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 d’Ivoire, West Africa. The company also holds a suite of exploration
tenements, including extensive exploration interests in Côte d’Ivoire. LGL has a 100% stake
in all its operations except the Bonikro assets (90%) and the exploration permits in Côte
d’Ivoire (98%).
|
|
|
|
|
|
|
The following map shows the location of LGL’s 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 expert’s report continued
|
|
164
|
GRANT SAMUEL
n
n
n
Listed below are some significant events in LGL’s history since its incorporation in 1995:
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
§
|
|
|
LGL’s Bonikro operation in Côte d’Ivoire 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
LGL’s portfolio of operations and development projects is summarised as follows:
|
LGL – Reserves, Resources and Production
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
LGL
|
|
|
|
|
|
Resources
|
|
Reserves
|
|
31 Dec 2009
|
|
Asset/Project
|
|
Interest
|
|
Location
|
|
(Moz)
|
|
(Moz)
|
|
(000’s 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 d’Ivoire
|
|
|
1.1
|
|
|
|
0.7
|
|
|
|
135
|
|
|
Total Operating Assets
|
|
|
|
|
|
|
|
|
|
|
51.0
|
|
|
|
30.3
|
|
|
|
1,096
|
3
|
|
Exploration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hiré Permit
|
|
|
98
|
%
|
|
Côte d’Ivoire
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
|
Bonikro Exploitation Permit
Extension application
|
|
|
90
|
%
|
|
Côte d’Ivoire
|
|
|
0.2
|
|
|
|
—
|
|
|
|
—
|
|
|
Total Exploration
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
|
—
|
|
|
|
—
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
|
|
52.1
|
|
|
|
30.3
|
|
|
|
1,096
|
|
Source: LGL
|
|
|
|
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:
|
Source: LGL and Grant Samuel analysis
|
|
|
|
|
2
|
|
Reserves, resources and production estimates represent LGL’s 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 d’Ivoire.
|
|
|
|
3
|
|
Production does not include the 12,565 ounces contribution from Ballarat during
calendar year 2009.
|
11
|
|
|
|
|
11
Independent expert’s report continued
|
|
166
|
GRANT SAMUEL
n
n
n
Source: LGL and Grant Samuel analysis
LGL grew its production by approximately 90% in the four years to 31 December 2009, driven by a
257,000 ounce increase at Lihir Island, the acquisition of the Mount Rawdon and Bonikro mines and
the successful ramp up of the Bonikro operations. LGL has increased its initial production guidance
for the year ending 31 December 2010 to 1.0-1.1 million ounces of gold. Cash costs are expected to
be below US$450 per ounce, compared to US$397 per ounce in 2009:
Source: LGL
Note: Bonikro numbers represent 100% of production. 2008 production from Mount Rawdon represents
the production
attributable to LGL.
12
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
167
|
GRANT SAMUEL
n
n
n
|
|
3.2
|
|
Financial Performance
|
|
|
|
|
|
|
The operating and financial performance of LGL for the four years to 31 December 2009 is
summarised below:
|
LGL — Financial Performance (US$ million)
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
|
|
2006
|
|
2007
|
|
2008
5
|
|
2009
6
|
|
Gold sold (000’s oz)
|
|
|
643
|
|
|
|
708
|
|
|
|
861
|
|
|
|
1,115
|
|
|
Average realised price (US$/oz)
7
|
|
|
510
|
|
|
|
666
|
|
|
|
850
|
|
|
|
956
|
|
|
Gold produced (000’soz)
|
|
|
651
|
|
|
|
701
|
|
|
|
871
|
|
|
|
1,111
|
|
|
Total cash costs (US$/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
|
|
Source: LGL
|
|
|
|
|
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 expert’s report continued
|
|
168
|
GRANT SAMUEL
n
n
n
In analysing LGL’s recent financial performance the following should be noted:
|
§
|
|
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 Equigold’s 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 LGL’s decision to divest the Ballarat operation and an associated A$409 million
after tax impairment charge. As a result of the write-down, LGL reported a net loss for the
year.
|
14
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
169
|
GRANT SAMUEL
n
n
n
|
|
3.3
|
|
Financial Position
|
|
|
|
|
|
|
The financial position of LGL as at 31 December 2008 and 31 December 2009 is summarised
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December
|
|
|
|
2008
|
|
2009
|
|
Receivables
|
|
|
21.4
|
|
|
|
15.2
|
|
|
Inventories
|
|
|
394.0
|
|
|
|
495.8
|
|
|
Payables
|
|
|
(102.1
|
)
|
|
|
(111.4
|
)
|
|
Net working capital
|
|
|
313.3
|
|
|
|
399.6
|
|
|
Property, plant and equipment
|
|
|
2,104.0
|
|
|
|
1,888.8
|
|
|
Deferred mining costs
|
|
|
257.0
|
|
|
|
299.5
|
|
|
Intangible assets
|
|
|
419.3
|
|
|
|
352.0
|
|
|
Other net assets / (liabilities)
|
|
|
(222.0
|
)
|
|
|
(123.8
|
)
|
|
Total funds employed
|
|
|
2,871.6
|
|
|
|
2,816.1
|
|
|
Cash and cash equivalents
|
|
|
64.7
|
|
|
|
473.5
|
|
|
Total debt
|
|
|
(0.5
|
)
|
|
|
(50.9
|
)
|
|
Net cash / (borrowings)
|
|
|
64.2
|
|
|
|
422.6
|
|
|
Minority interests
|
|
|
(31.9
|
)
|
|
|
(31.7
|
)
|
|
Net assets attributable to LGL shareholders
|
|
|
2,903.9
|
|
|
|
3,207.0
|
|
|
Statistics
|
|
|
|
|
|
|
|
|
|
Shares on issue at period end (million)
|
|
|
2,787
|
|
|
|
2,368
|
|
|
Net assets per share (US$)
|
|
|
1.33
|
|
|
|
1.35
|
|
|
NTA
14
per share (US$)
|
|
|
1,14
|
|
|
|
1,21
|
|
Source: LGL
|
|
|
|
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$340.9 million (net of transaction costs) completed in 2009 resulted in an increase
in net assets.
|
|
|
|
|
|
13
|
|
Numbers may not add due to rounding.
|
|
|
|
14
|
|
NTA is net tangible assets, which is calculated as net assets less intangible assets.
|
15
|
|
|
|
|
11
Independent expert’s report continued
|
|
170
|
GRANT SAMUEL
n
n
n
|
|
3.4
|
|
Cash Flow
|
|
|
|
|
|
|
LGL’s cash flows for the four years ended 31 December 2009 are summarised below:
|
LGL — Cash Flows (US$ million)
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: LGL
|
|
|
|
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 LGL’s
gold hedge book, repay the gold loan and retire all of LGL’s 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$1.5 cents per share paid on 31 March 2010.
|
|
|
|
|
|
15
|
|
Numbers may not add due to rounding.
|
16
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
171
|
GRANT SAMUEL
n
n
n
|
|
3.5
|
|
Group Hedging
|
|
|
|
|
|
|
LGL completed the close out of its gold hedge book in June 2009. However, hedge accounting
requires that the profit and losses on those hedge contracts are brought to account at the
original designated dates. Accordingly, LGL will report the non-cash impact of these closed
hedge contracts in future periods. A schedule of the non-cash hedging losses to be booked by LGL
in future periods is summarised below:
|
LGL — Non-cash Hedging Losses Schedule (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 d’Ivoire 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 d’Ivoire, 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 d’Ivoire. LGL had no tax losses in Côte d’lvoire 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 expert’s report continued
|
|
172
|
GRANT SAMUEL
n
n
n
|
|
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 LGL’s 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:
|
LGL — 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
|
|
Source: LGL
|
|
|
|
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, MRL’s 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
|
GRANT SAMUEL
n
n
n
|
|
3.8
|
|
Share Price Performance
|
|
|
|
|
|
|
A summary of the share price and trading history of LGL since 1 January 2005 is set out
below:
|
LGL — Share Price History
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weekly
|
|
Average
|
|
|
|
Share Price (A$)
|
|
Volume
|
|
Weekly
|
|
|
|
High
|
|
Low
|
|
Close
|
|
(000’s)
|
|
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
|
|
Source: IRESS
|
|
|
|
The following graph shows the weekly closing share price and trading volumes for LGL since 1
January 2005:
|
Source: IRESS
19
|
|
|
|
|
11
Independent expert’s report continued
|
|
174
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 LGL’s 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:
|
Source: IRESS, Bloomberg
|
|
|
|
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 LGL’s underlying performance.
|
20
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
175
|
GRANT SAMUEL
n
n
n
|
|
4.1
|
|
Background
|
|
|
|
|
|
|
Newcrest is Australia’s largest gold producer and one of the world’s 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.
|
|
|
|
|
|
|
Newcrest’s 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 O’Callaghans 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 company’s 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 Newcrest’s operations is set out on the map below:
|
Source: Newcrest
|
|
|
|
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 expert’s report continued
|
|
176
|
GRANT SAMUEL
n
n
n
Listed below are some key events in Newcrest’s recent history:
|
|
|
|
|
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 Newcrest’s 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 Newcrest’s 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 Harmony’s 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 Newcrest’s 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
|
Source: Newcrest
22
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
177
|
GRANT SAMUEL
n
n
n
|
|
|
|
Newcrest’s portfolio of gold and copper-gold assets is summarised as
follows:
|
Newcrest Operations and Development Projects
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
(000’s oz)
|
|
(000’s 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
|
|
Source: Newcrest
|
|
|
|
Newcrest’s 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 Newcrest’s gold resources were defined at the company’s
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 Newcrest’s 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 expert’s report continued
|
|
178
|
GRANT SAMUEL
n
n
n
Source: Newcrest and Grant Samuel analysis
Source: Newcrest and Grant Samuel analysis
|
|
|
|
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 group’s
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
|
GRANT SAMUEL
n
n
n
Source: Newcrest
Note: Gosowong numbers represent 100% of production
25
|
|
|
|
|
11
Independent expert’s report continued
|
|
180
|
GRANT SAMUEL
n
n
n
|
|
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:
|
Newcrest
– Financial Performance
(A$ millions)
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: Newcrest and Grant Samuel analysis
|
|
|
|
In analysing Newcrest’s 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
|
|
Newcrest’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 expert’s report continued
|
|
182
|
GRANT SAMUEL
n
n
n
|
|
4.3
|
|
Financial Position
|
|
|
|
|
|
|
The financial position of Newcrest as at 31 December 2009 is summarised below:
|
Newcrest – Financial Position (A$ millions)
20
|
|
|
|
|
|
|
|
|
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
|
%
|
Source: Newcrest and Grant Samuel analysis
|
|
|
|
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
|
|
Newcrest’s 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
|
GRANT SAMUEL
n
n
n
Newcrest – US$ Private Placement Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$1,100 million and their term is three years. The existing
and new facilities were undrawn as at the date of this report.
|
|
|
4.4
|
|
Cash Flow
|
|
|
|
|
|
|
Newcrest’s cash flows for the three years ended 30 June 2009 and the six months ended 31
December 2009 are summarised below:
|
Newcrest — Cash Flow (A$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: Newcrest and Grant Samuel analysis
|
|
|
|
Over the three and a half years ended 31 December 2009, Newcrest’s 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 company’s 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$2.8 billion.
|
29
|
|
|
|
|
11
Independent expert’s report continued
|
|
184
|
GRANT SAMUEL
n
n
n
|
|
4.5
|
|
Group Hedging
|
|
|
|
|
|
|
Following the expiry of its copper contracts in June 2007 and the close out of its gold hedge
book in June 2008, Newcrest does not have any future obligations with respect to gold or copper
hedge contracts. However, Newcrest manages its exposure to commodity price movements through
gold put options, fixing its A$ 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:
|
Newcrest — Hedge Losses Release Profile (A$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, Newcrest’s 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
|
GRANT SAMUEL
n
n
n
Newcrest — Share Rights on Issue as at 18 June 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: Newcrest
|
|
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:
|
Newcrest
— 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
|
%
|
Source: Newcrest
31
|
|
|
|
|
11
Independent expert’s report continued
|
|
186
|
GRANT SAMUEL
n
n
n
|
|
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:
|
Newcrest – Share Price History
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weekly
|
|
Average
|
|
|
|
Share Price (A$)
|
|
|
|
|
|
Volume
|
|
Weekly
|
|
|
|
High
|
|
Low
|
|
Close
|
|
(000’s)
|
|
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
|
|
Source: IRESS
|
|
|
|
The following graph illustrates the weekly closing share price and trading volumes for
Newcrest since January 2006:
|
Source: IRESS
|
|
|
|
Newcrest’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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. Newcrest’s 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 Newcrest’s 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$34.83.
|
|
|
|
|
4.8.2
|
|
Relative Performance
|
|
|
|
|
|
|
Newcrest is a constituent of various indices including S&P/ASX 100, S&P/ASX 100 Resources and
the S&P/ASX All Ordinaries Gold. At 13 July 2010 its weighting in these indices was
approximately 1.8%, 6.1% and 42.2% respectively. The following graph illustrates the performance
of Newcrest shares since January 2006 relative to the S&P/ASX All Ordinaries Gold Index and the
spot gold price expressed in Australian dollars:
|
Source: IRESS, Bloomberg and Grant Samuel analysis
|
|
|
|
Newcrest’s shares have traded in line with the S&P All Ordinaries Gold Index reflecting its
significant weighting in this index. In the 2006 calendar year and the first half of the 2007
calendar year, Newcrest underperformed the spot gold price and the S&P All Ordinaries Index,
possibly reflecting grade reconciliation and other operational issues at Telfer. Since August
2008, Newcrest’s share price and the Gold Index have underperformed the A$ spot gold price.
|
33
|
|
|
|
|
11
Independent expert’s report continued
|
|
188
|
GRANT SAMUEL
n
n
n
|
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:
|
Source: Bloomberg
|
|
|
|
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$15 billion. It will be the world’s fifth largest gold
company by gold reserves and production:
|
34
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
189
|
GRANT SAMUEL
n
n
n
Source: Bloomberg and Grant Samuel analysis
Note: Production corresponds to the mid-point of each company’s guidance for the 2010 financial
year. The size of the
bubbles represents market capitalisations as at 13 July 2010 expressed in US$.
|
|
|
|
The merged Newcrest will have attractive investment characteristics. It will have cash costs of
production comparable to those of Barrick Gold Corporation (“Barrick”), Goldcorp Inc. (“Goldcorp”)
and Newmont (although Goldcorp’s 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 world’s largest gold mining
operations: Lihir Island, Cadia Valley and Telfer:
|
35
|
|
|
|
|
11
Independent expert’s report continued
|
|
190
|
GRANT SAMUEL
n
n
n
Source: LGL
Notes:
|
|
|
|
|
1.
|
|
Barrick owns 50%.
|
|
|
|
2.
|
|
Barrick owns 60% and Goldcorp owns 40%.
|
|
|
|
3.
|
|
Barrick owns 75% and Kinross Gold Corporation owns 25%.
|
In particular, the Lihir Island and Cadia Valley operations are expected to have very long mine
lives (potentially 30 to 40 years) and should provide the backbone for an enduring, world class
gold company.
The merged Newcrest will operate in five countries with 10 mines across South East Asia and West
Africa. Output from the Cadia Valley, Lihir Island and Telfer operations will be supplemented by
production from Gosowong, Bonikro, Hidden Valley, Mount Rawdon and Cracow. The merged Newcrest has
major growth opportunities at Wafi-Golpu and Namosi and prospective exploration interests in Côte
d’Ivoire (Africa) and Morobe Province, Papua New Guinea.
36
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
191
|
GRANT SAMUEL
n
n
n
Source: LGL and Newcrest
The merged Newcrest will be a diversified gold company, with no asset representing more than 45% of
the reserve base and Australia representing 48% of pro forma gold production for the twelve months
to 31 December 2009:
Source: LGL and Newcrest
|
|
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 expert’s report continued
|
|
192
|
GRANT SAMUEL
n
n
n
|
|
5.3
|
|
Resources, Reserves and Production
|
|
|
|
|
|
|
The merged Newcrest’s pro forma reserves and resources and the merged Newcrest’s production for
the 12 months ended 31 December 20009 are set out below:
|
Merged Newcrest — Pro Forma Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (000’s oz)
|
|
|
1,582.0
|
|
|
|
1,096.2
|
22
|
|
|
2,678.2
|
|
|
Copper (000’s t)
|
|
|
92.2
|
|
|
|
—
|
|
|
|
92.2
|
|
Source: LGL and Newcrest
The merged Newcrest is expected to have a significant growth pipeline over the next five years,
with production forecast to grow 6% per annum to 3.75 million ounces
23
for the year
ending 30 June 2014:
Source: LGL and Newcrest
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
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$85 million per annum pre tax, which represents
approximately 4% of the merged Newcrest cost base.
|
|
|
|
|
5.5
|
|
Pro Forma Financial Position
|
|
|
|
|
|
|
The unaudited pro forma financial position of the merged Newcrest as at 31 December 2009 is
summarised below:
|
Merged Newcrest — Unaudited Pro Forma Financial Position (US$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
%
|
Source: LGL, Newcrest and Grant Samuel analysis
The unaudited pro forma balance sheet has been prepared on the following basis:
|
|
§
|
|
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 expert’s report continued
|
|
194
|
GRANT SAMUEL
n
n
n
|
|
§
|
|
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.
|
A detailed unaudited pro forma balance sheet and accompanying reclassification and adjustment notes
are set out in Section 9.4 of the Scheme Booklet. The pro forma balance sheet has been prepared by
Newcrest and reviewed by the Investigating Accountant, PricewaterhouseCoopers.
PricewaterhouseCoopers’ report is set out in Section 12 of the Scheme Booklet.
40
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
195
|
GRANT SAMUEL
n
n
n
|
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$33.50—34.50. The value attributed to the
Consideration is summarised as follows:
|
Value of Consideration per LGL share (A$)
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Range
|
|
|
|
Low
|
|
High
|
|
Cash
|
|
|
0.225
|
|
|
|
0.225
|
|
|
Newcrest ordinary shares (A$33.50—34.50) ÷ 8.43
|
|
|
3.97
|
|
|
|
4.09
|
|
|
Total Consideration value per LGL share
|
|
|
4.20
|
|
|
|
4.32
|
|
Note: numbers may not add due to rounding
The actual value of the Consideration will vary with movements in the Newcrest share price.
The final value of the Consideration could ultimately exceed or be less than the range of
A$4.20-4.32 per LGL share set out above.
The range of Newcrest share prices adopted for the purpose of estimating the value of the
Consideration is consistent with the price at which Newcrest shares have traded in recent
weeks and over the longer term:
|
|
|
|
|
24
|
|
Excludes any shares issued as a result of vesting of LGL executive share rights.
|
41
|
|
|
|
|
11
Independent expert’s report continued
|
|
196
|
GRANT SAMUEL
n
n
n
Source: IRESS
Grant Samuel believes it is reasonable to adopt a Newcrest share price range of A$33.50-34.50
for the following reasons: 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;
|
|
|
|
|
§
|
|
Newcrest’s 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
|
GRANT SAMUEL
n
n
n
An alternate method would be to estimate the underlying value of a combined Newcrest and LGL and
then to apply a discount to reflect a portfolio interest in the merged Newcrest. Grant Samuel
has not had access to the detailed financial and operational information on Newcrest (such as
earnings and operational forecasts or life of mine plans) to undertake such a fundamental
analysis of the value of the Consideration. In any event, the market assessment of the value of
the Consideration is arguably more relevant and reliable than a theoretical estimate of a future
trading price for the merged Newcrest.
In considering the reliability of Newcrest’s share market price as an indicator of the value of
the Consideration, Grant Samuel has considered whether Newcrest’s current share price is a true
reflection of the fair market value of shares in the merged Newcrest. In particular, Grant
Samuel has considered whether there is any evidence of Newcrest’s shares appearing mispriced,
and whether there is any important information about Newcrest or Lihir that could affect the
share price but is not in the public domain. Specifically, Grant Samuel has:
|
|
§
|
|
analysed recent trading in Newcrest’s shares;
|
|
|
|
|
§
|
|
analysed the trading multiples implied by Newcrest’s 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 Newcrest’s 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):
|
Source: Bloomberg and Grant Samuel analysis
The market appears to be trading in Newcrest and LGL shares on the basis of an expectation that the
Proposal will proceed. Accordingly, it is reasonable to conclude that the Newcrest share price
represents a market estimate of the price at which shares in the merged Newcrest would trade given
current market conditions.
43
|
|
|
|
|
11
Independent expert’s report continued
|
|
198
|
GRANT SAMUEL
n
n
n
|
|
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 Government’s announcement on 2 July 2010 that it will not proceed with the RSPT and
13 July 2010, Newcrest’s shares have outperformed global gold equities, although this
outperformance may in part have reflected a strengthening in the copper price
|
|
|
|
|
6.5
|
|
Newcrest’s Share Price Performance
|
|
|
|
|
|
|
Newcrest’s 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$35.00.
|
Source: IRESS
The apparently stable value of Newcrest shares over the period masks the impact of movements in the
US$ gold price and the A$/US$ exchange rate. The US$ gold price has strengthened and the A$ has
weakened during this period. Ordinarily these movements should have resulted in a significant
strengthening in the Newcrest share price in A$ terms. Instead, in US$ terms, the Newcrest share
price has underperformed by approximately 10% relative to global gold equities:
44
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
199
|
GRANT SAMUEL
n
n
n
Source: Bloomberg and Grant Samuel analysis
In Grant Samuel’s view this underperformance may reflect a number of factors, including the
significant fall in the copper price over the period (Newcrest has a greater exposure to copper
than any of the other major gold companies).
45
|
|
|
|
|
11
Independent expert’s report continued
|
|
200
|
GRANT SAMUEL
n
n
n
|
|
6.6
|
|
Broker Forecasts
|
|
|
|
|
|
|
The closing Newcrest share price on 13 July 2010 was A$34.83, well below the broad range of
broker’s target prices for Newcrest shares:
|
Newcrest — Broker Target Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker
|
|
Date of Report
|
|
Price (A$)
|
|
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
|
|
Source: Brokers reports
Two of the broker reports were published before LGL’s announcement of the Initial Proposal on 1
April 2010 and four of the broker reports were published before the announcement of the Proposal on
4 May 2010. The target prices generally represent 12 month target prices rather than current
valuations by the relevant brokers.
46
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
201
|
GRANT SAMUEL
n
n
n
In recent months Newcrest shares have generally traded at or below the bottom end of the range of
brokers’ share price targets:
Source: IRESS and broker reports
It is difficult to explain with confidence the magnitude of the discrepancy between broker price
targets and recent Newcrest share prices. However, it may be explained by factors such as:
|
|
§
|
|
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 Samuel’s 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.
|
While no clear conclusions can be drawn from analysis of the broker price targets, there is no
evidence from the analysis that suggests that the Newcrest shares are over-priced relative to
market expectations. To the contrary, the analysis suggests that there may be some upside to the
Newcrest share price (although Grant Samuel does not believe it appropriate to rely upon any
potential upside for the purposes of its analysis).
47
|
|
|
|
|
11
Independent expert’s report continued
|
|
202
|
GRANT SAMUEL
n
n
n
|
|
6.7
|
|
Trading Multiples
|
|
|
|
|
|
|
Newcrest’s trading multiples and multiples for comparable gold companies are summarised below:
|
Comparable Gold Companies — Implied Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: Bloomberg and company reports
27
The Newcrest standalone multiples reflect Newcrest’s standalone reserves, resources and production,
based on share prices (and exchange rates) both prior to the Initial Proposal and as at 4 June
2010. The merged Newcrest multiples take into account the terms of the Proposal, the additional
shares that would be issued, the cash consideration and the impact of the Proposal including in
relation to attributable reserves, resources and production.
Newcrest on a standalone basis is trading on a basis broadly consistent with multiples for the
other gold majors. Its lower cash costs and significant copper resources support the premium in
terms of reserve and production multiples at which it is trading relative to AngloGold and Kinross
Gold Corporation (“Kinross”). Only Goldcorp trades on significantly higher reserve and production
multiples, apparently reflecting expected growth in production from a number of new very low cost
projects scheduled to commence operation in the near term. The multiples for the merged Newcrest
are lower than the standalone multiples, which could reflect LGL’s higher cost production and the
market’s discounting of LGL’s full reserve base, some of which will only be produced 30 or more
years into the future.
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
The following chart sets out a regression analysis of reserve multiple against cash cost:
Source: Bloomberg, company report and Grant Samuel analysis
28
The analysis suggests that the merged Newcrest is trading in line with the gold majors.
The multiple analysis is not definitive. However, there is nothing in the analysis that
suggests that shares in Newcrest on either a standalone basis or on a merged post-Proposal
basis are mis-priced.
|
|
|
|
|
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 expert’s report continued
|
|
204
|
GRANT SAMUEL
n
n
n
|
|
6.8
|
|
Share Trading Volumes
|
|
|
|
|
|
|
The average weekly volume of trading in Newcrest shares is summarised below:
|
Source: IRESS and Grant Samuel analysis
Newcrest’s average weekly trading volume has remained relatively constant over the period 1
January 2007 to 30 April 2010. The increase in weekly volume during May 2010 coincided with the
announcement of the Proposal on 4 May 2010. Since the announcement of the Proposal, average
weekly trading volumes have been almost double those prior to the announcement. Given the volume
of trading in Newcrest shares before and after the announcement of the Proposal, it appears
reasonable to conclude that the Newcrest share price should represent a consensus well informed
view of the value of Newcrest, developed in a liquid market for Newcrest shares.
|
|
6.9
|
|
Impact of the Proposal
|
|
|
|
|
|
|
The acquisition of LGL would have a significant impact on Newcrest’s 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 Newcrest’s 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 market’s assessment of the value of the merged
Newcrest.
|
50
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
205
|
GRANT SAMUEL
n
n
n
|
|
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$0.86. The valuation represents the
estimated full underlying value of LGL assuming 100% of the company was available to be
acquired and includes a premium for control. The value exceeds the price at which, based on
current market conditions, Grant Samuel would expect LGL shares to trade on the ASX in the
absence of a takeover offer.
|
|
|
|
|
|
|
The value for LGL is the aggregate of the estimated market value of LGL’s operating business
and other assets plus adjusted net cash. The valuation is summarised below:
|
LGL — Valuation Summary
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Range
|
|
|
|
US$ 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
|
|
|
LGL’s 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
|
|
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 LGL’s gold assets. AMC’s role included
a review of reserves and resources, development plans, production schedules, operating costs,
capital costs and exploration potential. AMC prepared valuations of LGL’s exploration interests.
AMC’s report is attached as Appendix 5 to this Report.
Grant Samuel’s financial analysis was based on valuation scenarios prepared in conjunction with
AMC, reflecting AMC’s 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$0.86. The financial models for LGL’s mining operations projected
US$ 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.
|
|
|
|
|
29
|
|
Numbers might not add due to rounding.
|
51
|
|
|
|
|
11
Independent expert’s report continued
|
|
206
|
GRANT SAMUEL
n
n
n
Grant Samuel’s valuation of LGL in the range US$8.7-9.8 billion implies the following valuation
parameters:
LGL — Implied Valuation Parameters (US$/oz)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Island’s 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 Samuel’s valuation of LGL has been assessed by aggregating the estimated market values
of LGL’s 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 Samuel’s 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
|
GRANT SAMUEL
n
n
n
The gold futures methodology assumes that there is a consistent relationship between share market
and transaction values for gold companies and the value of physical gold. However, since the onset
of the global financial crisis in 2008, there appears to have been a dislocation between physical
gold 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
Analysis of the relationship between the price of physical gold and the S&P TSX Global Gold Index
over a longer period of time also suggests that there has been a dislocation between physical gold
and gold equities. The following chart compares the performance of the S&P TSX Global Gold Index
with the performance of physical gold from 1 October 2000 (the commencement date for the S&P TSX
Global Gold Index) to 13 July 2010:
53
|
|
|
|
|
11
Independent expert’s report continued
|
|
208
|
GRANT SAMUEL
n
n
n
Source: Bloomberg and Grant Samuel analysis
The chart shows that the Index outperformed physical gold for most of the period, but that it has
underperformed in recent years. Grant Samuel has performed regression analysis (regressing the
Index against the gold price) for two periods: 1 October 2000 to 30 June 2006, and 1 July 2006 to
18 June 2010. For the first period, the regression analysis estimated a regression coefficient of
0.48. For the second period, the coefficient had fallen to 0.11. Moreover, the correlation
co-efficient had fallen from 0.84 to 0.30, suggesting that movements in the gold price had become a
less significant factor in explaining movements in gold equities. The choice of starting and end
dates for the analysis can skew the outcomes and so the conclusions must be treated with caution.
However, the analysis does suggest a shift in the market for gold equities.
Further evidence suggesting a significant downwards re-rating of gold stocks relative to physical
gold is derived from expressing share prices for major gold companies in terms of physical gold.
This analysis essentially determines the quantity of physical gold required to buy a gold share. As
set out below, the share prices for major gold companies (and the overall index) have declined
significantly when expressed in terms of physical gold:
54
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
209
|
GRANT SAMUEL
n
n
n
Source: Bloomberg and Grant Samuel analysis
The analysis shows that the major gold stocks and the S&P TSX Global Gold Index have suffered a
material loss of value relative to physical gold.
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. The following charts show, for Barrick, Goldcorp, Newcrest, AngloGold, Kinross and
LGL, that cash margins have expanded without any significant corresponding increase in reserve and
production multiples:
Source: Grant Samuel analysis
55
|
|
|
|
|
11
Independent expert’s report continued
|
|
210
|
GRANT SAMUEL
n
n
n
Source: Grant Samuel analysis
Overall, it appears clear that there has been a significant 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.
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:
Major Gold Company Betas
|
|
|
|
|
|
|
|
|
|
|
|
|
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
Given the imprecision associated with beta estimation any conclusion regarding beta movements needs
to be treated with caution. Short term movements in measurements of historical betas may reflect
specific rather than systematic risk issues and may not indicate any movement in expected betas,
which are the relevant benchmark for estimating costs of capital within the capital asset pricing
model framework. However, the data does strongly suggest an increase in betas, from values
approaching zero to values around or in excess of
56
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
211
|
GRANT SAMUEL
n
n
n
0.5. Such an increase would be expected to translate into higher costs of capital and a reduction
in market values.
Alternatively (or perhaps in addition to a perceived increase in riskiness), 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, such as the gold futures methodology that Grant Samuel generally applies, now appear to
have poorer explanatory power (particularly for long life projects) than previously.
Grant Samuel’s valuation analysis has therefore also considered the impact on calculated values of
assuming gold prices lower than the current spot price. From 1 January 2008 to 13 July 2010, the
S&P TSX Global Gold Index increased by 12%. The gold price on 1 January 2008 was around US$834 per
ounce. Given that gold equities effectively represent a geared exposure to physical gold (i.e.
gold equities should be more volatile than the gold price), an increase in gold equity prices of
around 12% would normally have been the result of some lesser increase in the gold price.
Accordingly, in addition to its standard analysis, Grant Samuel has calculated values for LGL’s
assets based on a gold price around US$900 per ounce. Grant Samuel has also 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.
Many valuations of gold assets use discount rates and gold price assumptions different to those
adopted by Grant Samuel. North American analysts sometimes use a zero discount rate when valuing
gold assets. Accordingly, for illustrative purposes, Grant Samuel has calculated net present
values for the gold assets of LGL on the basis of constant real gold prices in the range of
US$1,200-1,240 per ounce and a real discount rate of 0%.
Many Australian analysts employ conventional DCF analysis in their assessment of gold companies
(although gold companies and gold projects are then commonly valued at some multiple of estimated
Net Present Value (“NPV”), which in Grant Samuel’s view fundamentally undermines the reliability
and utility of the DCF analysis). If discount rates are estimated using the Capital Asset Pricing
Model (“CAPM”) on the assumption that costs of capital for gold companies are set in international
capital markets, then historical evidence would suggest that betas for gold assets are close to
zero, although more recent evidence may suggest that higher betas are appropriate. Betas around
zero imply that discount rates should be around the risk free rate. If discount rates are estimated
on the basis that costs of capital are set in (for example) the Australian market place, then much
higher beta estimates are supportable, which would suggest much higher discount rates.
Accordingly, Grant Samuel has also set out, for illustrative purposes only, the results of DCF
analysis using nominal discount rates of 5% and 10%. These rates are broadly reflective of rates
that could be adopted depending on assumptions as to whether costs of capital for gold assets are
set in international or Australian capital markets.
In addition, Grant Samuel has considered the option value inherent in mining operations, having
regard to the cost structure, mine life and other characteristics of the mining operations at LGL.
Grant Samuel has also taken into consideration sovereign and other country specific risk. To the
extent that a business is perceived as being particularly risky, this specific risk should be dealt
with by adjusting the cash flow scenarios. This avoids the need to make arbitrary adjustments to
the discount rate that can dramatically affect estimated values, particularly when the cash flows
are of extended duration or much of the business value
57
|
|
|
|
|
11
Independent expert’s report continued
|
|
212
|
GRANT SAMUEL
n
n
n
reflects future growth in cash flows. In addition, risk adjusting the cash flows requires a more
disciplined analysis of the risks that the valuer is trying to reflect in the valuation. However,
it is also common in practice to allow for certain classes of specific risk (particularly sovereign
and other country specific risks) in a different way by adjusting the discount rate applied to
forecast cash flows by a so-called country risk premium. Grant Samuel has not made any adjustment
to the risk free rate and other discount rates used in its valuation of LGL’s assets. The cash
flows from the financial models developed for the purposes of the valuation have not been adjusted
for sovereign risk. However, Grant Samuel has taken into account perceived sovereign risk in Papua
New Guinea in its consideration of the net present values calculated in its financial analysis.
Grant Samuel developed financial models for each of the key gold assets of LGL. The financial
models were developed by Grant Samuel on the basis of operating models developed by AMC based on
life of mine plans provided by LGL. AMC reviewed each of the technical assumptions in the operating
models, including those regarding reserve estimates, production profiles, operating costs, capital
costs and the potential for reserve extensions. Grant Samuel determined the economic and financial
assumptions used in the financial models. The models project gold production and costs from 31
December 2009 onwards. The valuations of LGL’s gold assets have been prepared as at 31 December
2009. Non trading assets and liabilities, such as shareholder loans, at that date have been
recorded as adjustments to each company’s mineral projects.
Given the shortcomings of theoretical valuation models, Grant Samuel has had particular regard to
alternative 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. In particular, the estimates of value have been reviewed in terms of reserve
and resource multiples, production multiples and comparable company analysis. These alternative
approaches to valuation are useful in determining the reasonableness of estimates of value based on
valuation approaches such as the gold futures methodology and traditional DCF analysis, because
these estimates are typically sensitive to the assumptions adopted.
Little weight has been placed on an analysis of comparative historical transactions. Implied
multiples from historical transactions reflect the market conditions at the time of the
transaction, in particular the gold price. As the gold price is very volatile the results of
analysing comparable transaction can also vary greatly.
The valuations of LGL’s gold assets represent Grant Samuel’s overall judgements as to value. They
do not rely on any one particular scenario or set of economic assumptions. The valuations have been
determined having regard to the sensitivity of the financial analysis to a range of technical and
economic assumptions. They incorporate Grant Samuel’s judgemental assessment of the impact on
value of factors such as development status, resource and reserve upside and optionality to the
extent not reflected in the financial analysis. Where appropriate, the valuations take into account
direct market based evidence as to the value of broadly comparable projects.
The valuation of LGL represents Grant Samuel’s assessment of full underlying value. It does not
represent Grant Samuel’s view of the likely share market value of either of the companies. Shares
in listed companies typically trade at a discount to full underlying value.
The valuations are based on a number of important assumptions, including assumptions regarding gold
prices and exchange rates. The valuations also reflect the technical judgements of AMC regarding
the prospects for each of the operations of LGL. Gold prices, exchange rates and expectations
regarding future operating parameters can change significantly over short periods of time. Such
changes can have significant impacts on underlying value. Accordingly, while the values estimated
are believed to be appropriate for the purpose of assessing the Proposal, they may not be
appropriate for other purposes or
58
|
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Lihir Gold Limited Scheme Booklet
|
|
213
|
GRANT SAMUEL
n
n
n
in the context of changed economic circumstances or different operational prospects for the gold
assets of LGL.
|
|
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 d’Ivoire;
|
|
|
|
|
§
|
|
a withholding tax rate in Côte d’Ivoire 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 management’s
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
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|
|
11
Independent expert’s report continued
|
|
214
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 world’s largest gold deposits, with reserves
sufficient to support operations for a further 27 years. In AMC’s 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
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Lihir Gold Limited Scheme Booklet
|
|
215
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 mine’s 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 LGL’s 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 LGL’s 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 expert’s report continued
|
|
216
|
GRANT SAMUEL
n
n
n
|
|
|
|
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. AMC’s 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 AMC’s 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$45
million at the end of the life of the project in 2037.
|
62
|
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Lihir Gold Limited Scheme Booklet
|
|
217
|
GRANT SAMUEL
n
n
n
|
|
|
|
The following table summarises projected production and costs for the three scenarios:
|
Lihir Island — Model Parameters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Total
|
|
100%
|
|
Forecast
|
|
Forecast
|
|
Forecast
|
|
Forecast
|
|
Life of Mine
|
|
Reserves Case
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore mined (Mt)
|
|
|
16.9
|
|
|
|
19.1
|
|
|
|
15.1
|
|
|
|
13.5
|
|
|
|
236.4
|
|
|
Ore milled (Mt)
|
|
|
6.3
|
|
|
|
6.7
|
|
|
|
11.6
|
|
|
|
11.8
|
|
|
|
299.1
|
|
|
Gold milled grade (g/t)
|
|
|
4.93
|
|
|
|
4.67
|
|
|
|
3.53
|
|
|
|
3.33
|
|
|
|
2.82
|
|
|
Gold production (Moz)
|
|
|
0.82
|
|
|
|
0.86
|
|
|
|
1.12
|
|
|
|
1.05
|
|
|
|
22.2
|
|
|
Total cash costs (US$/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 expert’s report continued
|
|
218
|
GRANT SAMUEL
n
n
n
|
|
|
|
The results of the financial analysis for the three cases are summarised below:
|
Lihir Island — Results of Financial Analysis (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Samuel’s 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 mine’s 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 mine’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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):
|
Lihir — Assumed 20 Year Mine Life (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$880-920 per ounce. The
results for the three cases are summarised below:
|
Lihir Island — Lower Gold Price Assumptions (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Samuel’s 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 Samuel’s 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 Samuel’s valuation
range for Lihir Island of US$7.5-8.5 billion.
|
|
|
|
|
|
|
The following table sets out median broker NPV multiples for a number of major gold companies. The
multiples represent current share market prices divided by broker estimates of NPV:
|
65
|
|
|
|
|
11
Independent expert’s report continued
|
|
220
|
GRANT SAMUEL
n
n
n
Broker NPV Multiples — Major Gold Companies
|
|
|
|
|
|
|
Major Gold Companies
|
|
Median NPV multiple
32
|
|
Barrick Gold Corporation
|
|
|
1.5
|
|
|
Goldcorp Inc
|
|
|
1.8
|
|
|
Newmont Mining Corp.
|
|
|
2.1
|
|
|
AngloGold Ashanti Ltd
|
|
|
1.8
|
|
|
Kinross Gold Corporation
|
|
|
1.5
|
|
|
|
|
|
The broker NPV estimates are based on a variety of approaches and assumptions, including as to gold
prices and the discount rates used in estimating NPVs. In general, however, the analysis shows
that market values are in the approximate range of 1.5-2.0 times analyst NPVs. The NPVs are
generally (although not exclusively) calculated using real rates in the range 5-7%. These real
rates correspond (broadly) to the 10% nominal discount rates adopted by Grant Samuel as part of its
DCF analysis.
|
|
|
|
|
|
|
The following table shows the multiples of calculated NPVs (based on the reserves case) implied by
Grant Samuel’s valuation of Lihir Island:
|
Lihir Island — Implied NPV Multiples (10% Discount Rate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPV Multiple
|
|
|
|
Gold Price (US$/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 Samuel’s 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 Samuel’s 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 world’s major gold companies. The valuation range of US$7.5-8.5 billion
implies the following valuation parameters:
|
Lihir Island — Implied Valuation Parameters (US$/oz)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 LGL’s 2010 first quarterly report.
|
66
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
221
|
GRANT SAMUEL
n
n
n
Comparable Company Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Source: Company reports and Grant Samuel analysis
|
|
|
|
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 Island’s 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.
|
7.4
Bonikro
|
|
|
|
Grant Samuel has valued LGL’s 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 expert’s report continued
|
|
222
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 d’Ivoire. The valuation incorporates an amount of US$20 million in respect
of LGL’s Côte d’Ivoire 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 d’Ivoire 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 d’Ivoire 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 plant’s 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$20 million are incurred in 2020 and 2021.
|
|
|
|
|
|
|
The following table summarises projected production and costs for the two scenarios:
|
Bonikro — Model Parameters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
Total Life
|
|
100%
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
of Mine
|
|
Case 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore milled (000’s t)
|
|
|
2,018
|
|
|
|
2,163
|
|
|
|
2,163
|
|
|
|
2,163
|
|
|
|
2,211
|
|
|
|
27,167
|
|
|
Gold milled grade (g/t)
|
|
|
2.19
|
|
|
|
2.15
|
|
|
|
2.14
|
|
|
|
1.00
|
|
|
|
1.80
|
|
|
|
1.91
|
|
|
Gold production (000’s oz)
|
|
|
134
|
|
|
|
140
|
|
|
|
140
|
|
|
|
66
|
|
|
|
120
|
|
|
|
1,580
|
|
|
Total cash costs (US$/oz)
35
|
|
|
494
|
|
|
|
456
|
|
|
|
423
|
|
|
|
818
|
|
|
|
469
|
|
|
|
432
|
|
|
Capital expenditure (US$ million)
|
|
|
10
|
|
|
|
6
|
|
|
|
5
|
|
|
|
5
|
|
|
|
2
|
|
|
|
43
|
|
|
Case 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore milled (000’s 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 (000’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
The results of the financial analysis are summarised below:
|
Bonikro — Results from Financial Analysis (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Samuel’s valuation of Bonikro in the range US$575-625 million (excluding the value of
exploration interests) takes into account the results of the financial analysis set out above. It
also reflects the sovereign risk in Côte d’Ivoire. The situation in Côte d’Ivoire has been volatile
since 1999. A military coup overthrew the Government in December 1999, a failed coup attempt in
September 2002 sparked a civil war and the country has experienced several periods of unrest since
then, largely related to the unresolved political situation. Elections have been postponed several
times since 2002 and there have been disagreements about the eligibility of some key political
figures. In February 2010, the President of Côte d’Ivoire dissolved the coalition government,
which was headed by a rebel leader, and disbanded the electoral commission in charge of organising
elections, raising further questions about the outcome of the peace process. The United Nations and
France have troops in the country, which reflects the persisting risk of conflict. LGL’s operations
have not been materially affected by civil unrest in recent years and LGL has not experienced any
significant problems with the local communities. Nonetheless, it appears reasonable to conclude
that the value of Bonikro is materially affected by sovereign risk issues associated with the
mine’s location in Côte d’Ivoire.
|
|
|
|
|
|
|
The value range implies the following valuation parameters:
|
Bonikro — Implied Valuation Parameters (US$/oz)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable
|
|
|
Implied Multiple
|
|
|
Multiples of LGL’s Interest in
|
|
(000’s 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 expert’s report continued
|
|
224
|
GRANT SAMUEL
n
n
n
Comparable Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable (Gold) (000’s 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
|
|
Source: Company reports and Grant Samuel analysis
|
|
|
|
The reserve multiples implied by the valuation are very high by comparison with the
comparable companies, but are considered reasonable taking into account AMC’s 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 LGL’s interest in the Côte d’Ivoire 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.
|
7.5
Mount Rawdon
|
|
|
|
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$11 million in
closure related expenditure incurred after the completion of mining and processing
operations in 2019.
|
|
|
|
|
|
36
|
|
Production statistics for Crew relate to 2009 production.
|
|
|
|
37
|
|
Costs for MDL relate to the weighted average cash costs for the nine months ended 31 March 2010.
|
|
|
|
38
|
|
Production and cash costs for Perseus relate to the CAGP project only and are for the first year of production.
|
70
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
225
|
GRANT SAMUEL
n
n
n
|
|
|
|
The following table summarises projected production and costs for Mount Rawdon:
|
Mount Rawdon — Model Parameters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Year ended 31 December
|
|
Life of
|
|
100%
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Mine
|
|
Ore mined (000’s tonnes)
|
|
|
6,947
|
|
|
|
4,256
|
|
|
|
3,454
|
|
|
|
5,529
|
|
|
|
6,735
|
|
|
|
33,574
|
|
|
Ore milled (000’s tonnes)
|
|
|
3,472
|
|
|
|
3,638
|
|
|
|
3,648
|
|
|
|
3,648
|
|
|
|
3,648
|
|
|
|
33,774
|
|
|
Gold milled grade (g/t)
|
|
|
0.89
|
|
|
|
0.95
|
|
|
|
0.80
|
|
|
|
1.05
|
|
|
|
1.23
|
|
|
|
0.81
|
|
|
Gold production (000’s ounces)
|
|
|
87
|
|
|
|
98
|
|
|
|
83
|
|
|
|
110
|
|
|
|
130
|
|
|
|
776
|
|
|
Total cash costs (US$/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:
|
Mount Rawdon — Results of Financial Analysis (US$ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$340-390 million implies the following valuation
parameters:
|
Mount Rawdon — Implied Valuation Parameters (US$/oz)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable
|
|
Implied Multiple
|
|
Multiples of
|
|
(000’s 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 LGL’s 2010 First Quarter Production Report 2010.
|
71
|
|
|
|
|
11
Independent expert’s report continued
|
|
226
|
GRANT SAMUEL
n
n
n
Comparable Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable (Gold) (000’s 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
|
|
Source: Company reports and Grant Samuel analysis
|
|
|
|
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.
|
7.6
Corporate Costs
|
|
|
|
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.
|
7.7
Net cash
|
|
|
|
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
LGL’s 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 Catalpa’s 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
|
GRANT SAMUEL
n
n
n
8
Evaluation of the Proposal
8.1
Summary and Conclusion
|
|
|
|
In Grant Samuel’s 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 world’s
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 Samuel’s 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 Samuel’s 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 LGL’s 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 Samuel’s 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 Island’s status as one of the world’s
largest gold deposits, with gold reserves of 28.8 million ounces. It reflects the expected
improvements in Lihir Island’s 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 expert’s report continued
|
|
228
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 mine’s 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 LGL’s 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 LGL’s 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 LGL’s 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 LGL’s 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 LGL’s current focus on Lihir Island),
although this diversification could also be achieved at an investor level through portfolio
allocation. It will provide exposure to Newcrest’s growth projects, particularly at Cadia East and
|
74
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
229
|
GRANT SAMUEL
n
n
n
|
|
|
Wafi-Golpu in Papua New Guinea. On the other hand, it will dilute LGL’s status as a pure gold
developer, given Newcrest’s 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 Newcrest’s 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 LGL’s 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 LGL’s 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 Samuel’s 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.
|
8.2
Approach
|
|
|
|
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 expert’s report continued
|
|
230
|
GRANT SAMUEL
n
n
n
|
|
§
|
|
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:
|
Relative Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (000’s oz)
|
|
|
1,166
|
|
|
|
1,631
|
|
|
|
42
|
%
|
|
- nine months to 31 March 2010 (000’s 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 Newcrest’s 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 have underperformed global
gold equities (in US$ terms) by around 10%. This underperformance appears to have been the
consequence of factors including the announcement of the RSPT and the significant fall in the
copper price (as well as, potentially, hedge fund trading related to the Proposal and a general
sell-
|
|
|
|
|
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$18.75 per ounce.
|
76
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
231
|
GRANT SAMUEL
n
n
n
|
|
|
|
off of Australian equities). LGL shares have traded in line with Newcrest shares (at
approximately the ratio implied by the Proposal terms). In the absence of the Proposal, LGL shares
would almost certainly have risen, reflecting the rise in the gold price and the fall in the
Australian dollar over the period. The pro-forma share market value for Newcrest set out in the
table above is based on its current share price. The pro-forma share market value for LGL assumes
that the LGL share price would have risen in line with global gold equities (by around 17% in A$
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 LGL’s 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 Samuel’s 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$85 million should ultimately be available
to the merged company. The value of these synergies would be significant, although not material in
the context of the size of the merged Newcrest. In addition, the creation through the Proposal of a
gold company much larger than either Newcrest or LGL has the potential to lead to a re-rating of
the merged company. The size and asset quality of the merged company and the likely liquidity in
the market for its shares should make it attractive for international investors in gold equities.
It is reasonable to expect some benefits in terms of a reduced cost of capital for the merged
Newcrest, although these benefits are difficult to quantify.
|
|
|
8.4
|
|
Premium for Control
|
|
|
|
|
|
|
Based on the VWAP for Newcrest and LGL shares for various periods prior to the announcement on 1
April 2010 that Newcrest had made an acquisition proposal, the Consideration represented the
following premiums to the LGL pre announcement share price:
|
Proposal – Implied Premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGL
|
|
Newcrest
|
|
VWAP
|
|
Consideration Range Premium
|
|
Date/Period
|
|
VWAP (A$)
|
|
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$4.20-4.32 implied a premium to LGL’s VWAP before the
announcement on 1 April 2010 of Newcrest’s initial takeover proposal in the range 37%-45%,
depending on the time frame for measurement of the premium. On this basis, the apparent premium
provided by the Consideration is attractive.
|
|
|
|
|
|
|
However, movements in the gold market since the announcement of Newcrest’s initial takeover
proposal mean that premium estimates based on historical share prices are misleading. Between 31
March 2010 and 13 July 2010, the S&P TSX Global Gold Index increased by 12%. By contrast, the
Newcrest share price (in US$ 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 expert’s report continued
|
|
232
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 Newcrest’s
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 LGL’s
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
|
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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 LGL’s 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.
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The following table shows the premiums implied by the Consideration
(based on Newcrest’s closing share price of A$34.83 on 13 July 2010) for
various assumptions regarding LGL’s performance relative to the S&P TSX
Global Gold Index in the period ended 13 July 2010, in the absence of
the Proposal:
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Range of Potential Premiums
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Assumed LGL performance relative to S&P TSX Global Gold Index
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-10%
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-5%
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In line
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Effective Premium
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35
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%
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29
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%
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23
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%
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Source: Bloomberg and Grant Samuel analysis
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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%.
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GRANT SAMUEL
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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
Samuel’s view the premium remains significant.
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8.5
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Takeover Analysis
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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.
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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.
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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 LGL’s Lihir Island asset.
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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 Samuel’s 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.
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More importantly, however, there is useful and in Grant Samuel’s view more reliable evidence as to
value to be derived from LGL’s sale process for the company. Since LGL’s 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 LGL’s 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 LGL’s 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).
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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
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Independent expert’s report continued
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GRANT SAMUEL
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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 LGL’s 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.
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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.
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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 LGL’s 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.
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8.6
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Other Advantages, Disadvantages and Risks
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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.
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|
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.
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Other factors that LGL shareholders should consider are:
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§
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|
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;
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Lihir Gold Limited Scheme Booklet
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235
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GRANT SAMUEL
n
n
n
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§
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with an approximate 37% interest in the merged Newcrest, LGL shareholders
will retain some exposure to any potential upside in LGL’s assets;
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§
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|
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);
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§
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|
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;
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§
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|
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 Newcrest’s net
assets; and
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§
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|
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.
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|
8.7
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|
Ineligible Foreign Shareholders
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|
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:
|
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§
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|
their Newcrest shares will be sold for market value;
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§
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|
they can acquire Newcrest shares through the ASX if they wish to retain an
exposure to the merged Newcrest; and
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§
|
|
shareholder representing only approximately 0.2% of LGL’s issued capital are
expected to be impacted by these provisions.
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|
|
8.8
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|
Taxation Issues
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|
|
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.
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|
|
8.9
|
|
Shareholder Decision
|
|
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|
|
The decision whether to vote for or against the Proposal is a matter for individual shareholders
based on each shareholder’s 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.
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|
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.
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Independent expert’s report continued
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236
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GRANT SAMUEL
n
n
n
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
82
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Lihir Gold Limited Scheme Booklet
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237
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GRANT SAMUEL
n
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9
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|
Qualifications, Declarations and Consents
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9.1
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|
Qualifications
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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 expert’s 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.
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|
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.
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9.2
|
|
Disclaimers
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|
It is not intended that this report should be used or relied upon for any purpose other than as an
expression of Grant Samuel’s 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.
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|
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.
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|
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|
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).
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|
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|
9.3
|
|
Independence
|
|
|
|
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|
|
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 expert’s report
if such a report was required:
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|
|
§
|
|
Newcrest — August 2005 and December 2009; and
|
|
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|
|
§
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|
LGL — October 2008.
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|
|
These engagements did not result in the commissioning of an independent expert’s report and Grant
Samuel did not provide either party with views on valuation. The engagements did not affect Grant
Samuel’s independence or its ability to prepare an independent expert’s report in relation to the
Proposal. Grant Samuel was not involved in setting the terms of, or any negotiations leading to,
the Proposal.
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83
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11
Independent expert’s report continued
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238
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GRANT SAMUEL
n
n
n
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|
|
|
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.
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|
Grant Samuel had no part in the formulation of the Proposal. Its only role has been the preparation
of this report.
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|
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|
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 Samuel’s 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.
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Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC
on 30 October 2007.
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9.4
|
|
Declarations
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|
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|
|
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.
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|
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|
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$0.83. Comparison of the estimated value of the
Consideration with the estimated underlying value of LGL suggested (based on theoretical valuation
analysis) that the Consideration was (marginally) not fair. However, the theoretical valuation
analysis is subject to considerable uncertainty. Given the additional (and in Grant Samuel’s view
more reliable) evidence as to value provided by the process whereby LGL sought alternative takeover
proposals for the company, Grant Samuel concluded that the Proposal was fair and reasonable.
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|
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|
Subsequent drafts were provided to reflect the increase in the Newcrest share price (potentially as
a result of a strengthening of the copper price) and the strengthening of the A$ 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).
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|
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|
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 (LGL’s 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
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Lihir Gold Limited Scheme Booklet
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239
|
GRANT SAMUEL
n
n
n
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|
|
|
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.
|
|
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|
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 market’s 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.
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|
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|
Grant Samuel’s 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. LGL’s 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.
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9.5
|
|
Consents
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|
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|
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|
|
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.
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|
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|
9.6
|
|
Other
|
|
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|
|
|
The accompanying letter dated 15 July 2010 and the Appendices form part of this report.
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|
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|
|
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.
|
GRANT SAMUEL & ASSOCIATES PTY LIMITED
15 July 2010
85
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Independent expert’s report continued
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240
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GRANT SAMUEL
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n
n
Appendix 1
Profile of LGL Assets
|
1
|
|
Lihir Island
|
|
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|
|
Overview
|
|
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|
|
|
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.
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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:
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|
|
|
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
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Lihir Gold Limited Scheme Booklet
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241
|
GRANT SAMUEL
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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.
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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.
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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 expert’s report continued
|
|
242
|
GRANT SAMUEL
n
n
n
|
|
|
The following diagram shows the location of the zones of mineralisation:
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
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 plant’s 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
|
|
|
|
|
|
|
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|
11
Independent expert’s report continued
|
|
244
|
GRANT SAMUEL
n
n
n
|
|
|
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:
|
Lihir Island — Resources and Reserves
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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$800
per ounce. Proved reserves are from stockpiled ore and reflect ore above cut-off on stockpile
as at 30 June 2009.
|
5
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
245
|
GRANT SAMUEL
n
n
n
|
|
|
Operating Performance
|
|
|
|
|
|
Lihir Island’s operating performance for the four years ended 31 December 2009 and for the quarter
ending 31 March 2010 is summarised below:
|
Lihir Island – Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
Year ended 31 December
|
|
31 March
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Material moved (Mt)
|
|
|
56.2
|
|
|
|
58.3
|
|
|
|
50.7
|
|
|
|
46.4
|
|
|
|
10.5
|
|
|
Ore mined (Mt)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- high grade ore
|
|
|
4.2
|
|
|
|
6.1
|
|
|
|
6.2
|
|
|
|
6.1
|
|
|
|
1.6
|
|
|
- economic grade ore
|
|
|
3.8
|
|
|
|
4.4
|
|
|
|
8.3
|
|
|
|
6.6
|
|
|
|
2.1
|
|
|
Ore milled (Mt)
|
|
|
4.3
|
|
|
|
4.8
|
|
|
|
6.2
|
|
|
|
6.5
|
|
|
|
1.7
|
|
|
Autoclave grade (g/t)
|
|
|
5.14
|
|
|
|
5.51
|
|
|
|
5.86
|
|
|
|
6.41
|
|
|
|
5.01
|
|
|
Recovery (%)
|
|
|
90.2
|
|
|
|
86.0
|
|
|
|
82.5
|
|
|
|
81.3
|
|
|
|
81.1
|
|
|
Gold produced (000’s oz)
|
|
|
650.8
|
|
|
|
700.2
|
|
|
|
771.5
|
|
|
|
853.4
|
|
|
|
180.3
|
|
|
Gross cash costs
(US$/oz)
4
|
|
|
397
|
|
|
|
442
|
|
|
|
545
|
|
|
|
507
|
|
|
|
608
|
|
|
Total cash costs
(US$/oz)
5
|
|
|
297
|
|
|
|
299
|
|
|
|
406
|
|
|
|
394
|
|
|
|
510
|
|
|
Gold sold (000’s oz)
|
|
|
643
|
|
|
|
707
|
|
|
|
765
|
|
|
|
852
|
|
|
|
157
|
|
|
Average price realised (US$/oz)
|
|
|
510
|
|
|
|
666
|
|
|
|
865
|
|
|
|
971
|
|
|
|
1,111
|
|
|
|
|
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 LGL’s 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 expert’s report continued
|
|
246
|
GRANT SAMUEL
n
n
n
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
Reserves and Resources
|
|
|
|
|
|
Mount Rawdon’s Mineral Resources and Ore Reserves as at 1 January 2010 are summarised below:
|
Mount Rawdon — Resources and Reserves
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
Average Grade
|
|
Contained Gold
|
|
|
|
(Mt)
|
|
(g/t)
|
|
(000’s 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
|
|
|
|
|
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 Rawdon’s 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$800 per ounce.
|
8
|
|
|
|
|
|
|
|
|
11
Independent expert’s report continued
|
|
248
|
GRANT SAMUEL
n
n
n
Mount Rawdon — Operating Statistics
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
Year ended 30 June
|
|
Year ended 31 December
|
|
31 March
|
|
|
|
2007
|
|
2008
|
|
2008
|
|
2009
|
|
2010
|
|
Ore mined (Mt)
|
|
|
3.4
|
|
|
|
3.4
|
|
|
|
3.5
|
|
|
|
3.2
|
|
|
|
0.6
|
|
|
Ore milled (Mt)
|
|
|
3.4
|
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
3.4
|
|
|
|
0.8
|
|
|
Grade (g/t)
|
|
|
1.13
|
|
|
|
1.14
|
|
|
|
1.03
|
|
|
|
1.11
|
|
|
|
0.97
|
|
|
Recovery (%)
|
|
|
89.2
|
|
|
|
90.2
|
|
|
|
89.8
|
|
|
|
90.8
|
|
|
|
90.2
|
|
|
Gold produced (000’s oz)
|
|
|
111.0
|
|
|
|
115.1
|
|
|
|
102.4
|
|
|
|
107.8
|
|
|
|
22.9
|
|
|
Gross cash costs (per
ounce)
|
|
|
n.a.
|
|
|
|
n.a.
|
|
|
|
n.a.
|
|
|
US$
|
462
|
|
|
US$
|
695
|
|
|
Total cash costs (per
ounce)
|
|
A$
|
373
|
|
|
A$
|
375
|
|
|
|
n.a.
|
|
|
US$
|
396
|
|
|
US$
|
572
|
|
|
Gold sold (000’s oz)
|
|
|
n.a.
|
|
|
|
n.a.
|
|
|
|
55.510
|
|
|
|
109.0
|
|
|
|
21.6
|
|
|
Ave price realised
(US$/oz)
|
|
|
n.a.
|
|
|
|
n.a.
|
|
|
|
651
|
|
|
|
968
|
|
|
$
|
1,102
|
|
|
|
|
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 Rawdon’s 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 d’Ivoire, in West Africa. It is
approximately 230 kilometres north-west of Abidjan, the nation’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
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 d’Ivoire 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 d’Ivoire, 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 LGL’s Australian group is to be repaid in full before the government of
Côte d’Ivoire is paid dividends. As at 30 April 2010, the balance of shareholder loans payable to
LGL Australia by its Côte d’Ivoire 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 d’Ivoire 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 expert’s report continued
|
|
250
|
GRANT SAMUEL
n
n
n
|
|
§
|
|
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 d’Ivoire 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
|
GRANT SAMUEL
n
n
n
|
|
|
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
|
|
|
|
|
|
Bonikro’s Mineral Resources and Ore Reserves as at 31 March 2010 are summarised below. The data
reflects 100% of Bonikro’s reserves and resources:
|
Bonikro — Resources and Reserves
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
Average Grade
|
|
Contained Gold
|
|
|
|
(000’s t)
|
|
(g/t)
|
|
(000’s 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
|
|
|
|
|
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 Bonikro’s production:
|
Bonikro – Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
31 Dec
|
|
31 Mar
|
|
30 Jun
|
|
30 Sep
|
|
31 Dec
|
|
31 Mar
|
|
|
|
2008
|
|
2009
|
|
2009
|
|
2009
|
|
2009
|
|
2010
|
|
Ore mined (000’s tonnes)
|
|
|
668
|
|
|
|
520
|
|
|
|
572
|
|
|
|
647
|
|
|
|
632
|
|
|
|
413
|
|
|
Ore milled (000’s 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 (000’s 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$/oz)
|
|
|
307
|
|
|
|
385
|
|
|
|
396
|
|
|
|
387
|
|
|
|
503
|
|
|
|
503
|
|
|
Gold sold (000’s oz)
|
|
|
26.9
|
|
|
|
35.2
|
|
|
|
49.1
|
|
|
|
27.8
|
|
|
|
41.4
|
|
|
|
21.6
|
|
|
Price realised
(US$/oz)
|
|
|
798
|
|
|
|
916
|
|
|
|
922
|
|
|
|
958
|
|
|
|
1,096
|
|
|
|
1,112
|
|
|
|
|
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 expert’s report continued
|
|
252
|
GRANT SAMUEL
n
n
n
|
|
|
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:
|
Hiré Permit Area — Resources
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
Average Grade
|
|
Contained Gold
|
|
|
|
(000’s t)
|
|
(g/t)
|
|
(000’s oz)
|
|
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
|
|
|
Total Hiré
|
|
|
9,736
|
|
|
|
2.8
|
|
|
|
892
|
|
|
|
|
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 plant’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
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 d’Ivoire Regional Exploration
|
|
|
|
|
|
Very limited exploration has been undertaken to date in Côte d’Ivoire 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 d’Ivoire 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 d’Ivoire.
|
|
|
|
|
|
In the past few months, LGL has focused its Côte d’Ivoire 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):
|
Bonikro Exploitation Permit Extension Application Area — Resources
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
Average Grade
|
|
Contained Gold
|
|
|
|
(000’s t)
|
|
(g/t)
|
|
(000’s oz)
|
|
Dougbafla East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicated
|
|
|
5,148
|
|
|
|
1.3
|
|
|
|
217
|
|
|
Inferred
|
|
|
407
|
|
|
|
1.2
|
|
|
|
15
|
|
|
Total Dougbafla East
|
|
|
5,555
|
|
|
|
1.3
|
|
|
|
232
|
|
|
|
|
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 LGL’s
exploration interests in Côte d’Ivoire 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 expert’s report continued
|
|
254
|
GRANT SAMUEL
n
n
n
Appendix 2
Profile of Newcrest Assets
|
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:
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
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:
|
|
|
|
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 expert’s report continued
|
|
256
|
GRANT SAMUEL
n
n
n
|
|
|
|
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:
|
Cadia Hill – Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
Cadia Hill Ore Reserves as at 30 June 2009 are summarised as follows:
|
Cadia Hill – Ore Reserves as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 Hill’s historical operating performance is summarised below:
|
Cadia Hill – Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
months to
|
|
|
|
Year to 30 June
|
|
31 March
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Material mined (000’s tonnes)
|
|
|
51,700
|
|
|
|
47,159
|
|
|
|
46,923
|
|
|
|
34,004
|
|
|
|
24,525
|
|
|
Ore treated (000’s 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
|
|
|
|
|
|
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 expert’s report continued
|
|
258
|
GRANT SAMUEL
n
n
n
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
|
A comparison of the Ridgeway and Ridgeway Deeps mining methods is illustrated below:
|
|
|
|
|
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 plant’s throughput rate at 5.6
million tonnes and increase recoveries. The modifications were completed in the June 2009 quarter.
|
|
|
|
|
|
|
Resources and Reserves
|
|
|
|
|
|
|
Ridgeway’s 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:
|
Ridgeway – Mineral Resources and Ore Reserves at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
6
|
|
|
|
|
|
|
|
|
11 Independent expert’s report continued
|
|
260
|
GRANT SAMUEL
n
n
n
|
|
|
Operating Performance
|
|
|
|
|
|
Ridgeway’s historical operating performance is summarised below:
|
Ridgeway — Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
|
|
|
|
Year to 30 June
|
|
to 31 March
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Material mined (000’s tonnes)
|
|
|
5,700
|
|
|
|
5,853
|
|
|
|
5,913
|
|
|
|
6,103
|
|
|
|
4,366
|
|
|
Ore treated (000’s 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
|
)
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
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 Underground’s Mineral Resources and Ore Reserves as at 30
June 2009 are summarised below. The deposit also contains molybdenum
and silver at commercial levels:
|
Cadia East Underground — Mineral Resources and Ore Reserves at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
8
|
|
|
|
|
|
|
|
|
11 Independent expert’s report continued
|
|
262
|
GRANT SAMUEL
n
n
n
|
|
|
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:
|
|
|
|
The diagram below illustrates the proposed development of Cadia East:
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 expert’s report continued
|
|
264
|
GRANT SAMUEL
n
n
n
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
Resources and Reserves
|
|
|
|
|
|
Telfer’s Mineral Resources at 30 June 2009 are summarised below:
|
Telfer — Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
Telfer’s Ore Reserves at 30 June 2009 are summarised below:
|
Telfer — Ore Reserves as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
The following table shows movements in Telfer gold and copper reserves since 2005:
|
Telfer — Ore Reserves as at 30 June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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 expert’s report continued
|
|
266
|
GRANT SAMUEL
n
n
n
|
|
|
Operating Performance
|
|
|
|
|
|
Telfer’s historical operating performance is summarised below:
|
Telfer — Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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 Telfer’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
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 Trotman’s 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 expert’s report continued
|
|
268
|
GRANT SAMUEL
n
n
n
|
|
|
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:
|
Gosowong
7
— Mineral Resources and Ore Reserves at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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:
|
Gosowong — Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to 30 June
|
|
Nine months
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
to 31 March
|
|
Material mined
8
(000’s tonnes)
|
|
|
7,300
|
|
|
|
570
|
|
|
|
304
|
|
|
|
452
|
|
|
|
411
|
|
|
Ore treated (000’s 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
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
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 Harmony’s 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
venture’s holdings is shown on the map below:
|
16
|
|
|
|
|
|
|
|
|
11 Independent expert’s report continued
|
|
270
|
GRANT SAMUEL
n
n
n
The operating company managing the Morobe operations is jointly owned by
Harmony and Newcrest. The total consideration paid by Newcrest for its 50%
interest in the Morobe joint venture was US$532.0 million. This consisted
of a US$180 million cash payment and the reimbursement to Harmony of
US$48.0 million in project expenditure incurred between 1 January and 7
August 2008 to secure an initial 30.01% stake, the funding of all project
expenditure to 30 June 2009 to secure an additional 19.99% at a cost of
US$297.7 million, and the payment of approximately US$6.3 million in
transaction fees.
|
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 world’s 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:
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
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 Valley’s Mineral Resources at 30 June 2009 are summarised
below. These figures represent 100% of the Mineral Resources:
|
Hidden Valley — Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
Hidden Valley’s Ore Reserves at 30 June 2009 are summarised below.
These figures represent 100% of the Ore Reserves:
|
Hidden Valley — Ore Reserves as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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 expert’s report continued
|
|
272
|
GRANT SAMUEL
n
n
n
|
|
|
Operating Performance
|
|
|
|
|
|
Hidden Valley’s historical operating performance is summarised below.
These figures represent 100% of production:
|
Hidden Valley (100%) — Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
30 Sep 2009
|
|
31 Dec 2009
|
|
31 Mar 2010
|
|
Material mined (000’s tonnes)
|
|
|
—
|
|
|
|
5,376
|
|
|
|
3,954
|
|
|
Ore treated (000’s 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
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
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-Golpu’s Mineral Resources at 30 June 2009 are summarised below.
These figures represent 100% of the Mineral Resources:
|
Wafi-Golpu — Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
20
|
|
|
|
|
|
|
|
|
11 Independent expert’s report continued
|
|
274
|
GRANT SAMUEL
n
n
n
|
|
|
|
Wafi-Golpu’s Ore Reserves at 30 June 2009 are summarised below. These
figures represent 100% of the Ore Reserves:
|
Wafi-Golpu — Ore Reserves as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
|
Reserves and Resources
|
|
|
|
|
|
Cracow mine Reserves and Resources at 30 June 2009 are summarised below:
|
Cracow
(100%) — Resources and Reserves as at 30
June 2009
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
Average Grade
|
|
Contained Gold
|
|
|
|
(Mt)
|
|
(g/t)
|
|
(Moz)
|
|
Resources
|
|
|
3.2
|
|
|
|
8.2
|
|
|
|
0.84
|
|
|
Reserves
|
|
|
1.0
|
|
|
|
7.2
|
|
|
|
0.23
|
|
|
|
|
The operating performance of Cracow for the four years ended 30 June 2009
and the nine months ended 31 March 2009 is summarised below:
|
Cracow Gold Mine — Operating Statistics
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
|
|
|
|
Year ended 30 June
|
|
to 31 March
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Ore mined (000’s tonnes)
|
|
|
320
|
|
|
|
376
|
|
|
|
431
|
|
|
|
463
|
|
|
|
357
|
|
|
Ore milled (000’s 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 (000’s 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
|
|
|
|
|
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 expert’s report continued
|
|
276
|
GRANT SAMUEL
n
n
n
|
|
|
The Namosi tenement, which is located approximately 30 kilometres west of
Fiji’s 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.
|
|
|
|
|
|
Namosi’s Mineral Resources as at 30 June 2009 are summarised as follows.
The figures represent 100% of the resource:
|
Namosi — Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
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.
|
|
|
7.1
|
|
O’Callaghans
|
|
|
|
|
|
|
O’Callaghans 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. O’Callaghans
is one of the world’s largest tungsten resources and also contains
significant zinc, copper and lead mineralisation.
|
|
|
|
|
|
|
The O’Callaghans 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:
|
O’Callaghans — Mineral Resources as at 8 February 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
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. Marsden’s
Mineral Resources as at 30 June 2009 are summarised as follows:
|
Marsden — Mineral Resources as at 30 June 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
23
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
277
|
GRANT SAMUEL
n
n
n
Appendix 3 — Comparable Listed Companies
Sharemarket Ratings of Selected Listed Gold Companies
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variables
|
|
Multiples
|
|
|
|
Enterprise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Costs
|
|
|
|
|
|
|
|
|
|
Value (US$
|
|
Gold Resources
|
|
Gold Reserves
|
|
Gold Production (000’s oz)
|
|
(US$ / oz)
|
|
Gold Resources
|
|
Gold Reserves
|
|
Gold Production (US$ / oz)
|
|
|
|
million)
|
|
(000’s oz)
|
|
(000’s 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 expert’s report continued
|
|
278
|
GRANT SAMUEL
n
n
n
Appendix 4
Valuation Concepts for Gold Projects
|
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 Samuel’s adoption of the gold futures
methodology as its preferred approach to the valuation of gold assets.
|
|
|
|
|
|
Grant Samuel’s 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 Samuel’s 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 Samuel’s 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
|
GRANT SAMUEL
n
n
n
|
|
|
|
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 Samuel’s 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:
|
Major Gold Company Betas
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
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 expert’s report continued
|
|
280
|
GRANT SAMUEL
n
n
n
|
|
§
|
|
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
|
GRANT SAMUEL
n
n
n
|
|
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:
|
PV is the present value of the gold mine given by summing the present value for future
production less the present value of future costs;
F
t
is the gold futures price for delivery in each future period t;
P
t
is the expected production in each period t;
C
t
is the expected extraction cost in each period t; and
Rf is the risk free rate for duration t.
|
|
|
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:
|
S
o
is the spot gold price at time 0.
|
|
|
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 expert’s report continued
|
|
282
|
GRANT SAMUEL
n
n
n
|
|
|
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
|
GRANT SAMUEL
n
n
n
Appendix 5
Report by AMC Consultants Pty Ltd
Refer to section 12 of the Scheme Booklet
1
|
INDEPENDENT TECHNICAL SPECIALIST’S 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
|
|
|
INDEPENDENT TECHNICAL SPECIALIST’S
REPORT
LIHIR GOLD LIMITED
AMC PROJECT 210051
July 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 specialist’s report continued
|
|
286
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
15 July 2010
The Directors
Grant Samuel & Associates Pty Ltd
Level 6, 1 Collins Street
MELBOURNE VIC 3000
Dear Sirs
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
LIHIR GOLD LIMITED
On 4 May 2010, Lihir Gold Limited (LGL) announced a proposed transaction with Newcrest Mining
Limited (Newcrest) whereby Newcrest will acquire all LGL’s ordinary shares under a Scheme of
Arrangement (Transaction). LGL has engaged Grant Samuel & Associates Pty Ltd (Grant Samuel) to
prepare an independent expert’s report on the Transaction (the Assignment).
AMC Consultants Pty Ltd (AMC) has been appointed to provide technical advice to Grant Samuel
in relation to the Assignment. In particular, Grant Samuel engaged AMC to provide a independent
technical specialist’s report, including a description of the mineral assets of LGL and their
planned development, and AMC’s conclusions as to reasonableness or otherwise of the technical
assumptions regarding Ore Reserves, production profiles, capital costs, operating costs and an
assessment of exploration interests.
The principal mineral assets reviewed by AMC include:
|
•
|
|
The Lihir Gold Mine in Papua New Guinea.
|
|
|
|
•
|
|
Mt Rawdon Gold Mine in Queensland, Australia.
|
|
|
|
•
|
|
Bonikro Gold Mine in Côte d’lvoire.
|
|
|
|
•
|
|
Exploration assets in Côte d’lvoire.
|
For each of the operations and projects reviewed, AMC has provided production, capital cost,
and operating cost projections (modelling scenarios) to Grant Samuel.
In general terms AMC, has modelled scenarios for each operating asset and project. AMC Case 1
is typically based on Ore Reserve
1
estimates and that part of other Mineral
Resources
1
and exploration potential for which AMC judges there is a high confidence of
future conversion to Ore Reserves.
AMC Case 2 typically adds to AMC Case 1 mining and processing inventories, those tonnages
which AMC judges to represent reasonable likely further additions to Ore Reserves from existing
Mineral Resources and from readily demonstrable exploration potential, but to a lesser confidence
level than in AMC Case 1. In some cases, AMC Case 2 provides for a significant expansion of
production and/or other upgrades and improvements. AMC believes that both AMC Case 1 the AMC Case
2 modelling scenarios are based on reasonable grounds.
AMC has completed its engagement as a Specialist in accordance with the Code for the
Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent
Expert Reports, 2005 (the VALMIN Code
2
).
AMC’s use, in this report, of the terms Mineral Resources and Ore Reserves are in accordance
with the JORC Code.
|
|
|
|
|
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.
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Lihir Gold Limited Scheme Booklet
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287
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
For the purposes of preparing this report, AMC has visited the operating sites in February
2009, reviewed material technical reports and management information and held discussions with
management staff both on site and in the LGL office in Brisbane. AMC has not visited the
exploration projects located away from the operations and projects under development as they are
not considered to be material to the overall value of LGL.
AMC has not audited the information provided to it, but has aimed to satisfy itself that all
of the information has been prepared in accordance with proper industry standards and is based on
data that AMC considers to be of acceptable quality and reliability. Where AMC has not been so
satisfied, AMC has included comment in this report and made modifications to the estimates and
forecasts provided by AMC to Grant Samuel.
For exploration assets, it is not possible to project cash flows and/or production estimates
with sufficient confidence to rely on discounted cash flow methodology. Therefore, AMC has
considered other methods to value the exploration assets. These methods are commonly used in
Australia to value exploration projects and are discussed in this report.
The VALMIN Code defines a Technical Value as an assessment of future net economic benefit and
a Fair Market Value as one which adds to or subtracts from a Technical Value a premium or discount
relating to market, strategic or other considerations. AMC’s values of exploration assets are Fair
Market Values. Some of the exploration valuation methods result in a Technical Value, but AMC does
not believe it appropriate at this time to apply a premium or discount to assets such as these to
obtain a Fair Market Value.
LGL has advised AMC that independent reviews of material tenements have been undertaken as
part of separate due diligence processes. AMC has not reviewed the status of tenements.
AMC’s review of operating costs has been restricted to site based costs. State or third party
royalties, taxes, concentrate transport charges, smelting and refining charges, and corporate or
head office costs have not been reviewed and are not included in costs presented in this report.
AMC presents the Technical Specialist’s Report which follows in the form of:
|
•
|
|
Executive Summary.
|
|
|
|
1.
|
|
Lihir Gold Mine.
|
|
|
|
2.
|
|
Mt Rawdon Gold Mine.
|
|
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|
3.
|
|
Bonikro Gold Mine.
|
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|
4.
|
|
Exploration Valuation.
|
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|
5.
|
|
Qualifications.
|
All monetary figures in this report are expressed in Australian Dollars (A$), or United
States Dollars (US$) or Papua New Guinea Kina (K) as at January 2010 unless otherwise noted. Costs
are presented on a cash cost basis unless otherwise specified.
Production and costs in this report are presented on a year ending December basis.
Mineral Resources are reported as inclusive of Ore Reserves.
For definitions of abbreviations used in this report, refer to Appendix A.
Yours faithfully
|
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A M Chuk
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L J Gillett
|
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M AusIMM
|
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M AusIMM (CP)
|
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Principal Consultant
|
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Director
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AMC210051-7rpt 100715
|
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iii
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12 Independent technical specialist’s report continued
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288
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
CONTENTS
EXECUTIVE SUMMARY
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1 LIHIR GOLD MINE (PNG)
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1
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1.1 Location and Background
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1
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1.2 Geology
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1
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1.3 Mineral Resources and Ore Reserves
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3
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1.3.1 Mineral Resources
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3
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1.3.2 Ore Reserves
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4
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1.4 Exploration and Reserve Potential
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5
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1.5 Mining Operations
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6
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1.5.1 Mine Description
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6
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1.5.2 Mining Schedule
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6
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1.5.3 Ore Stockpiles
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8
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1.5.4 Geotechnical and Geothermal Aspects
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8
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1.5.5 Reconciliation
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9
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1.5.6 Tonnage Reconciliation
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10
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1.5.7 Grade Reconciliation
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10
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1.5.8 Contained Gold Reconciliation
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11
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1.6 Metallurgy and Processing Operations
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11
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1.6.1 Plant Description
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11
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1.6.2 Plant Performance
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13
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1.6.3 Million Ounce Plant Upgrade Project
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14
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1.7 Waste Rock and Tailings Disposal
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15
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1.8 Power
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16
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1.9 Environment, Sustainable Development and Community Issues
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17
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1.10 Capital and Operating Costs
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19
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1.10.1 Sustaining Capital Costs
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19
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1.10.2 MOPU Project Capital Costs
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20
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1.10.3 Operating Costs
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21
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1.11 AMC Modelling Scenarios
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23
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1.11.1 AMC Case 1
|
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24
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1.11.2 AMC Case 2
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26
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1.11.3 Reserves-Only Case
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28
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1. 12 Risks and Opportunities
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30
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2 MT RAWDON GOLD MINE (QLD)
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31
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2.1 Location and Background
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31
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2.2 Geology
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32
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2.3 Mineral Resources and Ore Reserves
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34
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2.3.1 Mineral Resources
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34
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2.3.2 Ore Reserves
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35
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2.3.3 Potential for Additional Reserves
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36
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2.4 Mining Operations
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37
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2.4.1 Mine Description
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37
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2.4.2 Mine Planning and Scheduling
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38
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2.4.3 Mine Performance
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38
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2.5 Metallurgy and Processing Operations
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39
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2.5.1 Process Description and Operating Philosophy
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39
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2.5.2 Ore Characteristics
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40
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2.5.3 Ore Treatment Rate
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40
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2.5.4 Metal Recoveries
|
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41
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2.5.5 Additional Plant Capacity/Upgrades
|
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41
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2.5.6 Metallurgical Test Work
|
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41
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2.6 Power, Water and Infrastructure
|
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41
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2.7 Environmental, Health, Safety and Community Issues
|
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42
|
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2.7.1 Environmental
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42
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2.7.2 Health and Safety
|
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43
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2.7.3 Community
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43
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2.8 AMC Modelling Scenarios
|
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43
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Lihir Gold Limited Scheme Booklet
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
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2.9 Risks
|
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45
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3 BONIKRO GOLD MINE (COTE D’lVOIRE)
|
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46
|
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3.1 Location and Background
|
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46
|
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3.2 Geology
|
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47
|
|
|
3.3 Mineral Resources and Ore Reserves
|
|
|
48
|
|
|
3.3.1 Mineral Resources
|
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48
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3.3.2 Ore Reserves
|
|
|
49
|
|
|
3.3.3 Grade Control and Resource Reconciliation
|
|
|
51
|
|
|
3.4 Mining Operations
|
|
|
51
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|
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
|
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3.5 Metallurgy and Processing Operations
|
|
|
53
|
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3.5.1 Process Description
|
|
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53
|
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3.5.2 Process Operation
|
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54
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3.6 Waste Dump and Tailings
|
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56
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3.6.1 Waste Rock
|
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56
|
|
|
3.6.2 Tailings Dam
|
|
|
56
|
|
|
3.7 Infrastructure and Power
|
|
|
57
|
|
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3.7.1 Mine Site
|
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57
|
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3.7.2 Water Supply
|
|
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58
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3.7.3 Power
|
|
|
58
|
|
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3.8 Labour
|
|
|
59
|
|
|
3.9 Environmental and Community Issues
|
|
|
59
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|
|
3.9.1 Regulatory Background
|
|
|
59
|
|
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3.9.2 Impact Assessment
|
|
|
59
|
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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 LGL’S EXPLORATION PROJECTS
|
|
|
66
|
|
|
4.1 Introduction
|
|
|
66
|
|
|
4.2 Exploration Valuation Methods
|
|
|
66
|
|
|
4.2.1 Côte ri’lvoire Regional Exploration Valuation
|
|
|
66
|
|
|
5 QUALIFICATIONS
|
|
|
70
|
|
TABLES
|
|
|
|
|
|
|
|
|
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 KPI’s — 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
|
|
|
|
|
|
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
290
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
|
|
|
|
|
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|
|
|
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 d’lvoire, 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
|
|
|
|
|
|
|
|
|
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|
|
|
APPENDIX B QUALIFICATION OF PRINCIPAL CONTRIBUTORS
|
|
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Lihir Gold Limited Scheme Booklet
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|
291
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
EXECUTIVE SUMMARY
Lihir Gold Mine
Lihir Gold Mine is 100% owned by LGL and is located on Lihir Island in northeast Papua New
Guinea (PNG), approximately 900 km north northeast of Port Moresby, PNG’s capital.
The Lihir Island is formed from the remnants of five volcanoes. The Lihir Gold Mine is
located within the youngest volcano (approximately one million years old) at Luise Caldera on the
eastern side of the island, although gold mineralisation itself dates from 0.15 to 0.90 million
years.
Volcanism is no longer active on Lihir Island, however, the host rocks at Luise Caldera are
in an active geothermal area. LGL is harnessing underground geothermal reservoirs to generate
electricity, supplemented by generation using heavy fuel oil (HFO). As a result of the geothermal
activity, the ore and waste rock must be depressurised and cooled prior to mining to mitigate
potential for explosive geothermal steam emissions.
Gold mineralisation is hosted by brecciated and hydrothermally altered volcanic rocks near
surface, and intrusive monzonitic rocks at depth. The entire sequence has been extensively
altered, resulting in the development of geological zones which influence mining/geotechnical
design and planning as well as metallurgical processing.
Gold occurs mainly as sub-micron sized particles in pyrite and marcasite and is mostly
refractory in nature. High grade gold mineralisation of greater than 3.5 g/t Au, including bonanza
zones of more than 100 g/t Au, is concentrated around the intersections of steeply dipping feeder
structures with shallow dipping contacts. Lower grade halo mineralisation generally envelopes the
high grade zones, but can also be developed by itself.
Construction of the Lihir Gold Mine was started in 1995 and first gold was poured in 1997.
Since then, production has progressively increased with the mine producing 850,000 ounces of gold
in 2009 at a gross cash cost of US$507/oz and a total cash cost of US$394/oz per LGL management
reports.
Mineral Resources and Ore Reserves as reported by LGL in its 2009 Annual Report are:
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Measured and Indicated Resources:
|
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553 Mt at 2.42 g/t Au
containing 43.0 Moz Au as at August 2009.
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Inferred Resources:
|
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87 Mt at 1.95 g/t Au
containing 5.5 Moz Au as at August 2009.
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•
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Proved and Probable Reserves:
|
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331 Mt at 2.71 g/t Au
containing 28.8 Moz Au as at June 2009.
|
The mineral resource has been estimated at a cut-off of 1.0 g/t Au within a conceptual pit
optimisation shell generated at a gold price of US$1,000/oz, with mining depletion to December
2008.
AMC believes that the current resource estimates have been prepared to a good standard and
that gold and sulphur distributions are adequate for mine planning. The quality of the input
drillhole resource data is of a suitable standard for resource estimation and the quality and
density of the data are appropriately reflected in the resource classification.
AMC notes that exploration activity is constrained by the steep caldera to the west and south
of the Lihir Gold Mine and will also be limited by the location of a coffer dam to the east.
However, AMC considers that areas to the north of Kapit and immediately to the east of current
mining operations within Luise Caldera are highly prospective and are likely to contain additional
mineral resources and are likely add to reserves in the coming years.
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The Probable Reserve estimate is based on the resource model at an average process plant feed
cut-off of 1.36 g/t Au within a detailed pit design based on a pit optimisation shell generated at
US$800/oz, with mining depletion to June 2009. The pit optimisation runs that the reserve estimate
is based on do not utilise Inferred Resource blocks in the resource model and are constrained by
the culturally significant Alaia Rock, located in the Coastal area.
Capital costs for pit extensions are also applied in the pit optimisation process as “hurdle”
costs. Examples are the costs of relocating the Kapit stockpile to Kapit North, the cost of
constructing a coffer dam to enable extension of the pit into the harbour, and the cost of removal
and replacement of infrastructure required for pit cut-backs.
The Proved component of the Ore Reserves comprises the stockpile estimate based on the mine
grade control system. As stated in LGL’s 2009 Annual report, the stockpiles as at June 2009
contained 62 Mt grading 2.5 g/t Au (containing 4.9 Moz Au).
An internationally recognised consulting group has independently audited the June 2009
Reserve estimation procedures and reported in February 2010 that no fatal flaws were found. AMC
believes that the reserve estimate is reasonable and has been reported in accordance with the JORC
Code.
Reserves are reconciled against actual mined data which combine process plant production data
and stockpile movements as determined from the ore control model and survey data. The actual mined
data have reconciled very well with reserves on a global basis with, for the past three years,
actual tonnes of ore mined at 103% of reserve, gold grade at 101% of reserve, and contained gold
at 104% of reserve.
The Lihir Gold Mine operates by conventional open pit methods with either 6m or 12m high
benches. The primary mining fleet currently comprises five O&K RH200 shovels, one O&K RH120 shovel
and 36 Caterpillar 785 trucks.
The Minifie deposit was accessed first because of its lower stripping ratio and higher gold
grades. Mining of the Minifie and Lienetz deposits will ultimately extend the pit to within 100m
of the shoreline with a base some 200m below sea level. The planned final dimension of the pit is
approximately 2 km by 1.4 km. Mining of Kapit will extend the pit a further kilometre to the north
parallel to the coast and extending out into the harbour.
Low grade ore is stockpiled (current stockpiles average around 2.5 g/t Au). Waste is either
barged out for deep sea disposal or is being dumped in-shore ahead of the Kapit coffer dam
construction.
LGL submitted an Environmental Impact Statement (EIS) to the PNG Department of Environment
and Conservation (DEC) in July 2005, which identified the need for increased waste disposal beyond
the allowed volume of 18,000,000 m
3
. The DEC approved this updated EIS in March 2008,
with new Environmental permits being issued in October 2008.
The Lihir Island mining operation is set in a very complex geotechnical, geothermal and
seismic environment.
The rock mass is very weak in the upper zones of the open pits, with more competent materials
at depth. Overall pit wall slope failure is assessed by LGL as being unlikely, but landslide
failures above the pit rim or affecting access roads are possible.
The next major area of the mine to be developed is the Kapit pit, where pioneering work has
commenced. The pit will be mined from around 300m above sea level to around 200m below sea level.
There are limited geotechnical data available at present for the Kapit pit and adjacent areas and
additional geotechnical drilling is planned as a priority.
Mining of the Kapit final pit cut-back requires construction of a coffer dam in Luise
Harbour, aligned sub-parallel to the shore line. Dam construction is scheduled to be complete by
the end of 2014. The design has been signed off by an internationally recognised geotechnical
engineering consultancy. The dam will be up to 80m high on the seaward side. Risk assessments of
the dam and the design and depressurisation of the pit final walls are key aspects of the project.
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Significant work is required to ensure completion of the dam within the scheduled timeframe. If
there are delays in its completion, the Kapit pit cut-back may be delayed, affecting process plant
feed grade, as the cut-back includes 12.6 Mt of high grade ore grading 5.6 g/t Au. The Kapit pit
area also features high virgin rock mass temperatures prior to preparations for mining, relative
to previously developed pit areas. If cooling is slower than planned, the production schedule may
be detrimentally affected.
Based on current ore reserve estimates, mining is scheduled to be completed in 2025 and
processing of stockpiles is scheduled to be completed in 2037. The stockpiles are expected to peak
at 160 Mt of ore.
The Lihir Gold Mine ore processing plant comprises two main circuits. The first circuit was
designed to process run of mine (ROM) ore by crushing and grinding prior to being fed directly to
the autoclave plant to oxidise all of the pyritic sulphur prior to cyanide leaching and
carbon-in-leach gold recovery followed by standard carbon elution and gold electrowinning and,
finally, gold bullion smelting. The second, more recent plant was designed to process a lower
grade ore by crushing and grinding followed by sulphide froth flotation recovery to improve the
sulphur and gold grades in concentrates.
The pressure oxidation circuit comprises three autoclaves. Feed from the direct feed circuit
and concentrate from the flotation circuit are blended into the autoclaves to optimise the sulphur
addition to the units and, consequently, their operation. The autoclave circuit is conventional
for gold circuits with temperature at about 205°C and a pressure at about 2,650 kPa. Oxygen from
three operating oxygen plants is injected into the autoclave to oxidise more than 90% of the
sulphides. Oxygen is injected into the autoclave at an equivalent of approximately 1.9t of oxygen
to 1t of sulphur.
Washed pulp from the autoclaves is fed to the leach circuit where lime and cyanide are added
and then the dissolved gold is adsorbed onto activated carbon particles. Gold is stripped from the
loaded carbon is into solution before electrowinning cell where the gold is plated onto cathodes.
Gold from the cathodes is smelted into gold bullion poured which is high quality and contains
about 93% to 95% gold, 1% to 2% silver and about 3% to 5% base metals. The bullion bars are
shipped to a refinery in Perth for final refining to saleable 99.99% gold bars.
Tailings are disposed of via a deep sea outfall. The tailings are extensively treated and
detoxified before being discharged below biologically productive upper ocean layers, with final
settlement depths estimated at 1,500m to 2,000m.
Tailings volumes and chemistry have been in compliance with regulatory criteria established by
DEC.
In 2008, LGL approved a major expansion to the Lihir Gold Mine process plant to increase
annual gold processing capacity by 200 koz to 300 koz to approximately one million ounces per year
(the million ounce production upgrade, or MOPU project). Annual plant throughput will increase from
the current range of 6.5 Mt to 7.5 Mt to between 10.5 Mt and 12.5 Mt. Construction of the expansion
commenced in 2008 and is scheduled for completion in late 2011. The upgrade will include
installation of a fourth autoclave with the capacity of more than two of the existing autoclaves, a
fourth oxygen plant, and a second tailings outfall installation, plus associated plant and
infrastructure additions and upgrades.
This expansion is being installed within the same footprint as the existing plant.
The total MOPU capital budget is US$783M (exclusive of the extra power plant). Approximately
50% of the project budget is committed. LGL reports that the MOPU project is within budget and on
schedule for completion at the end of 2011.
AMC considers that it is reasonable to expect that implementation of MOPU will be successful.
The existing power demand for the overall operation is around 74 MW, provided by a combination
of geothermal energy from steam extracted from underground reservoirs in the mine area, together
with HFO power generation stations. Power accounted for approximately one-third of the processing
plant operating costs in 2009.
Currently, approximately 30 MW to 35 MW of geothermal power is being generated.
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Power demand studies indicate a total average power demand of 126 MW once the MOPU project is
completed. However, the geothermal field has not yet developed sufficiently to provide the
additional power requirements. Accordingly, a 70 MW barge mounted power station is currently under
construction, complete with associated infrastructure, and will meet the additional demand until
the geothermal field has been sufficiently developed.
AMC considers the ability to reliably and cost effectively maintain the geothermal steam
supply to meet both the current and future power demand represents a significant risk to LGL’s
processing plant operating cost projections.
Potable water (filtered and chlorinated) and adequate raw water for the plant are sourced
from containment weir and pump installations. Sea water is also used for some process plant
demands.
The Lihir Gold Mine is operated in accordance with a number of agreed development plans
signed with the PNG Government in 1995.
An EIS to incorporate all existing environmental permits into two new permits, included an
extension to the mine life of fourteen years, increases to total ore and waste mining tonnages,
increases to tailings disposal and an enlarged mine footprint was approved in March 2008.
The Lihir Gold Mine is also ISO14000 compliant and in April 2010 was re-certified as part of
the tri-annual certification process.
AMC considers that LGL has assessed environmental risks appropriately and has implemented a
reasonable plan to mitigate these risks.
The three key elements of LGL’s ongoing commitment to sustainable development on Lihir Island
comprise its corporate Sustainable Development Policy released in 2008, a revised Integrated
Benefits Package Agreement signed in 2007, and the Lihir Sustainable Development Plan prepared by
the local-level rural government body and approved by LGL in 2007.
Through these actions, LGL has made a strong commitment to support the local population.
Whilst LGL has established a reasonably good relationship with the local communities, the
mine experiences occasional disruptions due to disputes. Some disputes that disrupt mining are
directly linked to community concerns associated with the operation, but others are not. LGL and
the community have an agreed formal process to manage dispute resolutions, but this process does
result in lost time.
LGL must obtain approval from the local community to access new areas for mining and
exploration. At present there are several areas subject to negotiation, both inside the Luise
Caldera area as well as elsewhere on the island. Access to the Coastal resource is a key to
increasing ore reserves, and this is dependent on reaching agreement on the culturally significant
Alaia Rock.
LGL has identified that there are a number of potentially significant risks to its operation
associated with sustainable development and community related issues. AMC concurs with LGL’s
assessment and notes that LGL has implemented plans to manage and mitigate these risks.
AMC has prepared two production and cost scenarios; AMC Case 1 and AMC Case 2. Both cases are
based on LGL gaining access to the Coastal resource, and the MOPU project is assumed to be
completed as planned at the end of 2011.
AMC Case 1 and AMC Case 2 are based on power supply assumptions per LGL’s Conservative (30 MW
geothermal) and Target (56 MW geothermal) power supply scenarios respectively. The resulting
average power cost increases in both AMC cases relative to LGL’s strategic business planning
projections. Additional power capital has also been allowed for, in line with LGL’s Conservative
and Target scenarios.
Both AMC cases are based on approved capital expenditure for MOPU and estimates for other
projects, sustaining capital, production and operating costs, and an allowance of US$100M for
mine closure and rehabilitation costs which AMC considers are reasonable.
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AMC Case 1 is based on Ore Reserves plus 5.6 Moz of additional mining inventory that AMC
considers is likely to be sourced from the Coastal resource or similar within the caldera. Key
features of AMC Case 1 are:
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•
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|
Total processing plant feed inventory of 368 Mt grading 2.8 g/t of gold containing 33 Moz,
recovering 27 Moz of gold.
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•
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Mining to conclude in 2026 with stockpile processing continuing to 2042.
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•
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Reduced processing plant total gold recoveries by 1.5% relative to LGL’s projections.
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•
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Gold production averaging 990 koz per annum while mining continues and then around 650 koz
per annum while processing stockpiles only.
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•
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|
Capital expenditure of USS796M spent on the OPU and other current projects (from January
2010).
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•
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Sustaining capital expenditure of US$2,643M.
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•
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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.
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•
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Closure costs of US$100M.
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•
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|
Remaining life of mine (LOM) cost (total operating, capital and closure) of around US$545/oz.
|
AMC Case 2 is based on AMC Case 1 plus addition of a further 4.7 Moz of mining inventory that
AMC considers reasonable to expect from demonstrable exploration potential within the caldera and,
in particular, areas adjacent to Kapit. Key features of AMC Case 2 are:
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•
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Processing of 427 Mt grading 2.7 g/t of gold containing 37 Moz, recovering 31 Moz of gold.
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•
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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.
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•
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|
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.
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•
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Mining to conclude in 2031, with stockpile processing continuing to 2047.
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•
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|
Gold production averaging 940 koz per annum while mining continues and then around 655 koz
per annum while processing stockpiles only.
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•
|
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Capital expenditure of US$796M spent on the MOPU and other current projects (from January
2010).
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•
|
|
Sustaining capital expenditure of US$2,725M.
|
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•
|
|
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.
|
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•
|
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Closure costs of US$100M.
|
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•
|
|
Remaining LOM cost (total operating, capital and closure) of around US$500/oz.
|
Grant Samuel requested AMC to prepare a case limited to the mining and processing of ore
reserves. Key features of this Reserves-Only Case are:
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•
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Processing 299 Mt grading 2.8 g/t of gold containing 27 Moz, recovering 22 Moz of gold.
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|
•
|
|
Mining to conclude in 2025, with stockpile processing continuing to 2037.
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•
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|
Gold production averaging 950 koz per annum while mining continues and then around 630 koz
per annum while processing stockpiles only.
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•
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Capital expenditure of US$775.5M spent on the MOPU and other projects (from January 2010).
|
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•
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|
Sustaining capital expenditure of US$2,353M.
|
|
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|
•
|
|
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.
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•
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Closure costs of US$100M.
|
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•
|
|
Remaining LOM cost (total operating, capital and closure) of US$575/oz.
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Mt Rawdon Gold Mine
Mt Rawdon Gold Mine is situated in south-east Queensland, approximately 80 km south-west of
Bundaberg and 300 km north-north-west of Brisbane. The deposit is located beneath the southern
side of Mt Rawdon, which is located between Mingham Creek and the Perry River, both of which drain
to the Burnett River.
The gold mineralisation is hosted within a volcanoclastic sequence that strikes north-east and
plunges to the south-west, dominated by dacite intrusives and dacite-rich volcanoclastics. The
surface extent of mineralisation forms a roughly ovoid zone of 200m by 300m with gold grades
greater than 0.7 g/t Au. Approximately 72% of the gold is hosted within pyrite and base metal
veinlets, with the balance contained in disseminated sulphide mineralisation in the surrounding
host rock. Gold and electrum occur as free grains within base metal sulphides and fractures within
pyrite.
Construction commenced in early 2000 followed by the commissioning of the operation in
January 2001. LGL acquired the operation during a merger with Equigold NL in 2008.
LGL completed a new Life of Mine Plan (LOMP) in September 2009, and in November 2009
re-optimised the pit design to account for updated price forecasts and costs. Based on the current
LOMP, the mine is scheduled to cease production in 2016 with treatment of stockpiles continuing
until 2019.
Mineral Resources and Ore Reserves reported by LGL in its 2009 Annual Report and currently
published on LGL’s website were estimated as at 1 January 2010 and are in summary as follows.
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|
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|
|
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•
|
|
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.
|
|
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|
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|
•
|
|
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.
|
AMC believes that the Mt Rawdon Gold Mine resource estimates are reasonable and have been
reported in accordance with the JORC Code. Geology and mineralisation is well understood and the
estimates appear to have been generated with due care. The reserve estimate is based the on a
detailed pit design which forms the basis of the current Mt Rawdon Gold Mine LOMP. AMC believes
that the reserve estimate is reasonable and has been reported in accordance with the JORC Code.
The Mt Rawdon Gold Mine mineralisation is currently open at depth. The stripping ratio and average
gold grade pose the most significant issues to the viability of mining at greater depth. Gold
prospectivity within the surrounding Mt Rawdon region is considered by AMC to be low as controls
on the gold mineralisation are considered to be unique to the mine and have not been observed
elsewhere in the area.
During the last three years the mine has achieved close to budget for the total volume of
rock mined, stripping ratio, ore produced and gold head grade. The current stripping ratio is the
highest in the mine’s history due to mining the cut-back for Stage 2, but is then forecast to
decline steadily until closure. The unit cost per tonne of ore produced is expected to peak over
the next few years due to the high stripping ratio and then reduce, compensating for the
increasing excavation cost and haulage costs with increasing depth.
Given the consistent historical performance against budget, there is no reason to expect that
the mine will not be able produce the ore tonnages scheduled in the plan. AMC considers that with
a continuation of current practices, there are no mining or geotechnical issues that are likely to
compromise future production.
Ore is processed using conventional cyanide leaching technology at a rate of approximately
3.5 Mtpa. The ore processing facilities include crushing, two stage grinding, leaching and gold
recovery circuits along with associated reagents and tailings storage facility.
Volcanoclastic ore tends to be blockier and harder than dacite. The proportion of
volcanoclastic in the feed is expected to increase on completion of the present cut-back in
approximately two years time. The operation of the crushing and grinding circuits presents an
ongoing operational challenge. LGL is implementing a number of upgrades and changes in the plant
to address this, and is budgeting on an increased milling rate in the future as a result.
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The budgeted gold and silver recoveries are in line with current performance and, in AMC’s
opinion, the relationships used are reasonable for long-term planning.
The mine operates in compliance with the Environmental Authority (EA) issued by the
Environmental Protection Authority (EPA). The EA is updated as necessary on an ongoing basis and
sets out monitoring requirements and limits for such things as water quality, noise, vibration
dust etc. There have been occasional excursions above threshold levels in some water monitoring
bores.
A draft closure plan has been submitted to the EPA. Cost for the EPA’s tailings dam closure
requirement has been estimated by LGL at A$10.9M, but LGL considers that this capping is unlikely
to be required or effective, given the environmental conditions and the properties of the
tailings. Testwork for other options has commenced, and a review of the closure plan strategies
and options is scheduled for late 2010.
In its September 2009 LOMP, LGL identified three business cases, identified as Conservative,
Target, and Optimistic cases. AMC believes the plans derived in each case are reasonable. AMC has
elected to present only one Likely case for purposes of valuation, because variations between the
three LGL cases are relatively small; there is believed to be little or no upside in terms of
significant additional resources discovered, and the operation has a well-established operating
history, with low technical downside risks.
AMC has elected to use LGL’s Target case as the basis of its modelling scenario. The key
features of this plan are:
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•
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|
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 operation’s life, and
A$11M of closure rehabilitation costs.
|
Overall, Mt Rawdon Gold Mine is a stable 100,000 oz per annum low cost gold producer with
positive community support. The greatest risk concerning the operation of the Mt Rawdon Gold Mine
involves any environmental incident, notably any type of spill involving cyanide and the wildlife
deaths on or in the tailings storage facility.
The main operational risk results from the lack of quantification of ore hardness as the pit
develops which limits the confidence in achieving the predicted grinding circuit throughput. If
the planned milling rate is not achieved, the operation’s life will be extended, however, AMC does
not believe that this would have a significant impact on value, as total costs will be spread over
a longer period and increase slightly, but revenues, though also spread over the longer life, will
remain higher in the earlier years as ore grades treated would increase.
Bonikro Gold Mine
The Bonikro Gold Mine is located in Côte d’lvoire, approximately 70 km south south-west of
Yamoussoukro. LGL has 89.9% ownership of the managing company, LGL Mines CISA. Gold production
commenced at the mine in 2008. A feasibility study has recently been completed on the adjacent
Hiré deposits.
The Bonikro Gold Mine is located within the southern portion of the Oume-Fetekro Greenstone
Belt, itself part of the Proterozoic Birimian volcano-sedimentary group which is host to several
substantial gold deposits, mostly in neighbouring Ghana.
Mineralisation occurs in several styles, notably shear-hosted within both the
metavolcanics/sediments and granodiorite, within stockworks confined to the granodiorite, and in
the surrounding host rocks as discrete, persistent, planar lodes.
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The granodiorite strikes north-north west over a length of 700m, in an orientation consistent
with the regional structural fabric. The bulk of the mineralisation is restricted to the southern
400m.
Mineral Resources and Ore Reserves reported by LGL for Bonikro Gold Mine and adjacent deposits
are: Bonikro Gold Mine as at March 2010
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|
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•
|
|
Indicated Resource:
|
|
21.5 Mt at 1.3g/t Au
containing 918 koz Au.
|
|
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|
•
|
|
Inferred Resource:
|
|
8.4 Mt at 1.1 g/t Au
containing 306 koz Au.
|
|
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•
|
|
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.
|
AMC believes that the Mineral Resources and Ore Reserves estimates are reasonable and have
been reported in accordance with the JORC Code.
At the Bonikro Gold Mine the mineralisation extends below the current pit design providing
opportunities to increase the both Mineral Resources and Ore Reserves.
Exploration has successfully identified a number of additional deposits in the Bonikro area.
The Hiré deposits include Agbale, Akissi So, Chappelle, and Assondji So. Additional deposits have
been identified at Dougbafla and Ditula. Further resource definition programmes are underway
providing opportunities to expand or establish resource estimates for the project area.
Mining at the Bonikro Gold Mine is by open pit methods utilising conventional drill, blast,
load and haul methods. High grade ore (above 0.9 g/t Au) is preferentially treated and the low
grade ore (0.5 g/t Au to 0.9 g/t Au) is stockpiled. Under the current mine plan, mining ceases in
2020. The stockpiles are then to be treated until late 2021.
Ore is processed using conventional carbon-in-leach technology, with some gold recovered in a
gravity circuit. A 94% metallurgical recovery of gold is targeted.
Water usage in processing at 2.1 KL/t of ore is relatively high compared to like operations.
This is satisfactorily met through a combination of rainfall catchment in the tailings dam,
process water return, and mine area boreholes.
Electrical power is drawn from the country’s national grid system which is supplied from
hydro-electric and gas sources operated by a private company which has been contracted by the
Ivorian Government to operate the country’s supply network. The power draw at present levels of
production is approximately 6 MW. Backup generators are installed on site.
Côte d’lvoire has a limited number of people with relevant mining skills. This has created
difficulties in staffing the operation. Labour is recruited from the local community wherever
possible with training programmes established for operator, technical and managerial roles.
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LGL has established a good health and safety culture in the operations and this is borne out
by the falling lost time injury rate since the commencement of operations.
An Environmental Management and Monitoring Program (EMMP) has been completed and sets out the
monitoring programme for each of the environmental aspects identified by an environmental impact
assessment.
LGL is evaluating the option of developing, by open pit, various satellite deposits within
reasonable distances to the existing Bonikro gold recovery plant (<15 km). Notably, LGL has
embarked on a feasibility study of the Hiré deposits, for which an interim report was completed in
December 2009.
LGL has subsequently concluded that expansion of the Bonikro Gold Mine plant to 3.5 Mtpa is
justified, and commissioned development of a flowsheet and capital estimate for the expanded
plant.
LGL has identified that there are several key risks to the operations and has developed a
range of controls to mitigate the assessed risks.
AMC has prepared two production and cost scenarios: AMC Case 1 and AMC Case 2. In establishing
these cases AMC has reviewed the Conservative, Target and Optimistic business plans prepared by
LGL. AMC believes its AMC Case 1 and AMC Case 2 scenarios for Bonikro Gold Mine represent
reasonable projections for a high certainty and a lower certainty cases.
AMC Case 1 is based on LGL’s Target case. It consumes the current Bonikro Gold Mine Ore
Reserve and includes the following additions to the mining inventory:
|
|
|
|
|
|
|
•
|
|
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.
|
AMC Case 1 forecasts gold production of 1.6 Moz over 12 years and has a remaining LOM site
cost (total operating, capital and closure) of US$475/oz.
AMC Case 2 is based on the same assumptions as AMC Case 1 with the additions of:
|
•
|
|
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.
|
AMC Case 2 forecasts gold production of 2.0 Moz over 12 years and has a remaining LOM site
cost (total operating, capital and closure) of US$500/oz.
CDI Exploration
LGL has approximately 10,700 km
2
of granted exploration licences in Côte d’lvoire,
in sixteen defined project areas. Much of the exploration effort has been focussed close to the
Bonikro Gold Mine (Hiré and Oume Projects), while remaining activities are distributed along the
strike of Birimian stratigraphic units. All the projects are scheduled for exploration work during
2010.
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The status of exploration ranges from untested geochemical soil anomalies, through prospects
with anomalous drill intersections requiring follow up, to five projects with declared resources.
These five deposits, Akissi So, Asondji So, Agbale, Chappelle, and Doublafla East, are proximal
(<15 km) to the Bonikro Gold Mine, and AMC has treated the resources as production sources in
its modelling scenarios.
For the remaining prospects, AMC has considered a number of valuation methods, but due to
country-specific limitations associated with exploration in Côte d’lvoire has restricted the
valuation options to one, namely Comparable Transaction (CT). The CT method is itself constrained
by the paucity of mineral property transactions in Côte d’lvoire, and consequently AMC
investigated transactions associated with gold exploration activity in neighbouring countries
which are underlain by the same prospective Birimian stratigraphy. As a basis for comparison with
the LGL tenements, AMC identified six transactions in Ghana and one in Burkina Faso, all completed
within the last five years,.
In deriving present value estimates per tenement area unit (km
2
) from these
transactions, AMC has taken account of the following:
|
•
|
|
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.
|
From the resulting present value estimates AMC has selected representative values in the range
US$2,000 to US$4,000 per km
2
. These have been assigned to the LGL tenements, and
weighted according to LGL interest, from which AMC has obtained a value range for the LGL tenements
of US$13M to US$27M, with a preferred value of US$20M.
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Lihir Gold Limited Scheme Booklet
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Independent Technical Specialist’s Report
1 LIHIR GOLD MINE (PNG)
1.1 Location and Background
Lihir Gold Mine is 100% owned by LGL and is located on Lihir Island within the Bismarck
Archipelago in northeast Papua New Guinea (PNG). The island is part of a group of volcanic islands
called the Tabar to Feni Chain that runs parallel to New Ireland. Lihir Island is approximately
900 km north northeast of Port Moresby, PNG’s capital (Figure 1.1).
Figure 1.1 Location of Lihir Gold Mine, PNG
In 1982, gold mineralisation was discovered on Lihir Island leading to a major exploration
campaign and feasibility study, culminating in the PNG Government granting a Special Mining Lease
in 1995 to the Lihir Joint Venture Project (comprising Rio Tinto and Nuigini Mining Limited).
In 1995, LGL was established to own and operate the Lihir Gold Mine, construction started in
the same year and first gold was poured in 1997. Since then, production has progressively
increased with the mine producing 853,000 ounces of gold in 2009 at a gross cash cost of US$507/oz
and a total cash cost of US$394/oz per LGL management reports.
In October 2005, a management agreement with a subsidiary of Rio Tinto plc was terminated and
a new CEO and management team was established to operate the mine.
In 2008, LGL approved a major expansion to the Lihir Gold Mine process plant to increase
annual gold processing capacity to approximately one million ounces per year (the MOPU project).
Construction of the expansion commenced in 2008 and is scheduled for completion late 2011.
1.2 Geology
The Lihir Island is formed from the remnants of five volcanoes. The Lihir Gold Mine is
located within the youngest volcano at Luise Caldera on the eastern side of the island
(approximately one million years old), although gold mineralisation itself dates from 0.15 to 0.90
million years (Figure 1.2).
Mineralisation is hosted by brecciated and hydrothermally altered volcanic rocks near surface,
and intrusive monzonitic rocks at depth. The entire sequence has been extensively altered,
resulting in the development of a clay zone at surface, grading into a mica-feldspar zone, then a
feldspar-biotite zone, followed by a feldspar-biotite-anhydrite zone at depth. These zones
influence mining/geotechnical design and planning as well as metallurgical processing.
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Figure 1.2 Lihir Island Geology
Gold occurs mainly as sub-micron sized particles in pyrite and marcasite and is mostly
refractory in nature. High grade gold mineralisation greater than 3.5 g/t Au, including
bonanza zones of more than 100 g/t Au, are concentrated around the intersections of steeply
dipping feeder structures with shallow dipping contacts separating impermeable from
permeable host rocks. Lower grade halo mineralisation generally envelopes the high grade
zones, but can also be developed by itself (Figure 1.3).
Figure 1.3 Generic Model for Gold Deposition within Lihir (Ladolam) Deposit
Source:
LGL – “2009_Resource_report.pdf”
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Volcanism is no longer active on Lihir Island however the host rocks at Luise Caldera
are in an active geothermal area. LGL is harnessing underground geothermal reservoirs to
generate electricity, with 58% of power consumed in 2009 being generated by geothermal
energy, while 42% was generated using heavy fuel oil (HFO). Geothermal activity impacts
mining as areas within the mining area must be depressurised to mitigate potential for
explosive geothermal steam emissions.
1.3 Mineral Resources and Ore Reserves
1.3.1
Mineral Resources
A new mineral resource model and estimate for Lihir Gold Mine was prepared in August
2009 by an independent consultant replacing the December 2008 mineral resource estimate.
The new model was prepared using ordinary kriging for gold, sulphur, copper and bulk
density, with resources estimated using uniform conditioning for gold. Improvements
relative to the previous estimate have resulted from:
|
•
|
|
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.
|
A total of 16 gold domains have been included in the 2009 resource estimation. These
include new domains modelled in 2008 such as Minifie Deeps, Link Central and Link Halo,
North Leinetz, and Coastal (see Figure 1.4).
Figure 1.4 Ore Zone Domains in the August 2009 Mineral Resource Update
Source:
LGL, August 2009 Mineral Resources Report
(“2009_Reource_report.pdf”)
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Independent Technical Specialist’s Report
Table 1.1 presents a summary of the August 2009 Mineral Resource estimate for the
Lihir Gold Mine, with the December 2008 estimate for comparison. The August 2009 Mineral
Resource has been estimated inside a conceptual pit shell using a cut-off of 1.0 g/t Au and
a gold price of US$1,000/oz. Within this conceptual pit, resources are included from the
Minifie, Lienetz, Kapit, Saddle, Borefields, ROM, Coastal, Link, and Tamaduk (Figure 1.4)
zones.
Table 1.1 Mineral Resource Estimate — August 2009 (Compared with December 2008)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: Lihir Gold Limited Annual Report 2009.
|
|
|
|
|
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.
|
The changes in the mineral resource estimates from 2008 to 2009 are due to the following
factors:
|
•
|
|
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.
|
AMC believes that the current resource estimates have been prepared to a good standard
and that gold and sulphur distributions are adequate for mine planning. The quality of the
input drillhole resource data is of a suitable standard for resource estimation and the
quality and density of the data are appropriately reflected in the resource classification.
AMC notes that exploration activity is constrained by the steep caldera to the west and
south of the Lihir Gold Mine and will also be limited by the location of the coffer dam to
the east. However, AMC considers that areas to the north of Kapit and immediately to the
east of current mining operations within Luise Caldera are highly prospective and are likely
to contain additional mineral resources and are likely add to the reserve inventory in the
coming years.
1.3.2 Ore Reserves
Ore Reserves as of the end of June 2009 are presented in Table 1.2. The reserve
estimate is based on the 2008 resource model within a detailed pit design, with mining
depletion to June 2009. The pit optimisation runs that the reserve estimate is based on
utilize only Indicated Resource blocks in the resource model and are constrained by the
culturally significant Alaia Rock, located in the Coastal area.
Capital costs for pit extensions are also applied in the pit optimisation process as
“hurdle” costs. Examples are the costs of relocating the Kapit stockpile to Kapit North, the
cost of constructing a coffer dam to enable extension of the pit into the harbour, and the
cost of removal and replacement of infrastructure required for pit cut-backs.
An internationally recognised consulting group has independently audited the June 2009
Reserve estimation procedures and reported in February 2010. The same group preformed an
independent ore reserve review for LGL in 2006 and 2008. The February 2010 report concluded
that no fatal flaws were found during the procedures review for the June 2009 Reserves. AMC
believes that the reserve estimate is reasonable and has been reported in accordance with
the JORC Code.
|
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Table 1.2 Ore Reserves Estimate — June 2009
1,2,3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: Lihir Gold Limited Annual Report 2009.
|
|
|
|
|
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.
|
The defining aspects of the 2009 Ore Reserve estimate and key changes relative to the 2008 estimate are:
|
•
|
|
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 LGL’s financial modelling. Site
operating costs and sustaining capital expenditure are applied in the pit optimisation.
|
1.4 Exploration and Reserve Potential
Near Mine Exploration
Near mine exploration within Luise Caldera, inside and peripheral to existing mine operations
is ongoing. A US$10M infill drilling program is planned for 2010 to upgrade resources within the
boundaries of the planned Kapit pit. The drill programme is expected to be completed at the end of
the year and LGL expects to add significantly to the resource inventory in the next few years. In
AMC’s opinion, there is a high likelihood of additions to reserves from near mine exploration
targets, including the area north-east of Kapit, Link Halo, and Coastal Zone below the Harbour Base
stockpile. Some areas immediately adjacent to the existing pit are culturally sensitive (Alaia
Rock) and will require agreements with local landowners before resources in this area can be
converted to reserves.
If access to the Alaia Rock area in the Coastal Zone is not negotiated, then an eastwards
extension of the pit limit into the modelled Coastal Zone mineralisation would be limited. This
would reduce the potential for additional ore reserves at the Lihir Gold Mine, however, it should
be noted that this does not impact on the stated Ore Reserves.
The Link and Halo area immediately to the east and north of the planned Kapit pit. is
considered by LGL to be highly prospective and LGL intends to drill this area as part of the 2010
drilling programme. Currently there are too few drillholes to generate resources for conversion to
reserves. AMC agrees with LGL’s assessment that this area is highly prospective.
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The Harbour Base area is also considered by LGL to be highly prospective for
additional resources because it is immediately to the east of the Lienetz pit and is
adjacent to Alaia Rock. However, evaluation of the Harbour Base is at an early stage, with
a significant amount of drilling required to assess the resource potential of this area.
LGL has estimated that approximately 480 drillholes costing US$70M would be required to
assess the Harbour Base area. Given the lack of exploration drilling, issues with
relocating the material stockpiled in this area and proximity of the Harbour Base area to
the planned coffer dam, AMC is not able to determine the potential for additional reserves
being identified in this area.
Lihir Island
LGL’s exploration licence encompasses the entire Lihir Island and LGL has identified a
number of prospective targets. LGL has a number of agreements in place to allow exploration
to proceed on some parts of the island, however there are a number of prospective areas
where negotiations are continuing and access is not yet available. The main prospects
identified to date include Lihir North and Huniho, Wurtol, Samo, Lamboar, and Londolovit in
the central and western side of the island. The southeast sector of the island has been
subject to little reconnaissance exploration.
Overall, AMC believes that the remainder of the island remains prospective for new
gold and copper-gold mineralisation, however exploration is not advanced and community
issues could be significant.
1.5 Mining Operations
1.5.1 Mine Description
The Lihir Gold Mine deposits are mined by conventional open pit methods with either 6m
or 12m high benches. The benches are inclined at 2% to facilitate drainage in the high
rainfall environment.
The Minifie deposit was accessed first because of its lower stripping ratio and higher
gold grades. Mining of Minifie and Lienetz will ultimately extend the pit to within 100m of
the shoreline with a base some 200m below sea level. The planned final dimension of the pit
is approximately 2 km by 1.4 km. Mining of Kapit will extend the pit a further kilometre to
the north parallel to the coast and extending out into the harbour.
Low grade ore is stockpiled. Waste is either barged out for deep sea disposal or is
being dumped in-shore ahead of the Kapit coffer dam construction.
Mine planning, management and operations are conducted by LGL, with blasting
undertaken by a contractor. The primary mining fleet currently comprises five O&K RH200
shovels, one O&K RH120 shovel and 36 Caterpillar 785 trucks. Ancillary equipment includes
four Caterpillar 992 loaders, five Caterpillar 777 trucks, seven blast-hole drills, three
Caterpillar 16 H graders and four waste barges.
1.5.2 Mining Schedule
The planned mining sequence in overall terms is to complete Minifie and Lienetz,
followed by Kapit.
The current mining focus is completion of Phases 11 and 12 in Lienetz and Minifie
respectively and the initial development of Kapit, consisting predominantly stockpile
relocation and of waste movement (Figure 1.5).
Phase 9 (on the West side of Minifie), will be the final phase of Minifie. Mining of
this phase will commence in the second half of 2010, and finish in 2016. Kapit pioneering
pit development and depressurisation and cooling of the pit area via steam relief wells has
commenced.
The initial Kapit pit development consists predominantly of waste movement and
comprises a single pit phase down to the Kapit diversion drain level. This stage will be
completed by the end of 2012.
Mining of Kapit pit below the diversion drain level is planned to commence with a
“starter” pit (Kapit Phase 1) which will progresses below sea level in 2014, followed by a
cut-back to the final pit limit (Kapit Phase 2). For scheduling purposes, LGL has assumed
that mining of the Kapit pit below sea level occurs after the coffer dam is in place.
Mining is to conclude with the ROM and Saddle phases.
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The planned sequence is approximately in the order of descending ore value taking into
account grade, ore type, and strip ratio. The ground temperature increases to the north and
with depth, requiring the ground to be depressurised and cooled. This is also a factor in
scheduling the mining of Kapit after Minifie and Lienetz.
Mining of the Kapit pit requires construction of the coffer dam prior to mining the
starter pit and Phase 2 below sea level. Mining is scheduled to be completed in 2025 based
on current Ore Reserves, with process plant feed being reclaimed from stockpiles
thereafter.
The scheduled peak annual vertical rates of advance are 144m (twelve 12m benches) in a
waste-only cut-back and 72m (six 12m benches) in a blind sink situation. Although rates of
120 to 130 vertical metres per annum are reported for 2007, AMC considers the peak planned
rates to be aggressive, but does not consider that they pose a significant risk to achieving
the mining schedule, providing adequate shovel capacity is available.
Figure 1.5 Schematic of Phase Positions — Current Ore Reserves
Source: LGL, 2009 Strategic Business Plan
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AMC considers the most significant risk to achieving the schedule, is the ability to
access ore from the Kapit pit within the planned time frame. This ore is required to prevent
a decrease in the gold production schedule between 2012 and 2016. Management plans have been
developed and/or design studies and investigations are underway directed toward mitigating
the impact of this risk. These measures include focus on the continued geothermal
depressurisation and cooling of the Kapit ore body prior to mining and the coffer dam
project.
It should be noted that the mining schedule as described above relates to current Ore
Reserves. Negotiation of access to the Alaia Rock area, thereby enabling conversion of
resources to reserves in the Coastal and Link areas, would enable revision of the mining
schedule accordingly.
1.5.3 Ore Stockpiles
The gold mineralisation includes central higher grade cores with lower grade halos. The
ore mining rate has been typically twice that of the ore processing rate. Historically,
lower grade ore (around 1.5 g/t Au to 3.0 g/t Au) has been stockpiled while higher grade ore
(plus 3.0 g/t Au to 3.5 g/t Au) has been preferentially processed. LGL plans to continue
this strategy, but envisages that all stockpiled ore will eventually be processed.
As at December 2009, stockpiles were estimated to contain 63 Mt grading 2.4 g/t Au
(containing 4.8 Moz Au). The stockpile estimate is based on the mine grade control system
and is the Proved component of the Ore Reserves.
Areas available for stockpiling are at a premium due to the constraints imposed by the
caldera wall, which dominates the terrain, and the shoreline. The planned ultimate pit
extends through the useable area within the caldera that is proximate to the processing
plant, power station, workshops, offices, port and other infrastructure.
The large quantity of stockpiled ore and the limited areas available for stockpiling
present a significant challenge for mine planning and scheduling. Additional ore is planned
to be stockpiled during the remaining mining operations, scheduled for completion in 2025
based on current Ore Reserves. Thereafter, all plant feed will be reclaimed from the
stockpiles, the tonnage of which is scheduled to peak at 160 Mt.
The main stockpile (approximately 40 Mt) is within the planned Kapit pit limit. This
stockpile reached capacity in 2005 and, since then, ore has been stockpiled in a dormant
part of the Minifie pit where there is currently around 15 Mt. Smaller ex-pit stockpiles
also exist in the Coastal area.
The Kapit stockpile is scheduled to be relocated in 2009-2010 to enable development of
the Kapit pit and the current plan is to relocate this stockpile to an engineered dump
immediately to the north of the Kapit final pit limit, notwithstanding the significant haul
back to the process plant. The stockpile is to be relocated using a contractor fleet
equivalent to one O&K RH120 shovel and four Caterpillar 785 trucks. This fleet would be
available to the operation thereafter.
Ore will continue to be stockpiled in the Minifie pit until mining of Phase 12 is
completed in 2012. Thereafter, some ore will be stockpiled within the Minifie pit area for
the remainder of the mine life.
1.5.4 Geotechnical and Geothermal Aspects
The Lihir Island mining operation is set in a very complex geotechnical, geothermal
and seismic environment.
The rock mass is very weak in the upper zones of the open pits, with more competent
materials at depth. Structural controls are significant and steam pressures/temperatures
are considered by LGL to be a negative geotechnical factor. Overall pit wall slope failure
is assessed by LGL as being unlikely, but landslide failures above the pit rim or affecting
access roads are possible.
The current pit ore source is Lienetz and the west wall of the Lienetz pit is
currently a particular area of geotechnical focus.
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A landslide in the Kapit area in October 2005 closed the main access road from the
village to the mine and plant area for a few weeks while remediation works were undertaken.
Pioneering work for the Kapit pit development has commenced. The pit will be mined
from around 300m above sea level to around 200m below sea level. There are limited
geotechnical data available at present and additional geotechnical drilling for the Kapit
pit and adjacent areas is planned as a priority. Mining at Kapit requires the construction
of a major diversion drain around the western and north wall of the pit and some of this
area will mine through part of the Kapit landslide area.
Mining of the Kapit final pit cut-back also requires construction of a coffer dam in
Luise Harbour, aligned sub-parallel to the shore line. Dam construction is scheduled to be
complete by the end of 2014. Options for the alignment of the dam, its location and design
were evaluated and the detailed design for the coffer dam has been developed, substantially
to an “issued for construction” standard. The design includes specification of some further
geotechnical testwork. The design has been signed off by an internationally recognised
geotechnical engineering consultancy. The dam will be up to 80m high on the seaward side.
The wall will be constructed on the weak marine sediments that comprise the Luise Harbour
floor and the northern end of the coffer dam may overlay Kapit landslide material, however,
this weak material will be dredged to a competent foundation where the dam wall and pile
sheeting are to be placed. Risk assessments of the dam and the design and depressurisation
of the pit final walls are key aspects of the project.
Bulk materials for the dam will be sourced from open pit waste. Competent and weak
waste rock is currently being placed in an area at the southern end of the coffer dam
alignment, in preparation for the project.
Although the Kapit coffer dam design is nearing completion, significant work is still
required to ensure completion of the dam within the scheduled timeframe. If there are
delays in its completion, Kapit Phase 2 pit may be delayed affecting process plant feed
grade, as Phase 2 contains 12.6 Mt grading 5.6 g/t of high grade ore and 6.2 Mt grading 1.9
g/t of low grade ore.
Cooling and depressurisation of the rock mass within the proposed pits is required
prior to mining. Horizontal drain holes are drilled into the pit walls for each stage and
in the final pit walls for water and steam depressurisation. Maximum temperatures prior to
preparations for mining have typically been:
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Minifie — 40°Cto60 °C.
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Lienetz — 80 °C to 120 °C.
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Kapit — up to 220 °C to 240 °C at the base of the designed pit.
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Strict protocols have been developed to mitigate the risk of geothermal outbursts
during mining. A key step is the drilling and monitoring of steam relief wells to
depressurise and cool the ground prior to mining. Probe holes are then drilled. Material
must be less than 130 °C prior to blast-hole drilling, with the normal threshold being a
maximum of 120 °C. After blasting, material must cool to 100 °C before it is dug.
Given the higher temperatures experienced in the Kapit area, the rate of cooling has
important implications for the mining schedule. If cooling is slower than planned, the
production schedule may be detrimentally affected.
1.5.5 Reconciliation
Reserve tonnes, grade and metal have been reconciled against actual mined using
monthly data. The actual mine data combine process plant production data and stockpile
movements as determined from the ore control model and survey data. Reconciliation results
have been reported for high grade, medium grade and low grade categories.
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1.5.6 Tonnage Reconciliation
For the past three years, the tonnage depleted from the reserve model has been less
than the actual tonnes mined, as can be seen in Table 1.3. This has historically been the
case.
Table 1.3 Tonnage Reconciliation — Reserve Model to Actual Mined
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January 2007 to April 2010
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Reserve - Tonnage
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Actual Mined - Tonnage
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Item
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(Mt)
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(Mt)
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Ore Type
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HG
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MG
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LG
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Total
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HG
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MG
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LG
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Total
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Tonnes (Mt)
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12.11
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3.69
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25.03
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40.83
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14.38
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6.01
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21.56
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41.96
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Percent Difference
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119
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%
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163
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%
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86
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%
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103
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%
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HG — high grade, MG — medium grade, LG — low grade.
1.5.7 Grade Reconciliation
Globally, the reserve and the grade control average grades reconcile very well. The
reserve high and medium grades are higher than the actual mined grade with the reserve low
grade less than the actual mined grade, as can be seen in Table 1.4.
Table 1.4 Gold Grade Reconciliation — Reserve Model to Actual Mined
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January 2007 to April 2010
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Reserve - Gold Grade
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Actual Mined - Gold Grade
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Item
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(g/t)
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(g/t)
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Ore Type
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HG
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MG
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LG
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Average
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HG
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MG
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LG
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Average
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Gold Grade (g/t)
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6.44
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3.78
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2.15
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3.57
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5.75
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3.45
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2.23
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3.61
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Percent Difference
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89
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%
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91
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%
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104
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%
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101
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%
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Figure 1.6 summarises the month by month grade reconciliation for the mine against the
process plant. Monthly variations are generally within 10% of predicted grades with a few
outliers. Grade variances tend to be cyclical and are most likely related to different
mining areas and precision issues in the grade model.
Figure 1.6 Grade Reconciliation — Mine to Process Plant (Mill) Feed (January
2006 to April 2010)
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1.5.8 Contained Gold Reconciliation
Although there are large variances within the various ore categories and the medium
grade ore reserve significantly under predicts, total contained gold reconciliation is
good, with percentage variance less than 5%.as can be seen in Table 1.5.
Table 1.5 Contained Gold Reconciliation — Reserve Model to Grade Control
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January 2007 to April 2010
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Reserve - Contained Gold
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Actual Mined - Contained Gold
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Item
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(Moz)
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(Moz)
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Ore Type
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HG
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MG
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LG
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Total
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HG
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MG
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LG
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Total
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Contained Gold (Moz)
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2.51
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0.45
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1.73
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4.69
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2.66
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0.67
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1.55
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4.87
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Percent Difference
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106
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%
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149
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%
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90
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%
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104
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%
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Figure 1.7 summarises the contained gold variances between the mine and the process plant
for the period between January 2006 and April 2010. As expected with this style of
mineralisation and drilling density, there are significant variations on a month by month
basis. Overall, however, metal reported from the mine appears to be reconciling well with
the process plant.
Figure 1.7 Contained Gold Reconciliation — Mine to Process Plant (Mill) Feed (January 2006 to April 2010)
1.6 Metallurgy and Processing Operations
1.6.1 Plant Description
The Lihir Gold Mine ore processing plant comprises two main circuits. The first
circuit was designed to process ROM ore by crushing and grinding to a nominal size prior to
being fed directly to the autoclave plant to oxidise all of the pyritic sulphur, thereby
releasing the microscopic size gold particles for conventional cyanide leaching and
carbon-in-leach (CIL) gold recovery followed by standard carbon elution and gold
electrowinning and, finally, gold bullion smelting. The second, more recent plant was
designed to treat a lower grade ore by crushing and grinding followed by sulphide froth
flotation recovery to improve the sulphur and gold grades in concentrates. These
concentrates are then blended with the ROM autoclave feed to improve overall autoclave
operation.
The crushing plant comprises a conventional gyratory primary crusher for the harder,
more competent ores and a sizer/breaker rolls type crusher for the softer, less competent
material. Both crushers discharge to a long overland conveyor onto a radial stacker for
stockpiling ahead of the grinding circuit.
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There are two grinding circuits; one for the “high grade” ore (HGO) that is fed direct
to the downstream oxidising autoclaves and the second to process the concentrates produced
from the lower sulphur grade feed, referred to as “flotation grade” ore (FGO), primarily to
improve the sulphur content of the feed to the autoclaves. Both grinding circuits have a
primary semi-autogenous grinding (SAG) mill followed by a secondary ball mill in closed
circuit with hydrocyclones. The HGO grinding circuit has a recirculating pebble stream that
is crushed by two cone crushers before returning to the SAG mill. The FGO circuit does not
have a pebble crushing circuit and the FGO pebbles are returned to the HGO circuit. The two
circuits grind to a nominal size distribution of 80% passing 120 microns
(P
80
=120 μm) which appears to be more than adequate and could allow optimisation
options. The ground slurry is thickened in a thickener and the underflow slurry at about
50% solids is sent to storage tanks ahead of the three pressure oxidation autoclaves.
The flotation circuit is a simple, bulk sulphide float comprising a single roughing
stage using a bank of six 150 m
3
flotation tank cells. Mass recovery is in the
order of 30% to 35% and the gold and sulphur recovery to concentrate is 90% and 95%
respectively. The flotation concentrate is thickened in a concentrate thickener to about 50%
solids (by weight) and stored prior to being blended with the HGO material as feed to the
oxidation autoclaves. The flotation tailings are pumped to the central tailings discharge
system.
The pressure oxidation circuit comprises three autoclaves. Feed from the HGO circuit
and concentrate from the FGO circuit are blended into the autoclaves to optimise the sulphur
addition to the units. The autoclave circuit is conventional for gold circuits with
temperature at about 205°C and a pressure at about 2,650 kPa. Oxygen (O
2
) from
three operating oxygen plants is injected into the autoclave to oxidise more than 90% of the
sulphides. Oxygen is injected into the autoclave at an equivalent of approximately 1.9t
O
2
to 1t of sulphur. Each autoclave has a heat recovery circuit comprising one
“flashing” vessel and one “preheat” vessel.
The pulp from the autoclaves is directed to a 3-stage counter-current-decantation
(CCD) washing circuit. The acidity of the slurry exiting the autoclaves at about 10 g/L
free acid, is reduced to below 1 g/L using seawater and other water sources to allow the
solids to be fed to the cyanide leach circuit. The decanted liquor from the first CCD unit
is discharged to tailings.
The washed pulp is fed at about 44% solids to the leach circuit where lime and cyanide
are added. Cyanide is maintained at about 250 ppm in the first vessel and the discharge
pulp runs at about 120 ppm. Lime is added to maintain a pH of about 9.7. The pulp overflows
from the leach tanks to a bank of six CIL tanks where the dissolved gold is adsorbed onto
activated carbon particles. The CIL gold extraction is about 85%.
Carbon added to the CIL circuit adsorbs the gold up to about 3,000 g/t. The loaded
carbon is screened and washed before gold stripping. Acid washing is conducted in a 6t
column on a batch basis using dilute hydrochloric acid and then water rinsed. Stripping or
elution is conducted continuously in a 6t Anglo American Research Laboratories (AARL)
column using a solution of sodium hydroxide (caustic soda) and cyanide. The gold is removed
into solution which then flows through an electrowinning cell where the gold is plated onto
a set stainless steel wool cathodes. Once the carbon is stripped of gold it is regenerated
in a kiln before being reused.
Smelting is conventional using standard borax based fluxes and electric smelting
furnaces. The gold bullion poured is high quality and contains about 93% to 95% gold, 1% to
2% silver and about 3% to 5% base metals. The bullion bars are shipped to a refinery in
Perth for final refining to saleable 99.99% gold bars.
The CIL tailings are sent to the common tailings system that collects the flotation
tailings, CCD wash water, O
2
plant cooling water return and power plant cooling
water return. These flows then discharge through a de-aeration tank prior to final
discharge to undersea deposition. The undersea discharge is approximately 125m below the
sea surface and about 500m from shore.
Adequate raw water for the plant is sourced from a containment dam (Londolovit Weir)
which collects run-off from a large catchment area. In addition to Londolovit, there is a
small creek near the mine (Kapit Creek) into which LGL has installed a pump. Sea water is
also used for some process demands such as washing in CCD. Fresh water is basically
filtered Londolovit raw water and potable water is Londolovit water filtered and
chlorinated.
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The reagents used by LGL are relatively simple and are generally imported by
ship in bulk form:
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Burned lime is imported in shipping containers.
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•
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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.
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•
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Grinding balls are imported in sea containers and stored in simple bunkers.
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•
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Oxygen is produced from three on-site production plants.
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•
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Flocculant for the thickeners is imported in bags and mixed in a standard “Jet
Wet” mixing system.
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•
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Two flotation reagents (PAX and MIBC) are procured in liquid form ready for
distribution.
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•
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Borax is the main smelting reagent and is imported as needed in
small bags.
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LGL has commenced an expansion which is about 53% complete based on direct
expenditures to April 2010. This expansion, or MOPU, is based on increasing the HGO feed
rate significantly and requires upgrades as discussed in Section 1.7.3.
AMC considers the processing plants to be conventional and the combination of direct
feed and flotation concentrate feed is a good means of optimising sulphide feed grade to the
autoclaves, albeit at a loss of recovery. There is an overall increase of gold ounces which
is good business practice and allows the lower recovery to be acceptable. The main
processing constraint is the amount of sulphur able to be accommodated by the autoclaves and
the amount of oxygen available to be injected into the autoclaves. This oxygen injection is
a direct function of the sulphur addition.
The plant operation appears to be well managed on a day-to-day basis despite the
convoluted layout that has evolved as the plant has expanded in a very restricted site.
These problems will be exacerbated as the MOPU project finalises construction and the
expansion commissioning is completed.
The overall operating times for the crushing and grinding plants remain well below
industry practice. Well maintained crushing should operate at about 75% to 80% of the total
time while SAG mill/ball mill grinding circuits operate at least 93% of the time. Therefore,
overall plant throughput could be improved significantly if these operating time benchmarks
could be achieved. Some of the operating shutdowns arise from poor initial plant layout.
Despite this, autoclave availability is rarely restricted by lack of feed, and the
additional crushing and grinding capacity afforded by the MOPU project will also alleviate
these issues.
The recent additions to metallurgical staff at LGL are likely to provide benefits once
the overall unit processes and unit operations are analysed and optimised e.g. optimum
grind sizes for both grinding circuits, optimum autoclave residence time and optimum
flotation conditions, and should improve performance.
1.6.2 Plant Performance
Prior to 2007, all ore was processed through the HGO circuit. In 2007, the FGO Plant
was commissioned, with 2008 being the first full year with both circuits operating.
Consequently, there is limited historical information on which to judge the full
performance of both circuits. Overall plant recovery prior to 2007 (averaging 89.5%) was
higher than 2008 (82.5%) because of flotation losses in the FGO circuit as well as the
increased autoclave unit throughput and the extra leach throughput, thereby reducing
retention times.
Recovery is projected to rise after the MOPU project is commissioned because a greater
proportion of autoclave direct feed material will be treated, more oxygen will be
available, and leach times will be increased. AMC generally accepts these projections.
However, experience in 2008, 2009 and the first four months of 2010 suggests that with high
unit autoclave feed rates and subsequent higher flows through the CIL, the overall gold
recoveries have dropped to 82.5%, 81.3% and 81.4% respectively. The forecast flows for 2012
and onwards suggest that the autoclave flows will hover at about 235 tph per autoclave
until 2018 when they drop to about 210 tph and then, in 2022, increasing to above 240 tph.
Actual plant performances for years 2004 to 2009 are summarised in Table 1.6.
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Table 1.6 Process Plant KPI’s — Years 2004 to 2009
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2004
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2005
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2006
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|
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
|
|
Source: December Monthly Reports.
Value shown with a dash (-) are not available.
AMC accepts that the change from an HGO:FGO ore treatment ratio of 1:1 will move to about
5:1 which, in itself, will increase recovery by 1.5% to 2.0% or an overall recovery of about
83%. The extra oxygen should help improve recoveries as should the expected extra leach
time. Thus AMC accepts the LGL recovery forecasts but suggests that a sensitivity of the
operation to 3% lower recoveries should be tested. AMC also notes that the forecast
recoveries drop when the ore grades drop with more stockpiled feed being introduced, the
forecast recoveries also drop.
1.6.3 Million Ounce Plant Upgrade Project
LGL has approved and commenced the MOPU project to increase annual plant throughput
from the current range of 6.5 Mt to 7.5 Mt to between 10.5 Mt and 12.5 Mt, and increase
annual gold production by 200 koz to 300 koz. The upgrade will include the following
additions to the process plant:
|
•
|
|
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.
|
14
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
315
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
|
•
|
|
An additional weir for raw water supply from an alternate catchment.
|
This expansion is being installed within the same footprint as the existing plant. Some
workshop buildings and some roads will have to be moved.
A flowsheet for MOPU is shown in Figure 1.8.
Figure
1.8 MOPU Processing Flowsheet
The MOPU capital budget is US$783M (exclusive of the extra power plant). The project is
being managed by LGL with contracts for design supply and erection being let. Approximately
50% of the project budget is committed. Construction work has commenced, with a large
proportion of the civil works completed, and structural works due to commence shortly. LGL
reports that the MOPU project is within budget and on schedule for completion at the end of
2011.
AMC has reviewed the MOPU Feasibility Study. In AMC’s opinion, the expansion plans are
technically sound, with increased throughput rates and delivery of a significantly higher
proportion of feed direct to pressure oxidation circuit also being justified.
The implementation of the MOPU project will be quite complicated with a myriad of
“tie-ins” between the old plant and the new, requiring very close attention to detail and a
high degree of cooperation between project personnel and the plant operating team.
Nonetheless, AMC considers that it is reasonable to expect that implementation will be
successful.
1.7 Waste Rock and Tailings Disposal
The waste rock and tailings disposal strategy adopted by LGL is subject to strict
regulatory requirements and approvals by the PNG Department of Environment and Conservation
(DEC).
15
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
316
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Waste rock is primarily barged to deep sea disposal sites (i.e. greater than 100m
depth), however, limited shore dumping also occurs to create useable flat reclaimed land. In
2008, 30 Mt of soft waste was mined, of which 23 Mt was barged and 7 Mt was placed in the
Harbour Base area. Each barge has a capacity of around 1,400t and a cycle time in the order
40 minutes. LGL finds barging causes operational inefficiencies with high maintenance costs
and is investigating greater use of shore dumping for both soft and hard waste.
Significant amounts of waste material will be required for construction of the
cofferdam prior to mining of the Kapit ultimate pit cut-back. Design of the coffer dam is
now at “issued for construction” status, and it will primarily utilise hard waste rock
material for the outer walls with softer material within the containment walls. Run of mine
waste will be selected for coffer dam construction, reducing the need for material
rehandling.
Control measures are in place to ensure waste rock is disposed of in locations suitable
for long-term management. Marine surveys are undertaken on a quarterly basis to monitor
placement and movement of waste rock after dumping. Results indicate target areas and depths
are being met and, in 2009, the mine was in compliance.
Sediment plumes can be observed during barge loading and unloading, however these are
localised and are relatively rapidly dispersed. Dredging of the barge loading area is
periodically undertaken to remove sediments and this material is discharged at depth.
LGL submitted a new Environmental Impact Statement (EIS) to the DEC in July 2005,
which identified the need for increased waste disposal beyond the allowed volume of
18,000,000 m
3
. The DEC approved this updated EIS in March 2008, with new
Environmental permits being issued in October 2008.
Tailings are disposed of via a deep sea outfall. The tailings are extensively treated
and detoxified before being discharged below biologically productive upper ocean layers,
with final settlement depths estimated at 1,500m to 2,000m. Extensive monitoring of the
physical and biological impact of the tailings was completed as part of the MOPU EIS by
recognised Australian and international consultants. The findings and modelling for the
expanded plant indicate that current DEC water quality licence conditions will be met.
Tailings volumes and chemistry have been in compliance with regulatory criteria
established by DEC.
The tailings line for the MOPU project requires duplication of the existing line, with
the drilling of a hole through the reef to a discharge point 125m below sea level. The
increased tailings disposal rate required under MOPU will exceed current permit levels, but
LGL believes negotiations with DEC are progressing well and expect to receive permits for
the additional discharge.
1.8 Power
The existing power demand for the overall operation is between 72 MW and 76 MW,
provided by a combination of geothermal energy from steam extracted from underground
reservoirs in the mine area, together with HFO power generation stations.
The existing geothermal power stations and the HFO stations have total rated
capacities of 56 MW and 64 MW respectively. Currently, approximately 30 MW to 35 MW of
geothermal power is being generated, with the balance coming from HFO. Additional
geothermal wells are due to be connected to the steam pipe network by mid 2010, and the
Kapit North steamfield well is due to be connected by the end of 2010. It is estimated that
these wells will provide an additional 17 MW of geothermal power.
Power demand studies indicate a total average power demand of 126 MW once the MOPU
project is completed, including supporting infrastructure and future mine dewatering needs.
However, the geothermal field has not yet developed sufficiently to provide the additional
power requirements. Accordingly, a 70 MW barge mounted power station is currently under
construction, complete with associated infrastructure, and will meet the additional demand
until the geothermal field has been sufficiently developed.
16
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
317
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Steam relief wells depressurise and cool the rock mass within the designed final pit
limits. The geothermal power resource is harvested from zones beneath the areas
depressurised and cooled ahead of mining. A significant increase in the rate of decline of
geothermal steam supply and reservoir pressure occurred within the main steam supply zone
during 2009. This change, combined with reduced steam recovered from new wells installed
outside the main zone, resulted in a shortfall against budget in geothermal steam for power
generation during 2009.
The situation is compounded by the majority of the existing steam production wells and
steam field infrastructure being scheduled to be mined out by about 2013, as part of the
Kapit development.
A new drill rig capable of drilling 3,000m deep holes has arrived on site for
development of the geothermal field in the Kapit North area, north of the October 2005
Kapit landslide. Installation of deeper wells within this area is expected to better
utilize this geothermal reservoir.
AMC considers the ability to reliably and cost effectively maintain the geothermal
steam supply to meet both the current and future power demand represents a significant risk
to LGL’s planning.
1.9 Environment, Sustainable Development and Community Issues
The Lihir Gold Mine operations are operated in accordance with a number of agreed
development plans signed with the PNG Government in 1995.
The project’s original approved Environmental Plan was prepared in accordance with the
Environmental Planning Act (1978), the Water Resources Act (1982) and the Environmental
Contaminants Act (1978). LGL established an Environmental Management and Monitoring Program
(EMMP), approved and administered by DEC to ensure mining impacts did not exceed permit
levels.
In 2005, LGL submitted a new EIS to incorporate all existing environmental permits
into a single permit under the Environment Act (2000), which came into effect in 2004. The
EIS also included an extension to the mine life of fourteen years, increases to total ore
and waste mining tonnages, increases to tailings disposal and an enlarged mine footprint.
The EIS was approved in March 2008.
LGL has a programme to monitor the environmental impacts of the mine on terrestrial
and marine environments, and publishes a report annually that is submitted to DEC. The
Lihir Gold Mine is also ISO14000 compliant and in April 2010 was re-certified as part of
the tri-annual certification process.
Incidents are defined using five categories as follows:
|
•
|
|
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.
|
Category 4 and 5 incidents are classified as significant and are reported at Executive
Management level with a full investigation report, follow-up actions and sign off. LGL has
reported no Category 5 incidents since mine start up and only a small number of Category 4
incidents (Figure 1.9). LGL reports that no Category 4 or 5 incidents have occurred since
2005.
17
|
|
|
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|
12 Independent technical specialist’s report continued
|
|
318
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Figure 1.9 Environmental Incidents — 1998 to 2008
Source: Annual Enviornmental Report 2008.
As part of its risk assessment and management process, LGL has identified a number of
potential environmental risks including loss of fuel, acid rock drainage from the mine or
waste rock stockpiles and potential to exceed discharge limits e.g. amount of waste rock,
cyanide and copper levels.
AMC considers that LGL has assessed environmental risks appropriately and has
implemented a reasonable plan to mitigate these risks.
There are three key elements of LGL’s ongoing commitment to sustainable development at
the Lihir Gold Mine:
|
•
|
|
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.
|
18
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
319
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
|
|
–
|
|
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.
|
Through these actions, LGL has made a strong commitment to support the local
population. Some 90% of the workforce is local or from other parts of PNG. In 2009, LGL
spent K982M within PNG, of which direct payment to Lihirians totalled K140M. LGL also
supports the Lihir community through provision and/or funding of education and medical
services.
Whilst LGL has established a reasonably good relationship with the local communities,
the mine experiences occasional disruptions due to disputes. Some disputes that disrupt
mining are directly linked to community concerns associated with the operation, but others
are not. LGL and the community have an agreed formal process to manage dispute resolutions,
but this process does result in lost time.
LGL must get approval from the local community to access new areas for mining and
exploration. At present there are several areas subject to negotiation, both inside the
Luise Caldera area as well as elsewhere on the island. The key areas critical to ongoing
mine development and life of mine (LOM) planning are access to Kapit North to commence
geothermal drilling and stockpile development, as well as access to the Coastal Zone, which
is dependent on reaching agreement on Alaia Rock, which is culturally sensitive.
LGL has identified that there are a number of serious risks to its operation
associated with sustainable development and community related issues. AMC concurs with
LGL’s assessment and notes that LGL has implemented plans to alleviate these risks.
1.10 Capital and Operating Costs
1.10.1 Sustaining Capital Costs
LGL incurs large sustaining capital costs annually, which is understandable given the
size and complexity of the operation. A summary of annual capital costs from 2004 to 2009 is
presented in Table 1.7. AMC has been advised that the costs include mostly sustaining
capital, plus major project capital expenditure between 2005 and 2007 to install the FGO
circuit and to commence the MOPU and the Interim Power Station projects.
Table 1.7 Capital Expenditure — 2004 to 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
19
|
|
|
|
|
12
Independent technical specialist’s report continued
|
|
320
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.10.2 MOPU Project Capital Costs
A breakdown of the MOPU project total capital cost estimate of US$783M, is
presented in Table 1.8. In June 2009, the Interim Power Station project was
approved to provide 70 MW of power at a total capital cost of US$163.5M. A
breakdown of this estimate is presented in Table 1.9. LGL has reported committed
expenditure on the MOPU project to December 2009 at approximately US$370M,
including the Interim Power Station.
Table 1.8 MOPU Project Capital Cost Estimate
|
|
|
|
|
|
|
|
|
Costs
|
|
Cost Category
|
|
(US$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
|
|
|
|
|
|
|
|
Source: “Original Budget” column of the
MOPU Monthly Progress report for January
2009.
20
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
321
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Table 1.9 Interim Power Station Capital Cost Estimate
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
The MOPU project and the Interim Power Station project are currently reported to
be within budget and on schedule for completion at the end of 2011.
1.10.3 Operating Costs
Table 1.10 summarises the historical operating costs to 2009. Figure 1.8
illustrates the unit operating costs per ounce of gold produced.
There was a steady increase in costs from 2004 to 2009 due to the escalation of the
cost of materials and labour. Mining costs increased in 2006 due to an increase in
material mined. Process costs vary somewhat depending upon the HFO and geothermal
power generation mix. In 2008, there was more HFO than budgeted because of
declining geothermal performance. AMC considers the general and administration
(G&A) costs are high compared with other similar sized operations, but this is
understandable because of the large community assistance component required on
Lihir Island. LGL has forecast a reduction in G&A costs in 2010 and in subsequent
years as the backlog of community projects are completed.
21
|
|
|
|
|
12
Independent technical specialist’s report continued
|
|
322
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Table 1.10 Operating Costs — 2004 to 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Estimates of operating costs for the Lihir Gold Mine after completion of the MOPU
project have been prepared for the MOPU Feasibility Study. Labour costs were
calculated using revised labour schedules and known labour unit rates. LGL
anticipates that manning will increase by 83 people; 47 in operations and 36 in
maintenance. Reagent costs were calculated using the new consumption rates and the
LGL known landed costs for the individual reagents. Items such as oxygen were
calculated knowing the O
2
:S ratio and the unit cost of oxygen
production. Maintenance costs were prepared with LGL experience and additional
autoclave maintenance experience from the technology supplier, Sherritt Gordon of
Canada.
The Feasibility Study assumed that an average of 56 MW would be generated from
geothermal sources in 2008 and 2009. An additional 20 MW of geothermal generation
capacity was envisaged to be commissioned in 2010 with a further 40 MW being
progressively commissioned thereafter. HFO generation was anticipated to drop from
20 MW in 2009 to 15 MW in 2010 and to 10 MW in 2011. Due to the increased
geothermal drilling demands as a result of declining well production in 2009, the
Kapit North geothermal field development has not progressed at the rate envisaged
in the Feasibility Study. Accordingly, the Interim Power Station project was
approved to meet the additional power demand of the MOPU project. The Interim
Power Station is currently on schedule to provide power by the second quarter in
2011.
Geothermal power generation up to a maximum of average 60 MW attracts carbon
credits (Certified Emission Reductions or CER’s) at a rate of 0.678 CER’s per MWh.
Geothermal power generation in excess of this attracts no credits. Geothermal
power generation costs have been estimated at US$25.00 per MWh (before credits).
22
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
323
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.11 AMC Modelling Scenarios
LGL’s annual strategic business planning process for the Lihir Gold Mine normally
involves development of a Conservative case, a Target case, and an Optimistic
case.
LGL’s current Conservative case for Lihir Gold Mine is a “reserves-only” case. Its
Target case assumes access to the Coastal resource is negotiated. LGL provided its
Conservative and Target cases to AMC but, at that time, LGL had not completed its
strategic business planning process for the Lihir Gold Mine for 2010 and had not
fully developed an Optimistic case.
Similarly, LGL had not completed its cost modelling for its strategic business
planning process. Both the Conservative and Target cases provided by LGL had the
same cost projections which LGL advised as having Optimistic case cost elements.
In developing the mining and processing inventories for its cases for Grant Samuel, AMC
has:
|
•
|
|
AMC Case 1 — Adopted the LGL’s 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.
|
In developing the operational
projections, AMC has for:
|
|
–
|
|
Assumed LGL’s 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 LGL’s 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
LGL’s Target case.
|
|
|
–
|
|
Assumed LGL’s Target case power supply scenario (56 MW from geothermal) with
capital and operating costs increased accordingly.
|
|
|
|
|
–
|
|
Increased mining operating costs by 10% relative to LGL’s 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 LGL’s Target case.
|
In AMC Case 1 and AMC Case 2, the MOPU project is assumed to be completed as
planned at the end of 2011.
Both AMC cases are based on approved capital expenditure for MOPU and estimates
for other projects, reasonable levels of sustaining capital and reasonably assured
expectations for production and operating costs, plus an allowance of US$100M for
mine closure and rehabilitation costs.
Additionally, as requested by Grant Samuel, AMC has prepared a case limited to the
mining and processing of ore reserves.
23
|
|
|
|
|
12
Independent technical specialist’s report continued
|
|
324
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.11.1
AMC Case 1
AMC Case 1 is based on Ore Reserves plus assumed additions to production inventories
from the Coastal resource or similar within the caldera. Key features of AMC Case 1
are:
|
•
|
|
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$545/oz.
|
Figures 1.10 and 1.11 show annual estimates of AMC Case 1 LOM production and
operating cost data, and Table 1.11 presents a summary of the AMC Case 1 costs.
Figure 1.10 AMC Case 1 — Processed Tonnes and Gold Head Grade
24
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
325
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Figure 1.11 AMC Case 1 — Gold Production and Operating Costs
Table 1.11 AMC Case 1 — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore Processed
|
|
Gold
|
|
Operating
|
|
|
|
|
|
Closure and
|
|
|
|
Tonnes
|
|
Gold Grade
|
|
Produced
|
|
Cost
|
|
Capital Cost
|
|
Rehabilitation
|
|
Year
|
|
(kt)
|
|
(g/t)
|
|
(koz)
|
|
(US$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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
12
Independent technical specialist’s report continued
|
|
326
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.11.2 AMC Case 2
AMC Case 2 is based on AMC Case 1 plus further additions to the mining inventory
that AMC considers reasonable to expect from demonstrable exploration potential
within the caldera. Key features of AMC Case 2 are:
|
•
|
|
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$500/oz.
|
Figures 1.12 and 1.13 show annual estimates of AMC Case 2 LOM production and
operating cost data, and Table 1.12 presents a summary of AMC Case 2 costs.
Figure 1.12 AMC Case 2 — Processed Tonnes and Gold Head Grade
26
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
327
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Figure 1.13 AMC Case 2 — Gold Production and Operating Costs
Table 1.12 AMC Case 2 — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore Processed
|
|
Gold
|
|
Operating
|
|
|
|
|
|
Closure and
|
|
|
|
Tonnes
|
|
Gold Grade
|
|
Produced
|
|
Cost
|
|
Capital Cost
|
|
Rehabilitation
|
|
Year
|
|
(kt)
|
|
(g/t)
|
|
(koz)
|
|
(US$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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
328
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.11.3 Reserves-Only Case
Grant Samuel requested AMC to prepare a case limited to the mining and processing of ore
reserves ore reserves. Key features of this Reserves-Only Case are:
|
•
|
|
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$575/oz.
|
Figures 1.14 and 1.15 show annual estimates of LOM production and operating cost data,
and Table 1.13 presents a summary of the Reserves-Only Case costs.
Figure 1.14 Reserves-Only Case — Milled Tonnes and Gold Head Grade
28
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
329
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Figure 1.15 Reserves-Only Case — Gold Production and Operating Costs
Table 1.13 Reserves-Only Case — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore Processed
|
|
Gold
|
|
Operating
|
|
|
|
|
|
Closure and
|
|
|
|
Tonnes
|
|
Gold Grade
|
|
Produced
|
|
Cost
|
|
Capital Cost
|
|
Rehabilitation
|
|
Year
|
|
(kt)
|
|
(g/t)
|
|
(koz)
|
|
(US$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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
330
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
1.12 Risks and Opportunities
LGL has established a risk management process with four risk rating categories that have
been derived according to company-wide definitions of likelihood and consequence. Risks
are rated as Category I, II, III or IV with Category I being the highest rating and IV
the lowest. No risks for Lihir Gold Mine are rated as Category I however, in May 2010, 17
risk areas were rated as Category II. They cover a diverse spectrum of issues ranging
from technical/production related risks, social and community, occupational health and
safety, environment, and legal/commercial issues and include areas such as:
|
•
|
|
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 LGL’s
valuation to recoveries that are 3% lower than those modeled be assessed by Grant
Samuel.
|
LGL has established control measures in relation to these and other risk areas.
AMC considers the LGL risk management process is reasonable and has identified the key
risks associated with the ongoing operation of the site. Plans to manage risk appear to
be sound.
AMC considers that there are also opportunities open to LGL that have not been built
into either AMC Case 1 or AMC Case 2, including:
|
•
|
|
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 operation’s performance.
|
|
|
|
•
|
|
Mining and processing operating unit costs and total power supply costs per LGL’s
business planning models are lower than AMC has built into its models. Realisation
of LGL’s lower cost projections would naturally improve the operation’s economics.
|
30
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
331
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
2 MT RAWDON GOLD MINE (QLD)
2.1 Location and Background
Mt Rawdon Gold Mine is situated in south-east Queensland, approximately 80 km south-west
of Bundaberg and 300 km north-north-west of Brisbane (Figure 2.1). Access to the mine is
from Gin Gin on the Bruce Highway, via a sealed road for 52 km south-west to the
township of Mt Perry and then south-east for 18 km on a gazetted, but mostly unsealed
road.
The deposit is located beneath the southern side of Mt Rawdon, which is located between
Mingham Creek and the Perry River, both of which drain to the Burnett River.
Figure 2.1 Location of Mt Rawdon Gold Mine
Construction commenced in early 2000 followed by the commissioning of the operation in
January 2001. In 2001 the owner at the time (Equigold NL) completed a diamond drilling
program immediately below and adjacent to the operating pit, which increased the ore
reserves from 22.8 Mt to 45.9 Mt. In 2005 a redesign of the open pit (involving a change
in cut-off grades and steeper ultimate pit wall angles) increased the reserves even
further.
LGL acquired the operation during a merger with Equigold NL in 2008.
LGL completed a new Life of Mine Plan (LOMP) in September 2009, and in November 2009
re-optimised the pit design to account for updated price forecasts and costs. The optimum
pit identified in this process was very similar to the current designed pit, which
therefore remains the LGL plan. Based on the current LOMP, the mine is scheduled to cease
production in 2016 with treatment of stockpiles continuing until 2019.
The Mt Rawdon Gold Mine is situated on nine Mining Leases (ML’s) occupying a total area
of 1,955 ha within Perry Shire. The mining leases were granted between 1974 and 2000 and
are all registered in the name of Equigold NL. Expiry dates on the tenements range from
April 2011 to April 2023. Mining and ore processing infrastructure is contained within
the combined ML areas. Other infrastructure such as the water supply weir and pipeline
services corridors are not covered by easements or ML’s. Table 2.1 shows details of all
the tenements held in the region.
31
|
|
|
|
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
332
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Table 2.1 LGL Mt Rawdon Operations Tenement Holdings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 Geology
The Mt Rawdon deposit is located at the southern end of the Carboniferous Coastal
Block adjacent to the intersection of a fault, parallel to the north-north-west
trending Perry Fault and the east-north-east trending Swindon Fault. The gold
mineralisation is hosted within a volcanoclastic sequence that strikes north-east and
plunges to the south-west. The volcanoclastic sequence consists of polymictic, matrix
supported, poorly sorted dacite-rich rocks. The sequence is dominated by dacite
intrusives and dacite-rich volcanoclastics. The two are considered genetically
linked; and were later intruded by a sequence of acidic to basic dykes and plugs.
Figure 2.2 shows a generalised east-west cross-section of the Mt Rawdon Gold Mine
showing the gold grade contours.
Figure 2.2 Generalised Cross-Section (Looking North)
|
|
|
|
|
TRAC = Trachyandesite FDAC = Fragmental Dacite
|
32
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
333
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
The mineralised zone contains 1% to 3% disseminated pyrite and typically 1 mm to 3 mm
wide veinlets of pyrite and base metal sulphide assemblages. The mineralisation is
generally low in base metals.
An intrusive dacitic dome feature, with associated andesite and trachyandesite dykes
occurs south of the main mineralised zone. The contact is steeply dipping and the
margins are brecciated. This area generally hosts the highest grade gold
mineralisation and is presently the focus of near mine exploration activity to extend
the current pit limits.
The alteration and mineralisation at Mt Rawdon Gold Mine result from multi-stage
events, which overprint the volcanoclastic sequence, the dacite suite, and to a
lesser extent the trachyandesite suite. The effects of the various stages of
alteration on the different rock types within the deposit have resulted in a wide
range of alteration rock types. The mineralisation is considered synchronous and
subsequent to most of the intrusive activity, and all of the major rock types within
the deposit are mineralised to some degree.
The surface extent of mineralisation forms a roughly ovoid zone of 200m by 300m with
gold grades greater than 0.7 g/t Au (Figure 2.3). The mineralisation takes the form
of fine disseminated pyrite within the host rocks, as well as more discrete sulphide
veinlets.
Figure 2.3 Generalised Level Plan (52 mRL)
|
|
|
|
|
TRAC = Trachyandesite FDAC = Fragmental Dacite
|
Within the Mt Rawdon deposit, the gold grades generally increase with increasing
pyrite content and sulphide veining. The pyrite is present in three forms: an early
disseminated phase, followed by sulphide veining and finally breccia veining.
Veinlets are a significant host to the gold mineralisation and carry variable amounts
of pyrite, galena, chalcopyrite, sphalerite, arsenopyrite, and free gold, with
veinlet widths rarely exceeding 5 mm. Approximately 72% of the gold is hosted within
pyrite and base metal veinlets, with approximately 28% contained in the surrounding
disseminated sulphide mineralisation.
Gold and electrum occur as free grains within base metal sulphides and fractures
within pyrite. Close inspection of hand specimens grading greater than 5.0 g/t Au
generally reveals visible gold. In thin section, gold is apparent in most intervals
with gold grades greater than 0.2 g/t Au. Microprobe analysis indicates that there
are two populations of gold grain sizes. The first population has a gold grain size
ranging from 348 microns to 881 microns, with the second gold population having grain
sizes in the 10 microns to 30 microns range. Approximately 10% of the recovered gold
comes from a gravity circuit.
33
|
|
|
|
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
334
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
2.3 Mineral Resources and Ore Reserves
Mineral Resource and Ore Reserve estimates were updated as at 1 January 2010. The
total gold reserve has risen to 835 koz, up 21 koz from the previous 2007 reserve,
adjusted for mining depletion. Silver content was estimated at 2.6 Moz, which is up
from 2.3 Moz previously (based on the 2007 reserve depleted by mining).
The 2010 Ore Reserve has been estimated using a gold price of US$800 and updated
operating cost assumptions resulting in a lowering of the cut-off grades from 0.495
g/t Au to 0.31 g/t Au. The optimised pit design has led to the southern and western
sides of the pit being pushed back, wall slopes flattened and the depth of the pit
reduced marginally.
Resources at the Mt Rawdon Gold Mine also have been updated to reflect the impact of
depletion since the last resource statement in June 2007, and drilling information
gathered through mining and exploration programs.
2.3.1 Mineral Resources
The Mt Rawdon deposit is defined by approximately 400 drillholes of which
approximately 15% are diamond drillholes, with the remaining holes being drilled
using reverse circulation (RC) and percussion methods. Approximately 25,000, two
metre composites have been used to generate the current resource estimates. All
samples have been analysed for gold and silver, with selective analysis for base
metals.
Historical drilling at the Mt Rawdon Gold Mine during the 1979 to 1984 period
comprised open hole percussion (rotary drilling) and limited diamond core drilling.
There is doubt regarding the quality of sampling of the early rotary drilling, but
these holes now constitute only a small part of the total database and AMC does not
believe that they will have any material effect on the current resource estimates.
Drilling completed post 1984 (Placer Pacific Ltd and Equigold NL) was audited by
external consultants in 2000 and found to be of suitable quality and that appropriate
diligence had been exercised. In 2000, approximately 30% of the resource database was
Equigold NL data.
Mineral Resources reported by LGL in its 2009 Annual Report and currently published
on LGL’s website were estimated at 1 January 2010 and are shown in Table 2.2. The
estimates are based on a resource model prepared in 2008 (2008 Resource Model) using
geological information available up to that date, depleted by mining to 1 January
2010. The resources have been reported at a cut-off grade of 0.31 g/t Au and include
resources that have been converted to ore reserves.
Table 2.2 Mineral Resource Estimate — January 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
The Measured and Indicated Mineral Resources
are inclusive of the Ore Reserves.
Cut-off grade of 0.31 g/t Au estimated using
current costs.
Rounding, conforming to the JORC Code, may cause some computational discrepancies.
Resource estimates were constrained by 3-D geological wireframes, and grades were
estimated using 2m composites. Grades were capped at 21 g/t Au in volcanics, 16 g/t
Au in dacite and 8.5 g/t Au in laterite. The laterite zone occurs between the
modelled base of total oxidation and the topographic surface.
Bulk density values used in the current resource model are 2.45 t/m
3
above
the base of total oxidation and 2.72 t/m
3
below. Bulk density data dates
back to the early 1980s when Placer undertook detailed bulk density measurements. The
earlier Placer bulk density data has been removed due to QA/QC issues.
Gold and silver grades in the 2008 Resource Model were both estimated using ordinary kriging.
34
|
|
|
|
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Lihir Gold Limited Scheme Booklet
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335
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Historically, the resource model has consistently underperformed with respect to the mill
reconciliation, manifesting itself generally in both increased tonnes and higher grades. During the
January 2009 to April 2010 period, reconciliations indicated that the resource/reserve model has
overstated tonnes by 9.9%, but understated the grade by 23.8%. The net effect of these variations
has resulted in an additional 11.74% more contained metal than indicated by the resource/reserve
model during this period. There are three reasons for these discrepancies:
|
•
|
|
“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.
|
Positive tonnage reconciliations have been verified by blast-hole sampling inside the
current final pit limits confirming additional ore tonnage not defined by the
resource drilling. The higher than expected gold grades are most likely a result of
coarse gold that has not been adequately modelled in the current resource estimates
due to the large nugget-effect associated with free coarse gold.
It is not clear if the positive mill reconciliation will continue into the future.
Issues related to the ratio of historical to recent drilling, drilling density,
distribution of free gold, and changes in the style of mineralisation with depth
could impact on future reconciliation results.
AMC believes that the Mt Rawdon Gold Mine resource estimates are reasonable and have
been reported by LGL in accordance with the JORC Code. Geology and mineralisation is
well understood and the current resource estimates appear to have been generated with
due care. Recent reconciliation results suggest that the resource model is
consistently underestimating both tonnes and grade, but AMC does not consider this to
be a material deficiency.
2.3.2 Ore Reserves
Ore Reserves reported by LGL as at 1 January 2010 are shown in Table 2.3.
Table 2.3 Ore Reserve Estimate — January 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Cut-off grade of 0.31 g/t Au as calculated using current costs.
Reserves are based on a maximum profit with an assumed LOM gold price of US$800 per
ounce. The quantity of contained gold does not indicate the quantity that will
ultimately be recovered.
Stockpile is ore above the cut-off as at 1 January 2010.
Rounding, conforming to the JORC Code, may cause some computational discrepancies.
This ore reserve estimate is based on a detailed pit design which forms the basis of
the current Mt Rawdon Gold Mine LOMP. AMC believes that the reserve estimate is
reasonable and has been reported in accordance with the JORC Code.
Waste excavated from the pit is separated into mineralised and non mineralised waste.
Mineralised waste has the potential to be economically processed should the gold
prices increase significantly above those used to determine the ore cut-off grade.
35
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12 Independent technical specialist’s report continued
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336
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
2.3.3 Potential for Additional Reserves
The final depth of the current pit design is -110 mRL; however, the gold
mineralisation is known to extend down to -250 mRL. Potential exists to increase the
resource and reserves at the Mt Rawdon Gold Mine at depth and to the south-west of
the main pit at the contact between the fragmented dacite and main dacite body. The
Mt Rawdon Gold Mine mineralisation is currently open at depth. The stripping ratio
and average gold grade pose the most significant issues to the viability of mining at
greater depth.
Completed drilling activity for 2010 has included two diamond holes to delineate
additional resources adjacent to the western wall of the designed pit, where higher
grade gold mineralisation is known to be associated with the fragmented dacite
intrusives, and three diamond drillholes along the eastern wall of the designed pit.
These drillholes were designed to test for the presence of incremental mineralisation
adjacent to the current final pit limit. The drillholes were also completed to gain
additional geotechnical information relating to future pit wall stability. Gold
prospectivity within the surrounding Mt Rawdon region is considered by AMC to be low.
Mt Shamrock is the only promising gold prospect outside of the known Mt Rawdon
mineralisation. A small 1,700m drilling program is planned for 2010. At Mt Shamrock
the gold is known to occur as small quartz carbonate veins and breccias and is
associated with arsenopyrite, bismuthinite and base metal minerals. Mt Shamrock is
not considered by AMC as a high tonnage proposition.
Proposed near-mine exploration activity for 2010 is centred on the five exploration
tenements held by LGL Mt Rawdon Operations. The majority of the money committed to
these exploration tenements is required to retain tenure and honour minimum capital
commitments as summarised in Table 2.4.
Table 2.4 Tenement Work Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regional exploration activity includes a current joint venture agreement
between LGL Mt Rawdon Operations and Belanda Pty Ltd over the Mt Perry Copper leases.
These mining leases are immediately west of the Mt Perry township. LGL Mt Rawdon
Operations has currently earned a 60% interest in the mining leases by spending
A$200,000 on exploration activities on the tenements. LGL Mt Rawdon Operations can
earn up to 80% interest upon spending a total of A$400,000 on the tenements.
A review of completed work has down-graded any potential for the Mt Perry Copper
leases to host a significant resource within the current tenement holdings. As such,
a decision has been reached by LGL to terminate the Joint Venture agreement with
Belanda Pty Ltd.
A summary of the proposed Mt Rawdon Gold Mine 2010 exploration program in given in Table 2.5.
Table 2.5 Exploration Budget — 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure
|
|
Percent
|
|
Item
|
|
(A$)
|
|
(%)
|
|
Mine Exploration
|
|
|
|
651,800
|
|
|
|
45
|
|
Near Mine Projects
|
|
|
|
671,700
|
|
|
|
46
|
|
Mt Perry Joint Venture
|
|
|
|
130,000
|
|
|
|
9
|
|
|
|
|
|
|
|
Total
|
|
|
|
1,453,500
|
|
|
|
100
|
|
|
|
|
|
|
Approximately 60% of the budget has been allocated to resource delineation drilling
focused on the extension of known mineralisation adjacent to the current final pit
limit.
36
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Lihir Gold Limited Scheme Booklet
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337
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
2.4 Mining Operations
2.4.1 Mine Description
Mining at Mt Rawdon Gold Mine uses conventional drill, blast, load, and haul techniques.
The active contractor owned fleet
comprises:
|
•
|
|
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.
|
Bench by bench grade control incorporates assaying blast-hole drill cuttings. These
are assayed for gold in an on-site laboratory. Blasting is carried out on 10m benches
with subsequent mining on three 3.5m flitches.
Crusher feed is typically 50% direct tip from the pit by trucks, and 50% by loader
from stocks. Oversize rocks are stockpiled and broken by a 35-tonne rock breaker.
Mineralised waste is currently stockpiled for possible future processing, either to
overcome shortfalls in pit production or when the pit is exhausted. A view of the pit
is shown in Figure 2.4, with the Stage 2 cutback at the far southern end of the pit.
The main earthmoving operation is carried out by a mining contractor (Golding
Contractors Pty Ltd) under a schedule of rates contract. The contract covers
completion of Stage 1, completion of the current cutback, followed by completion of
the Stage 2 pit. The contract requires a maximum annual material movement rate of
21.5 Mbcm from 31 October 2006. The workforce resides locally and works two 12 hour
shifts per day, five days per week.
A drilling contractor (Rock Australia) provides the equipment and manpower for
blasthole drilling. A separate contractor (Qascom) provides charging and blasting
services. Blasting consumables are provided by Orica. Cable bolting of the pit walls
is the responsibility of the owner and is undertaken on an as needed basis utilising
a Contractor. Maintenance crews and electrical services are the responsibility of the
owner.
All contractors (other than the recently appointed drilling contractor) have a long
association with the mine and there is a high level of site specific knowledge and
workforce stability. There is competition for skilled labour from coal mines in the
Bowen basin, but the Mt Rawdon Gold Mine offers an attractive rural/residential
lifestyle to employees. There have been no serious disputes with the contractors over
the life of the operation.
37
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12 Independent technical specialist’s report continued
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338
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Figure 2.4 View of Pit Looking South
2.4.2 Mine Planning and Scheduling
The mine has the capacity to produce at a higher rate than is currently planned, but
is constrained by the current processing capacity. To achieve a higher gold output
would require raising the cut-off grade and hence the head grade, but this may not
produce the maximum project value.
Short-term mine planning is carried out on site. Long-term planning is conducted
through the LGL Brisbane office. The current LOMP was developed in 2009 and has been
updated to reflect current metal prices, exchange rates, and costs.
A Ground Control Management Plan exists and a Geotechnical Risk Assessment was
conducted in January 2010. A Draft Slope Stability Management Plan was prepared in
April 2006. There has been a modest failure in the North Wall (left of centre in
Figure 2.3) and the east wall is being monitored for potential structural failures. A
comprehensive database of rockfall events is maintained. Cable bolting is done on
final pit walls as required.
AMC considers that with a continuation of current practices, there are no
geotechnical issues that are likely to compromise future production.
2.4.3 Mine Performance
During the last three years the mine has performed close to budget for the total
volume of rock mined, stripping ratio, ore produced, and gold head grade. The current
stripping ratio is the highest in the mine’s history as a consequence of mining the
cut-back for Stage 2. The current LOMP forecasts a steadily decline in stripping
ratio until closure. Given the consistent historical performance against budget,
there is no reason to expect that the mine will not be able produce the ore tonnages
scheduled in the plan.
Rock excavation costs have steadily increased reflecting the rising costs of inputs
(labour, energy and consumables) over the period. The LOMP forecasts continuing
increases at a similar rate until closure, but this may be conservative in the
current economic climate. The unit cost per tonne of ore produced is expected to peak
over the next few years due to the high stripping ratio and then reduce, compensating
for the increasing excavation cost and haulage costs with increasing depth.
38
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Lihir Gold Limited Scheme Booklet
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339
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LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
2.5 Metallurgy and Processing Operations
2.5.1 Process Description and Operating Philosophy
Ore is processed using conventional cyanide leaching technology at a rate of
approximately 3.5 Mtpa. The ore processing facilities include crushing, two stage
grinding, leaching and gold recovery circuits along with associated reagents and
tailings storage facility. Figure 2.5 shows a schematic drawing of the overall
process flowsheet.
Figure 2.5 Process Plant Flowsheet
ROM ore is direct truck dumped, or dumped via loader, into a primary gyratory
crusher. The primary crusher discharge is conveyed to a surge bin and bypass system
ahead of a secondary crusher. The proportion of ore fed to the secondary crusher is
used as a major control variable in maximising the grinding circuit throughput. The
secondary crusher discharge together with ore bypassing the secondary crusher is
conveyed to an open conical crushed ore stockpile.
The grinding circuit consists of a SAG mill and a pebble crusher followed by a ball
mill operating in closed circuit with classifying cyclones. Cyclone overflow slurry
passes over trash screens (600 micron deck aperture) with the coarse screen oversize
returning to the ball mill feed. A Knelson concentrator is installed to treat a
portion of the cyclone underflow. The Knelson concentrate is passed over a Gemini
table to produce a gravity concentrate which is then smelted.
The leach/adsorption circuit consists of one leach tank followed by five carbon
adsorption tanks. Oxygen is added to the leach tank. Typically one batch of carbon
per day is treated through an AARL stripping circuit to recover gold and silver to
the electrowinning circuit. The gold/silver sludge is recovered from the
electrowinning cell cathodes and smelted.
Slurry discharged from the leach/adsorption circuit is pumped to a tailings storage
facility. Water is recovered from the tailings dam together with supplementary fresh
water for use in the process plant.
39
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12 Independent technical specialist’s report continued
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340
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Reagents and consumables include steel grinding balls, lime, oxygen, sodium cyanide,
activated carbon, sodium hydroxide, hydrochloric acid, and liquid petroleum gas
(LPG).
2.5.2 Ore Characteristics
Volcanoclastic ore tends to be blockier and harder than dacite and blending is
performed when possible to reduce the variation in the ROM size distribution and ore
hardness presented to the primary crusher. The proportion of volcanoclastic ore in
the feed is expected to increase on completion of the present cut-back in
approximately two years time. Changes to the drill patterns and blast timing have
been tested in an effort to reduce the size distribution being fed to the primary
crusher, and hence improve throughput rates.
Andesite dilution in the feed tends to reduce slurry viscosity and presents
difficulty in maintaining good suspension of carbon in the adsorption tanks. Some
carbonaceous material can occur in the feed, though, given the consistency of the
final tailings grades, this does not appear to constitute a significant ‘preg
robbing’ component of the ore.
2.5.3 Ore Treatment Rate
A summary of data provided by LGL regarding the crushing plant is summarised in Table
2.6. Although average hourly crushing rates are consistently below budget, this has
been offset by higher plan utilisation.
Table 2.6 Crushing Plant Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Due to the interplay of a number of variables, which include ore lithologies, ore
hardness, ROM ore size distribution, crusher gap settings, and the proportion of
secondary crushed ore, AMC considers an average crushing rate of 500 tph to be
conservatively appropriate for future planning given the expectation of harder and
blockier ore as the pit becomes deeper. To achieve the planned throughput of 3.46
Mtpa a crushing plant utilisation of approximately 80% will be required. AMC believes
this is achievable.
A critical aspect of the crushing plant operation is the need to produce a size
distribution that optimises grinding circuit throughput. A summary of data provided
by LGL relating to the crushing circuit is shown in Table 2.6. Hourly throughput
rates have historically averaged below budget, resulting in reliance on higher than
budgeted availability to achieve budgeted annual throughput. The grinding circuit
typically produces a leach tank feed sizing of 60% passing 106 micron, with a top
size of 600 micron from the trash screen undersize. Historical grinding circuit data
is shown in Table 2.7.
Table 2.7 Grinding Circuit Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
The contracted site power demand is for 10,000 kW, though actual usage is
consistently higher. The power draw from the grid is constrained by both the incoming
supply and the capacity of the site incoming high voltage transformer. Although the
high voltage transformer is planned to be upgraded, there is presently no expectation
of Ergon Energy being able to increase site power supply above the present operating
demand.
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The operation of the crushing and grinding circuits presents an ongoing operational
challenge. Maximising grinding circuit throughput is based on optimising the
distribution of available power between the secondary crusher, SAG mill, pebble
crusher and the ball mill. LGL is implementing a number of upgrades and changes in
the plant to address these issues and the below-budget grinding rates, these are
discussed in Section 2.5.5.
The SAG mill shell has some cracks which are subject to ongoing condition monitoring.
It has been assumed that the integrity of the mill shell will be maintained for the
life of the operation. AMC consider the budgeted grinding circuit availability of 94%
to be achievable over this period.
2.5.4 Metal Recoveries
The LOM budgeted gold recovery is based on a recovery vs head grade relationship of
recovery % = 6.474 x head grade (g/t) + 81.831. Forecast gold recovery will therefore
vary with head grade. The long-term historical trend has been for a decrease in the
final tailings grade, with the December 2008 six month year to date average tailing
assay being 0.096 g/t. In AMC’s opinion the relationship used is reasonable for
long-term planning.
The LOM budgeted silver recovery is fixed at 56.2%, which is in line with current performance.
2.5.5 Additional Plant Capacity/Upgrades
There is essentially no additional plant capacity available due to the power supply constraints and
no external power supply upgrade is planned. The following changes are in progress or planned to
improve the efficient use of the available power and hence maintain or increase throughput:
|
•
|
|
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.
|
Although milling rates have increased to 427 tph in the first part of 2010, AMC
believes there is some risk that the planned milling rate increases in the LOMP will
not be achieved.
2.5.6 Metallurgical Test Work
Longer term ‘future ore’ testing is not currently performed and the assessment of
plant parameters has been wholly based on historical operating data and the
expectation of site personnel that the ore to be treated will increase in hardness at
depth.
Routine test work on pit and tailings samples is conducted on site. AMC has some
concerns regarding the level of confidence in pit sample test results.
2.6 Power, Water and Infrastructure
The mine has a contract for the supply of electricity with Ergon Energy which is
valid until 30 November 2010. There is an expectation that costs may increase
significantly when this is renewed. Power supply is at 66 kV from Gin Gin. The
transmission line to site has limited capacity and any upgrade would be very
expensive. The existing incoming site transformer is planned to be replaced, as noted
above.
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Water is sourced from the site weir (Perry weir), and from the Burnett River at
Paradise Dam. The water supply from the Burnett River is based on two contracts, a
base supply contract, and a priority contract if additional water is required. The
Perry weir overflowed recently, and when full, nominally has sufficient water for a
year. The mine is also considering piping water from a containment dam that captures
run-off from the site to the mine process water circuit to reduce the demand for
fresh water.
The main access road is prone to flooding during high rainfall events, but the
durations are quite short and have not caused serious disruptions to site operations.
In addition to the main access road, there is an emergency road, which is rarely
used.
Communications with the mine site is via a Telstra microwave link to Mt Perry, which
can be affected periodically by storm damage. There is no reliable mobile telephone
service on site.
2.7 Environmental, Health, Safety and Community Issues
2.7.1 Environmental
The climate of the region is subtropical, with a distinct dry season during the
winter months. Historical average rainfall for Mt Perry (16 km north-west of Mt
Rawdon) is approximately 955 mm. The area experienced a significant and prolonged
drought in recent years, which was broken in the 2009/2010 wet season, with all local
dams and weirs overflowing.
The open pit is dewatered as required, mainly after rain. Pit water is usually of
good quality and is pumped directly to the process circuit via the process water dam.
If necessary, this water can be pumped to the tailings dam instead.
Monitoring bores, which are below the north tailings dam wall, are dewatered back to
the tailings dam. There have been occasional exceedances measured at these bores.
Compliance is set out in the Environmental Authority (EA) issued by the Environmental
Protection Authority (EPA). The EA is updated as necessary on an ongoing basis and
sets out monitoring requirements and limits for such things as water quality, noise,
vibration dust etc. A total of 35 bores are monitored monthly, plus samples from
surface run-off and flowing streams, with samples analysed in an independent
laboratory. There have been occasional excursions above threshold levels in some
bores. An ongoing problem with high copper/zinc levels at bore 24 is being
investigated and this seems to be sourced from a natural mineralised zone adjacent to
the bore.
Prior to excavation, waste in the open pit is classified into acid waste categories
of non, medium and high, depending on its acid generating potential. High acid waste
is disposed of into the tailings dam, medium acid waste is encapsulated in the waste
rock dump, and non-acid producing waste is used to construct tailings dam walls and
to encapsulate medium acid producing material in the waste rock dump.
A mineralised waste stockpile containing approximately 5 Mt of low grade ore (cut-off
grade 0.4 g/t Au to 0.5 g/t Au) is stored on the western side of the waste rock dump.
This material is being stockpiled for possible future processing.
There is a small rubbish disposal landfill operated on the site, within the footprint of the waste
rock dump.
One tailings dam is operated at the site. All mineral processing wastes are stored in
the dam. The capacity of the dam is currently being increased to provide storage
capacity for 27 Mt of tailings. The dam will have a final footprint of approximately
175 ha.
Typically tailings enter the tailings dam at 120 ppm free cyanide and degrade to
approximately 30 ppm in the dam. There is a history of wildlife deaths associated
with the tailings dam, particularly birds.
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Air cannons have been used in the past to scare away birds with some success,
although it also resulted in complaints from a nearby landowner. Recent bird deaths
have led to the reintroduction of these hazing devices and they are working
effectively to minimize bird visitation. Inspections by mill and environmental staff
have also been increased. Thirteen of the 25 mortalities in 2009 occurred in January
before these measures were introduced and only three mortalities were recorded from
May to December. The process water dam was fully bird netted in April 2010. It is
possible that high cyanide level could become a significant issue and the only real
solution would be to introduce cyanide detoxification.
Order-of-magnitude capital and operating costs to retrofit a Vale Inco style sulphur
dioxide/air cyanide detoxification circuit to treat the process plant slurry tailings
have been estimated by AMC at A$3.0M and A$0.70/t respectively. No test work has been
performed to establish detoxification retention time requirements and air/reagent
consumptions.
A reduction in the detoxification circuit capital and operating cost may be achieved
if detoxification of a portion of the tailings supernatant water was undertaken. The
detoxified low weak acid dissociable cyanide solution could then be recycled back to
dilute the main body of the tailings supernatant pond to an appropriate level.
Detoxification of the tailings solution, compared to detoxifying the plant discharge
slurry would be expected to result in lower reagent consumptions, as no side
reactions with solids would occur.
The mine has an ongoing weed management plan (undocumented) regarding giant rats tail grass.
A draft closure plan has been submitted to the EPA and feedback indicates that the
EPA may require the mine to triple cap the tailings dam with clay (its default
requirement), which would be very expensive. The mine has developed a test cell
within the dam and filled it with tailings. Direct revegetation trails will commence
towards the end of 2010. The EPA has placed an assurance of A$9M for the triple layer
cap on the tails dam, but the mine considers that this cap is unlikely to be required
or effective, given the environmental conditions and the properties of the tailings.
Closure cost for the EPA requirement has been estimated by LGL at A$10.9M. A review
of the closure plan strategies and options is scheduled for late 2010.
2.7.2 Health and Safety
The mine has a comprehensive health and safety system which appears to be working
well, and in April 2010 achieved 12 months lost time injury free. The main mining
contractor Goldings has a fulltime safety officer on site. There is a strict drugs
and alcohol program, which includes regular and random testing. Annual hearing tests
are done for a proportion of the workforce (approximately 40 persons) and chest
X-Rays are done at commencement of employment, every five years and at termination.
Personal dust monitors are used and training has been conducted by SIMTARS. All LGL
employees have a senior first aid certificate that includes cardiac pulmonary
resuscitation training.
The higher than usual turnover in recent times has not resulted in a lower safety performance.
The local rural fire brigade and SES at Mt Perry are both comprised of mine workers.
2.7.3 Community
Since most of the local community benefits directly or indirectly from the mine,
there is reported to be strong general support for the continuing operation. An
annual open day, usually in April, is conducted to inform the community about ongoing
plans. LGL has worked with community and business leaders and Mt Perry Councillors to
investigate Sustainable Development options after mine closure. A consultant has
prepared a draft set of recommendations which will be reviewed in mid 2010.
2.8 AMC Modelling Scenarios
In its September 2009 LOMP LGL identified three business cases, identified as
Conservative, Target, and Optimistic cases. The basis for these three business cases
is summarised below. Each is based on the same mining schedule and current operating
performance and costs, except where noted. The major difference between the three
cases is the application of reconciliation factors to the block model. This changes
the tonnes and grade of ore mined and hence the processing schedule of each case. In
all cases, higher grade ore is preferentially treated until the end of mining in
2016. The key inputs to LGL’s three business cases are summarised as follows:
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–
|
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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.
|
|
|
–
|
|
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.
|
|
|
–
|
|
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.
|
Major items of capital expenditure in 2010, common to all of LGL’s cases, are the
replacement and upgrade of the Knelson Concentrator, upgrade of the mill discharge
and tailings pumps, and the main site transformer replacement.
AMC believes the plans derived in each case are reasonable, but has elected to
present only one modelling scenario to Grant Samuel for the following reasons:
|
•
|
|
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.
|
AMC has elected to use LGL’s Target case as the basis of its AMC Case 1 modelling
scenario. AMC considers this to be a realistic mid-range case, supported by detailed
mine plans, schedules and cost forecasts. A summary of this case is shown in Table
2.8.
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Independent Technical Specialist’s Report
Table 2.8 AMC Case 1 — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 made a number of changed to the Target case based on its review and updated advice from
LGL. The key changes are summarised below:
|
•
|
|
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 LGL’s 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.
|
2.9 Risks
Overall, the Mt Rawdon Gold Mine is a stable 100,000 oz per annum low cost gold
producer with positive community support and a generally low risk profile, but the
following risks are noted:
The main geological risks are associated with the volatility in grade. Positive grade
reconciliation appears to be dependent on mining activity in the vicinity of
fragmented dacite intrusives in the south-west corner of the pit. There appears to be
reasonable prospectivity in this part of the deposit and further drilling is planned
to delineate additional resources and extend the current pit limits.
The main ore processing risk results from the lack of quantification of ore hardness
as the pit develops, which limits the confidence in achieving the predicted grinding
circuit throughput, in particular, in several years time, following the cut-back.
If the planned milling rate is not achieved, the operation’s life will be extended.
If the milling rate in the long-term were say 400 tph, the rate achieved towards the
end of 2009, the life would be extended by one year. However, AMC does not believe
that this would have a significant impact on value.
AMC considers the most significant environmental risk to the operation would be the
potential for an incident such as a large cyanide spill.
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3
|
|
BONIKRO GOLD MINE (COTE D’IVOIRE)
|
3.1 Location and Background
Bonikro Gold Mine is located in the Côte d’Ivoire in West Africa. The project is
close to the regional centres of Hiré and Oume. It lies 7 km from the sealed road
which links the centres of Oume and Divo. This road in turn joins to the major
arterial road linking the country’s commercial capital Abidjan with the political
capital Yamassoukro. The mine site is approximately 240 km from the port and airport
at Abidjan and 70 km from Yamassoukro. (see Figure 3.1). The project comprises an
open pit mining operation with a conventional CIL gold recovery plant. Open pit
excavation commenced in mid 2008. A feasibility study has recently been completed on
the adjacent Hiré deposit.
Figure 3.1 Location Map
There was a state of civil conflict within the Côte d’Ivoire until the signing of an
agreement in 2007. This lead to the establishment of a “Zone of Confidence” which was
manned by the United Nations and French peace keepers and lay about 90 km to the
north of the Bonikro Gold Mine. The tensions between the north and south appear to
have eased and the UN is dismantling their observation posts within the Zone of
Confidence.
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Bonikro Gold Mine is 100% owned by LGL Mines CISA, which is a Côte d’Ivoire
registered company. The project was developed by Equigold NL and was brought into LGL
through the merger between LGL and Equigold NL in 2008. LGL currently owns 89.9% of
LGL Mines CISA.
3.2 Geology
Regionally, the Bonikro Gold Mine is located within the southern portion of the
Oume-Fetekro Greenstone Belt, itself part of the Proterozoic Birimian
volcano-sedimentary group (Figure 3.2). The Birimian is host to several substantial
regional gold deposits, mostly in neighbouring Ghana.
The Bonikro deposit itself is principally hosted by a granodiorite body which has
intruded an extensive sequence of greenschist facies metabasalts and metasediments.
Mineralisation occurs in several styles, notably shear-hosted within both the
metavolcanics/sediments and granodiorite, within stockworks confined to the
granodiorite, and in the surrounding host rocks as discrete, persistent, planar
lodes. Sericitic alteration is evident and gold is observed as both free form or
associated with sulphides in quartz veins.
The granodiorite strikes north-north west over a length of 700m, in an orientation
consistent with the regional structural fabric, although the bulk of the
mineralisation is restricted to the southern 400m. The inclination of the mineralised
body is defined by a plunge towards the south and a near-surface dip to the east,
which rolls towards the west at depth. Within the southern portion of the deposit,
the mineralisation is confined within a well-defined north-trending, east-dipping
(30°) shear zone. The highest gold grades tend to occur around the intersection of
the shear and the granodiorite.
Weathering has been interpreted as penetrating up to 60m below surface, but more
typically extends to 10m and 40m depth. The weathered zone is mostly heavily
oxidised, with only a relatively thin (2m to 15m) transition zone.
Figure 3.2 Geology of Côte d’Ivoire, Location of Bonikro Gold Mine and Exploration Tenements
47
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3.3 Mineral Resources and Ore Reserves
3.3.1 Mineral Resources
The Bonikro Gold Mine resource has been defined by over 300 drillholes on cross
sections at notional intervals of 25m, with inclined holes spaced 25m to 30m on
section. Shallow drilling into the oxide and upper parts of the primary zones has
been completed by RC methods, and the deeper holes have been drilled with RC
pre-collars (to around 100m) followed by diamond core tails (102 holes). Figure 3.3
shows an example of a drill section superimposed over the resource model.
For the Bonikro style of mineralisation AMC considers the drill spacing to be
sufficient for resource definition purposes.
The moderate east-dipping, planar, shear-hosted mineralised envelope has been
interpreted at a nominal 0.3 g/t sample cut-off grade to produce a closely confining
set of wireframe solids. The granodiorite stockwork does exhibit some clustering of
higher grades. Primarily on the basis of grade control data and structural
interpretation, a 0.9 g/t grade domain was interpreted to constrain the potential
smearing effect of higher grade mineralisation during grade estimation. The resource
remains open at depth and down plunge, although an identified cross structure may
limit potential to the south.
Bulk density information is derived from a data set of more than 2,400 measurements,
distributed across the deposit and reflecting different lithologies and weathering
horizons. Average density values, subset on rock type and weathering zone, have been
assigned to the corresponding areas within the resource model.
Figure 3.3 Drill and Model Section 688900N Showing Interim and Final Pits
AMC is of the opinion that appropriate estimation procedures have been applied to the
preparation of the Bonikro Gold Mine resource, reflecting due consideration for the
style of mineralisation.
The most recent resource estimate reported by LGL, within the context of the JORC
Code, is as at 31 March 2010. The resource estimate is presented in Table 3.1 and is
inclusive of ore reserves.
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Table 3.1 Mineral Resource Estimate (Bonikro Gold Mine) — March 2010
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
A revised geological block model was completed by LGL in December 2009.
Geostatistical grade estimation by uniform conditioning was completed by Tenzing Pty
Ltd, with the resulting model finalised in February 2010. This resource model forms
the basis for the pit optimisation and design work completed in April 2010.
Classification categories within the model were determined using a combination of
data proximity, and manually-determined limits, which reflect a range of factors
influencing confidence in the resource. No Measured Resources are declared in the
latest estimate reflecting experience gained since the commencement of mining and
processing. AMC considers the tonnes and grade assigned to the Indicated category to
be suitable for mine planning and evaluation.
In addition to the resources at Bonikro Gold Mine, LGL has published resources for
the Akissi So, Assondji So, Chappelle, Agbale, and Dougbafla East deposits, as shown
in Table 3.2.
Table 3.2 Mineral Resource Estimate (Other Deposits) — August 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
AMC is of the opinion that the mineral resource estimates prepared for the
Bonikro Gold Mine are reasonable and have been reported by LGL in accordance with the
requirements of the JORC Code.
3.3.2 Ore Reserves
The Bonikro Gold Mine Ore Reserve estimate has been reported by LGL as at 31 March
2010 and is presented in Table 3.3.
Table 3.3 Ore Reserve Estimate — March 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
The Reserves are based on gold price of US$900/oz, currently used by LGL for
long-term planning. The current pit outline is shown in Figure 3.4 along with the pit
optimisation shells generated for the various pushbacks. The pushback designs are
shown in Figure 3.5.
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Figure 3.4 Pit Optimisation Shells
Figure 3.5 Pushback Designs
The Ore Reserve has been estimated at a cut-off grade of 0.5 g/t Au and has been
depleted using a pit survey at the end of March 2010. It is envisaged that the high
grade portion will be milled as it is mined and the low grade portion will be
stockpiled for treatment after the mining operation has ceased. The pit has a planned
strip ratio of 3.5:1 (t:t).
In addition to the mining inventory, which has been derived from Measured and
Indicated Resources within the pit, 165 kt of Inferred Resources are also contained
within the pit outline, and 280 kt of mineralised waste (0.4 g/t Au to 0.6 g/t Au)
has been stockpiled providing some potential upside to the mining inventory.
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3.3.3 Grade Control and Resource Reconciliation
Grade control is conducted within a mining regime of 5m benches and 2.5m lifts.
Production material is classified as low grade (0.5 g/t Au to 0.9 g/t Au), for
stockpiling or high grade (above 0.9 g/t Au) for ROM. The grade control process has
been the subject of several reviews and trials in order to determine the most
appropriate method.
In the oxide zone grade control sampling has utilised DitchWitch trenches at 7.5m
trench spacing and 1m sample intervals. The trenches penetrate to approximately 0.9m
depth, and a polygonal estimation method is used to estimate the mineable blocks.
Angled RC drilling on a 10m by 5m pattern has been employed in fresh rock, with holes
alternately penetrating 10m and 20m vertical slices, and sampled on 1m intervals. The
raw samples are used to design ore blocks as a basis for dig plans. Since September
2009, RC drilling within parts of the interim pit has been used to construct an
ordinary kriging-estimated grade control model.
Trial blast-hole grade control started in September 2009 within areas where RC grade
control had been completed, and in January 2010 new grade control procedures were
implemented in conjunction with a move towards reduced selectivity of mining.
Currently blast-hole grade control sampling is used exclusively in the primary rock
material, during which a single sample is collected over the 5m bench, and grade
control model grades are estimated by ordinary kriging. The grade control process has
had to contend with a number of issues, including sample recovery in wet areas, QA/QC
matters associated with the laboratory, and the allocation of densities to stockpile
tonnes.
Reconciliation figures up to September 2009 returned lower tonnages and higher grades
of high grade material and increased tonnes and grade for low grade material. Recent
monthly reports show reconciliation trends of increased tonnes and reduced grades
both from the resource model to grade control and from grade control to production.
AMC is of the opinion that grade control practices are not yet fully mature, and that
along with improvements in mining processes, will require further refinement in order
to minimise reconciliation discrepancies.
3.4 Mining Operations
3.4.1 Mine Design and Geotechnical Aspects
The pit designs are based on the geotechnical studies carried out by AMC and by
in-house expertise, using information from:
|
•
|
|
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.
|
A slope design report was completed during the later part of 2009 (reported in
2010
3
). Table 3.4 shows the pit slope parameters for slope design at the
Bonikro Gold Mine.
|
|
|
|
|
3
|
|
AMC 2010 Bonikro Gold Project Rockmass Characterisation and Slope
Parameter Assessment. Unpublished AMC Consultants Ltd report to Lihir Gold Limited,
409015/509105 March.
|
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Table 3.4 Design Parameters for Detailed Design
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
The pit is still relatively shallow and hence there is limited experience relating to the likely
long-term stability of the pit walls. There have been some failures of the slope in weathered
material, particularly in the south and west. Two types of failure have occurred:
|
•
|
|
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.
|
A summary of the main geotechnical and hydrogeological issues affecting the Bonikro
Gold Mine was undertaken in September 2009
4
, the final report of which was
issued in January 2010.
LGL is continuing to review geotechnical aspects of the Bonikro Gold Mine in the
context of increasing mining experience and pit slope exposures. This is also
improving the understanding of the structures and hydrogeological regime.
3.4.2 Drill and Blast
To date, the majority of the pit has been excavated as free dig. The need for
blasting has been limited to the northern end of the pit where the depth of
weathering is significantly shallower. The drill and blast designs are prepared by
LGL staff. Supply and charging of explosives is carried out by a contractor. Blast
movement is monitored using blast markers. Information gained from monitoring is
subsequently used for planning of future blasts.
Drilling is carried out by a mix of contractor and LGL drill rigs. Blasting emulsion
is imported from Ghana and stored on site until required by the mining operation.
3.4.3 Load and Haul
Load and haul operations are carried out using mine labour and equipment, with
limited support from a small local contractor. The open pit operation commenced with
three second hand Caterpillar 777D trucks, loaded by Terex RH70 excavators. The
productivity of the RH70 excavators was deemed to be too low, and these were replaced
by the larger RH90 model.
The haul fleet was increased by the addition of four new Caterpillar 777F trucks. An
additional four Caterpillar 777F trucks were delivered to site early in 2009. The
mine has an ancillary fleet that includes a grader and two bulldozers.
|
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|
4
|
|
AMC 2010 Geotechnical and Hydrogeological Site Visit Report September
2009, Equigold Mines Côte D’Ivoire SA, Unpublished AMC Consultants Ltd report
to Lihir Gold Limited, 409020 January 2010.
|
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Ore is trucked from the pit to either the ROM pad or to stockpiles. The ROM ore can
be directly tipped to the crusher or, more usually, stockpiled on the ROM pad for
blending into the crusher with a front end loader.
The mine has experienced very wet conditions, and in the weathered horizons it was
necessary to tow trucks through wet material. To provide a trafficable surface, the
mine is harvesting laterite from alongside the pit for use as sheeting material.
Every attempt is made to recover this laterite for reuse. The pit is now in
predominately fresh material, and so trafficability has improved since commencement.
Three dewatering bores have recently been established along the main mineralising
shear to draw the water table down ahead of mining. A program of monitoring bores is
planned with the holes sited to allow monitoring of the water table in the pit area,
as well as targeting structures that may contain or transmit water.
Between the start of mining and 31 December 2008, a total of approximately 10
Mm
3
of ore and waste had been removed from the pit. The mining rate is
ramping up as more equipment is brought on line and operator training progresses. The
total monthly material movement in November and December 2009 was approximately
580,000 cubic metres.
3.4.4 Life of Mine Plan
LGL have a LOM schedule based on Bonikro Gold Mine’s Strategic Business Plan. The
schedule assumes that high grade ore (above 0.9 g/t Au) is preferentially treated and
the low grade ore (0.5 g/t Au to 0.9 g/t Au) is stockpiled. After the completion of
mining in 2020, the stockpiles are treated until late 2021. The milled head grade and
ore tonnages are shown in Figure 3.6.
Figure 3.6 Production Schedule
3.5 Metallurgy and Processing Operations
3.5.1 Process Description
Ore from stockpiles is reclaimed using front-end loaders and fed to the processing
plant via a primary gyratory crusher. This crusher, a 225 kW Nordberg 42/70, was
acquired second-hand by the mine’s previous owners, Equigold NL, from an operation in
Western Australia and was considered to be adequate to reduce the ROM feed to
approximately 125 mm. Operational experience subsequent to mine commissioning has
highlighted that this crusher may be both underpowered and undersized (i.e. incapable
of supporting a higher powered motor). This has a bearing on the future productivity
of the mine and represents a significant production risk for the next 18 to 24
months.
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Crushed ore is transferred to a 150t bin and returns to a double-deck screen, the
bottom aperture of which is set to 40 mm. Material passing this size is fed directly
to the single grinding mill; oversize is transferred to a 320 kW Hydrocone crusher
for further reduction. The screen and secondary crusher have not yet been
commissioned as the softer oxide ore is capable of being bypassed directly to the
mill.
Ore at minus 40 mm is stockpiled near to the mill and reclaimed at the rate of 230
tph to 280 tph. The mill is an Outotec 5.5m x 9.0m SAG unit operating at 75% of
critical speed and carrying a 20% to 25% steel charge comprising 125 mm diameter
balls. The installed power is 4.5 MW with a typical draw range of 4.1 MW to 4.3 MW on
ore blends containing up to 80% felsic (hard) rock. The mill is steel-lined and
discharges onto a 12 mm screen. The “scats” oversize, comprising rock and steel ball
fragments, is delivered to a cone crusher in open circuit with the mill feed
conveyor.
The required grind for gold liberation, commensurate with the 94% recovery target, is
80% passing 125 m. Slurry, containing minus 12 mm particles, is pumped from the mill
discharge screen underpan to a set of cyclones, from which oversize is returned by
gravity to the mill. The cyclone overflow reports to a biased distribution box, from
which the coarsest fraction is fed to a Falcon gravity concentrator before returning
to the mill. The cyclone overflow proceeds via trash screens to the leach tanks where
it is contacted with cyanide and oxygen for gold dissolution and subsequent
adsorption onto activated carbon which is present in the slurry. The coarse gold
concentrate recovered by the Falcon unit is stored at the gold room for subsequent
high-intensity cyanidation in a “Gekko” reactor.
Loaded carbon is screened from the leach slurry and presented for stripping in an
elution column. Using the AARL elution process, up to 4t of loaded carbon can be
stripped on a daily basis in a cylindrical elution column. Gold is removed from the
carbon using a hot solution containing caustic soda and cyanide. This pregnant
solution is retained for subsequent gold recovery by electrowinning, whilst the
stripped carbon is returned into the leach process.
Electrowinning takes place in the secure gold room where pregnant solution is
circulated through two cells comprising steel wool cathodes. Gold is deposited onto
these cathodes and at the end of the process, as indicated by a barren pregnant
solution containing less than 100 ppm gold, the cathodes are removed and oxidised
overnight in a calcine oven.
The cooled calcine, comprising mainly gold and iron oxides, is combined with the
required amounts of borax and silica sand and introduced to a small LPG-fired furnace
for approximately three hours. Here the contaminating metals enter the slag phase
whereas the gold, silver and minor amounts of copper remain in metal phase and sink
to the base of the refractory vessel. Upon tilting, the molten mass is poured over a
series of cascades where the valuable metals settle and solidify in bar moulds.
Pregnant solution from the “Gekko” reactor is introduced to a separate electrowinning
cell from which the gold is recovered in the same way as described above. This is
done separately to facilitate metallurgical accounting.
Gold doré bars are cooled, weighed and stamped before being secured in the vault
located within the gold room. Product export is achieved by helicopter to an
international airport.
3.5.2 Process Operation
The rapid ramp-up achieved since commissioning in mid-2008 has been facilitated by
the availability of high grade oxide ores which overlie the dominant felsic (and to
some extent, mafic) ore types. This removed the need to commission the secondary
crushing and screening circuit until the second half of 2009, and had reduced the
demands on the primary crusher. Clearly, as the year progressed and the percentage of
harder ore in the ROM feed increased, certain weaknesses inherent within the process
design were exposed and plant throughput was reduced, as shown in Figure 3.7.
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Figure 3.7 Budget and Actual Production February 2009 to March 2010
Figure 3.7, shows the actual and budgeted milled tonnages during the period February
2009 to March 2010, using data obtained from the mine’s monthly reports. The trends
highlight the sensitivity of milled tonnage to ore blend as demonstrated by the
operational difficulties experienced during June-October 2009. The graph also shows
the success which plant personnel have achieved with remedial initiatives such as
upgrading the mill discharge pumps and adding a graded ball charge to the mill. The
consequences of feeding a 100% hard ore to the mill cannot be predicted from this
data with a high degree of accuracy, however it has been reported that further
initiatives, such as the reduction in mill feed size, are under trial.
Whilst improvements have been made to the performance of the primary crusher by
increasing the motor size and feeding at a constant rate from a feeder (as opposed to
single 85t discharges from the haul trucks), the crusher still remains an area of
concern. It was reported that the crusher power was increased to 300 kW, but despite
a decrease in speed to limit torque, operation of the crusher caused the steel
structure to become unstable. It was reported that the original 215 kW motor has been
put back until the structure is stiffened in key places.
LGL envisage that the crusher should be capable of the required duty once the
structure is stiffened and the higher-powered motor is reinstalled. Whilst this
option merits investigation, AMC believe that there is a risk that this approach
could cause damage to the spider/top shell interface which would necessitate major
repairs or even crusher replacement.
Figure 3.8, shows gold recovery values (actual versus budget) for the period February
2009 to March. The budget was predicated on increasing recovery to 93% by April 2009,
and then to 95% in January 2010. The initial target was surpassed throughout all of
2009, however a downward trend emerged in mid-2009 which has continued into 2010
(refer dotted trend line). AMC believe that the downward trend in recovery may be
related to the gold liberation characteristics of the harder ore now being treated
and that the current grind size may not be adequate.
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Figure 3.8 Gold Recovery February 2009 to March 2010
The present elution system appears to be operating well and gold inventories within
the leach train are much reduced from 2008 levels. No problems with the
electrowinning, calcining and smelting systems have been reported by LGL.
3.6 Waste Dump and Tailings
3.6.1 Waste Rock
Mining operations to date have generated 280,000t of sub-economic mineralised waste
which is stored to the south of the pit area. Other waste rock mined during pit
establishment has been used in the construction of the tailings dam. Waste generated
by further widening of the pit will continue to be utilised in this way.
The main waste dump design was being finalised at the time of the site visit. The
intention is to develop a design as part of the closure plan that will not block any
water courses.
3.6.2 Tailings Dam
Barren tailings residues from the leach process are pumped a distance of
approximately 1.5 km from the plant area at the rate of 250 tph to 300 tph, at a
concentration of 40% to 50% solids by mass. Tailings are currently deposited by
spigotting from various locations across the wall.
The tailings dam was created by constructing walls across the north and south ends of
a valley which lies to the east of the mine site. The village of Bandamakro is
situated on the far side of the valley; however as the dam wall is raised to a final
height, the agreement with the villagers is to complete a resettlement program by
mid-2010.
The dam was designed for an ultimate capacity of 12.25 Mm
3
which would
cover an area of 100 ha at completion. This was considered adequate for the current
LOM, however should the mine life be extended by further reserves, then a second
valley exists approximately 500m further east of Bandamakro and could be reached by
simply extending the current tailings pipeline and installing booster pumps. A recent
study has concluded that the preferred option is to further raise the existing
facility and build walls at low valley points. This was selected in preference to
utilising the second valley which would have a negative impact on the availability of
agricultural land and could necessitate extensive financial compensation.
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The dam starter wall at the north end was originally constructed to a height of 12m
and comprises an excavated keyway which has been filed with compacted clay materials.
Dam design was conducted by external parties and is inspected annually to ANCOLD
requirements.
Owing to the natural impoundment of the tailings by the valley walls, operation of
the tailings dam should be relatively simple provided that the recommended freeboard
between the rock walls and liquid surface is maintained, seepage is monitored, and
the wall structure is free from erosion.
Whilst free-standing tailings dams require the pond area to be carefully controlled,
the tailings dam at the Bonikro Gold Mine acts as a convenient water storage facility
and is safe in this regard, provided the correct freeboard is maintained. This
provides ample opportunity for ultra-fines to settle and ensures that the return
water is relatively low in turbidity. A quiescent zone for water return has been
created at the south side using waste rock. The suction mouth of the mill return
water pump (single stage) is inserted into this zone, which ensures that settled
slimes are not returned to the plant.
Rehabilitation of the tailings dam at the end of the operation should comprise
drainage followed by a topsoil coverage and subsequent establishment for agricultural
or forestry activity. The final design and rehabilitation options will be developed
as part of a closure planning review to be carried out by LGL in late 2010.
3.7 Infrastructure and Power
3.7.1 Mine Site
No significant infrastructure existed at the mine site prior to its development by
LGL Mines CISA. The process plant is situated some 700m to the north of the open pit
on a suitably flat surface which is underlain by competent rock foundations. This
proximity to the pit is adequate to minimise haul distances and prevent fly-rock from
the blasts reaching the plant structures.
A 2m high perimeter fence surrounds the plant area which also surrounds the general
mine buildings, laboratory and workshops. The fence is constructed of steel diamond
mesh and has two strands of barbed wire at the highest level. An outer ring of razor
wire, laid in a six-coil pyramid, is provided for additional security. Vehicle
entrance to the site is via a manned gate, whilst personnel enter through a
turnstile. Searches of vehicles and bags are conducted upon exit.
The buildings within the plant area include a sizeable administration unit housing
the general manager, his management team and key supervisory and administrative
staff. The building is air-conditioned and is equipped with communications and fire
systems.
The laboratory building covers an area of approximately 350 m
2
and house
the sample preparation, digestion/leaching and lunch room facilities. As with the
administration building, construction is of breezeblock with timber trusses and a
steel roof.
The main motor control centre building is located behind the laboratory and occupies
a floor space of approximately 200 m
2
. The construction is similar to the
others, and has a timber board ceiling which has been fire retardant-treated. Smoke
detectors and alarms are also installed.
The plant workshop is constructed from steel members and steel sheeting.
Plant personnel offices are located at the south end of the plant area. These
comprise open plan offices and a small kitchen/tearoom area.
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3.7.2 Water Supply
The total annual volume of water required by the mine is in the region of 4.6 Mm
3
.
Hydrogeological work conducted at the feasibility stage identified a suite of water supply
alternatives. Three areas of potential supply were identified as follows:
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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.
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•
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Use of groundwater accessed via boreholes in the vicinity of the pit and mine site access road.
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A pipeline from the Bandama River whose nearest bank is 16 km from the mine site.
|
Prior to mine start-up it was believed that the initially high water requirements
could be satisfied by the combination of rainfall catchment in the tailings dam,
process water return, and mine area boreholes. Water returned to the mill as a
percentage of that which is returned with tailings was expected to be 50%. AMC
confirms that this value is being met. The current usage by the operation is
approximately 2.1 kL/tonne milled. This is higher than the world average of 1.15
kL/tonne
5
and it is therefore expected that there is scope for the
specific water consumption to reduce over time.
Given that the findings of the early work appear to be confirmed in practice and that
a viable alternative supply (Bandama River) is within a reasonable distance, the
supply of water does not appear to pose any undue risk to the operation at current
production levels.
3.7.3 Power
Electrical power is drawn from the country’s national grid system which is supplied
from hydro-electric and gas sources operated by
Compagnie Ivoirienne d’Electricite
(CIE). This company is a privately-owned subsidiary of France’s
Bouygues Group
and
has been contracted by the Ivorian Government to operate the country’s supply
network.
Demand for electrical power in Côte d’Ivoire is reported to be growing at the rate of
6% to 7% per annum
6
and CIE is managing several projects in order to meet
these needs and maintain the export of power to surrounding countries like Burkino
Faso and Mali.
The mine is supplied at 33 kV via a 15 km connection, which runs from a new
substation located near the town of Hiré on the 90 kV Taabo to Divo powerline. This
new connection required a small sending-end, sub-station complete with 13 MVA, 33 kV
transformer and circuit breakers. The 33 kV supply is metered at the plant
sub-station which is regarded as the point of supply for the operation. A 6.6 kV line
has been extended from this sub-station to the new Bonikro village, however no other
regional electrification can take place for the first five years without the mine’s
permission. After this time, ownership of the connection reverts to the State. A
concession was made to the relocated Bandamakro village in 2010 to connect each new
home with electric lighting and one 220 V power socket.
The sub-station was visited and found to be in good order. The incoming supply
frequency appeared to be steady at 50 Hz and the power factor was very good (0.99)
due to the correction equipment, which is installed locally on the mill motor, the
crushers and the wet circuits. There are occasional power outages, however these are
usually of a short duration and do not materially affect production.
Two 0.8 MW, second-hand Cummins generators are in situ adjacent to the switch room to
provide a back-up supply to critical equipment in the event of a prolonged power
outage. These have been test-run but are not yet synchronised.
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5
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GM Mudd “Resource Consumption Intensity and the Sustainability of
Gold Mining”, Second. Int. Conf. on Sustainability Eng. & Science, February
2007.
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6
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CIE website.
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The power draw at present levels of production is approximately 6 MW and it appears
that the current electrical infrastructure (13 MVA) is capable of supplying the mine
in an expanded/upgraded situation, should this be feasible.
3.8 Labour
There is a very limited mining inventory in Côte d’Ivoire. As a result, the operation
has a significant training component commensurate to the need to develop the required
skills in a workforce new to mining.
Labour is recruited from the local community wherever possible. Aptitude testing is
carried out to identify suitable candidates. There is intent to train local people
for technical and managerial roles. In the interim there is a need for expatriates to
fill these roles and to train Ivoirians. There are a number of technical and
managerial vacancies at the moment. The need to recruit and retain suitable
expatriates is seen by LGL as a priority for the Bonikro Gold Mine.
LGL are in discussions with the Caterpillar supplier regarding a contract for the
supply of maintenance systems and training for the LGL staff. This arrangement would
relieve some of the recruitment pressure in the area of maintenance planning and the
maintenance of the mobile fleet.
LGL have established a good health and safety culture in the operations and this is
borne out by the falling lost time injury rate since the commencement of operations.
3.9 Environmental and Community Issues
3.9.1 Regulatory Background
An Environmental Impact Assessment (EIA) was initiated in mid 2004 and submitted to
the National Environmental Protection Agency the following year. The work was
conducted primarily by SGS Environment (a division of SGS Laboratory Services Ghana)
whose team was augmented by local consultants and experts as required. A
comprehensive baseline study was conducted to assess both the environmental and
socio-economic characteristics of the area surrounding the proposed operation. The
environment baseline study included all relevant aspects e.g. atmospheric, aquatic,
biological and land usage.
Following the review process, which included public hearings, the permit was
provisionally granted in late 2005 and finalised in mid 2006. This permit is valid
for the LOM described in the application (8 years). A summary was included in the
feasibility study, issued May 2006, which described the main environmental issues,
their likely impacts and the mitigation measures which were to be taken during
execution of the EMMP. In addition to the environmental mitigation measures required
by the EIA, the legislative framework also requires a detailed, budgeted
environmental management programme and a rehabilitation plan for mine closure.
3.9.2 Impact Assessment
The principal environmental impacts identified by the study and their proposed
methods for mitigation are summarised below:
Dust emissions
— dust will be generated
from drilling/blasting/loading operations within the open pit, from vehicle activity
and from rock crushing within the plant. Whilst the nearest sensitive receptors were
considered too far away for there to be a significant impact, the EIA recommended
precautions including the use of low-blast explosives, in-plant dust extraction,
speed limitations on roads and road watering. No dust emission standards have yet
been introduced into Côte d’Ivoire legislation, therefore LGL has adopted World Bank
and World Health Organisation standards where appropriate. This also applies to water
quality standards.
Gaseous emissions
— other than vehicle exhaust and the carbon regeneration kiln, no
significant gaseous emissions emanate from the operation. No mitigation measures were
required.
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Noise and vibration
— noise levels at the sensitive receptors were anticipated
to be low with the exception of the mine blasts which are infrequent and of
short duration. These were considered more likely to cause surprise/fright which
could be mitigated through regular scheduling of blasting operations and
education and reassurance to the host communities.
Surface water
— contamination of surface water is probably the biggest risk to a
gold mining operation using cyanide and other hazardous chemicals. The EIA
concluded that the likelihood of water contamination was low because of (i) the
low incidence of sulphides in the ore, hence a minimal chance of acid drainage
and (ii) the recycling of water recovered from the tailings dam to the mill.
In addition to the monitoring of discharges from the operation and the
construction of civil works to intercept any spillages or run-off, it was
recommended that new boreholes and hand-pumps be provided to each of the
surrounding host communities to obviate any dependence on surface water
resources.
Ground water
— as hydrogeological work had indicated that surface run-off and
tailings dam return water would be sufficient to supply the process plant, the
dependence on ground water resources was regarded as low. Notwithstanding this,
several bores were drilled and equipped as a stand-by water source. It was
anticipated that pit dewatering would draw down the water table in the region of
the mine site, however owing to its fractured nature it was predicted that these
effects would remain only local. It was further recommended that observation
boreholes with piezometers be installed downstream of the tailings dam walls.
Ecology
— the area occupied by the mine site was considered to be characteristic
of the general region and, as such, no particularly sensitive vegetation or
unique habitats were identified. Measures such as topsoil conservation and the
prohibition of hunting in the mine site were proposed.
Soil erosion
— civil engineering measures to control rainfall run-off in the mine site
area were proposed.
Loss of smallholding
— it was proposed that a survey of agricultural holdings in
the mine site area be conducted and financial compensation given to farmers in
accordance with national guidelines. This is equivalent to approximately 10
years’ crop yield plus the nominal land value.
3.9.3 Compliance
The EMMP has been completed and sets out the monitoring programme for each of
the environmental aspects identified by the impact assessment. This initiative
was led by a senior company representative based in Abidjan who had also been
responsible for coordinating the EIA, having been recruited from SGS (Ghana) by
LGL Mines CISA during the past two years.
LGL has a Group-wide programme to monitor the impacts of the mine on terrestrial
and marine (where appropriate) environments and publishes a report on an annual
basis. LGL has developed four catagories of Environmental incident and requires
that each operation reports against these on a monthly basis. These categories
are defined as follows:
Category I: Procedural non-compliance with no environmental impact; technical
divergence from strict operating conditions; e.g. contained spill, late
submission of report.
Category II: Incidents with low potential for impact on the environment e.g.
multiple Category I incidents, minor hydrocarbon or chemical spill.
Category III: Incidents with the potential for moderate environmental impact
e.g. multiple Category II incidents, a large hydrocarbon spill that cannot be
immediately recovered.
Category IV: Incidents that have, or potentially have, high environmental impact
e.g. multiple Category III incidents, an uncontrolled spill from the mine or
process plant that has, or potentially could destroy flora and/or fauna.
AMC has studied the mine’s monthly reports for the period January 2009 to March
2010 and note that incidents are being reported each month in accordance with
the above categorisation.
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During 2009, there were 16 Category I incidents and six Category II incidents.
The majority of these incidents were caused by minor water, tailings and
hydrocarbon spillages. Mitigation measures to prevent a recurrence of these
incidents were discussed within the monthly reports.
By the end of March 2010, there were 10 Category I incidents and one Category II
incident reported for the year. As with 2009, these were related to minor
spillages of oil and water.
No incidents were reported in the more serious Categories III and IV.
Whilst internal auditing and reporting of environmental incidents appears to be
in place and functioning well, no formal external audits of the mine site’s
compliance with the terms of the environmental permit have yet been conducted.
In AMCs opinion an external audit of the mine’s social impact would be
appropriate.
3.9.4 Social Responsibility
The feasibility study conducted for the Bonikro Gold Mine correctly anticipated
the key areas where the local host communities would be affected, both
positively and negatively, by the proposed mining operation. The stated
intention of LGL was to ensure that the positive impacts greatly outweighed the
negative ones. The principal positive impacts identified by the study, and in
discussion with local stakeholders, were as follows:
Governmental benefits
— the Government is entitled to a free carry stake in the
Company as well as the collection of taxes on profit (after five years),
withholding taxes, income taxes and import duties.
Employment
— it was originally estimated that approximately 100 jobs would be
created in the local area with the likelihood of as many as 300 to 600 indirect
beneficiaries in the surrounding villages supplying support services such as
transport, food, informal retailing etc. Skills acquisition would be a factor
with both direct and indirect training taking place in the workplace and through
proposed apprenticeship schemes. LGL has been careful to ensure that the
selection of workers from the host communities has not been skewed towards any
particular village, but has tried to spread this amongst the five principal
villages.
Infrastructure
— positive benefits will be gained through the establishment of a
local electrical supply and its eventual connection to the local villages. The
relocation of Bonikro village, which was planned and conducted in collaboration
with the residents, appears to have been a complete success. The village
infrastructure has benefited by the supply of electrical power, running water, a
school, sports field, place of worship and community centre. A development fund
has been established for
ad hoc
community support projects.
The potential negative impacts on the host communities were identified as follows:
Access
— during development of the operation, certain areas would have to be
fenced off and access controlled e.g. mine, plant, tailings dam. These may
impact on the routes of traditional paths and tracks and would have to be
replaced and rerouted in collaboration with the stakeholders.
Relocation of villages and graves
— Bonikro village was earmarked for relocation
at the time of mine construction. The Bandamakro village situated to the east of
the tailings dam was to be relocated during 2009/2010. Although this was
originally cited as a negative impact, the success of Bonikro’s relocation
spread to the general area and had a favourable impact on negotiations for the
Bandamakro village move. LGL recognised that certain rituals have to be
conducted by the host communities during the relocation of graves and supports
them materially where possible.
Nuisance
value
— noise, fugitive dust and light pollution are minimised through
adherence to the EMMP and the location of the villages at least some 1 km from
the mine site.
Loss of agricultural land
— compensation for agricultural lands and crops lost
during mine development is conducted in keeping with national guidelines and in
collaboration with the stakeholders.
LGL is well aware of the importance of good community relations and strives to
maintain this through close dialogue with the stakeholders and the generation of
a “community development master plan”. LGL favours a participatory approach and
has correctly recognised that the community must also play a role in generating
ideas and implementing solutions.
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Typically, the greatest expectation in a rural area is one of employment. This
generally takes precedence over the other areas of social development, which
include capacity building, training, infrastructure development, and
cultural/sports activities. As many as 354 Ivorian jobs have been created in an
area containing approximately 3,000 inhabitants, and many more inhabitants
benefit indirectly through the provision of support services. LGL has recognised
this as an area where further development can take place and is considering what
type of wealth-creation projects are achievable. Although there are numerous
non-government organisations available with whom a project partnership can be
forged, it is advised that a separate, not-for-profit Bonikro Development
Association be formed whose board members will include both LGL and community
representatives. This will be more attractive than a non-government
organisation.
Senior members of mine management regularly visit the local communities and have
dialogue with the village elders. Clearly this often leads to a list of wishes
and needs, however, LGL has correctly recognised the importance of not
over-promising, but at the same time, delivering on the promises which are made.
Local community issues are reported on a monthly basis in a similar manner to
the reporting of environmental incidents. AMC has reviewed these reports and
notes that there is a significant dialogue with the local community on a wide
range of issues. Matters regarding dust, water run-off and the establishment of
haul roads and fence placements appear to be the most common causes for
complaint. These are generally followed-up and rectified within 24h to 48h of
occurrence.
Perhaps of greater concern are the reports of barricading roads, thefts and acts
of sabotage by local youths during a period of unrest in March/April 2009. It
was subsequently reported that the mine invited a group of 50 youths to the
operation during May 2009, during which time the various grievances were
resolved. It is expected that as the mine consolidates its presence in the area
and job-creation initiatives come to fruition, the likelihood of unrest
incidents will diminish.
A brief demonstration took place in November 2009 as the Bandamakro residents
demanded electrification of their new, relocated village. This was subsequently
conceded by mine management, however, house owners are to be responsible for
their usage bills. The village will be completed and handed over on 20 June
2010.
It was also reported that a livelihood study was being conducted in the Hiré and
Oume towns by sociologists. It is good practice to establish a livelihood
baseline for later reference. As with the environmental compliance issue, an
external audit of the mine’s social impact would be useful.
Provided that mine management continue to follow their stated policies towards
community relations, no undue risk should arise from this area.
3.10 Hiré Feasibility Study
LGL is evaluating the option of developing, by open pit, various satellite
deposits within reasonable distances to the existing Bonikro Gold Mine recovery
plant (<15 km). LGL has embarked on a feasibility study of the Hiré deposits,
for which an interim report was completed in December 2009.
The project is located adjacent to Hiré township (population ~36,000), and some
of the ore bodies strike from outside the residential area on the western side,
into and under the town. Consequently resource exploitation will require
mitigation procedures to minimise social and environmental impacts. Potential
impacts include direct encroachment of the operations into residential and
horticultural areas, blasting and flyrock risks, noise, vibration and dust
effects, and severing of community roads and pathways.
All mineralisation comprising the currently defined resources is controlled by
a number of northeast-trending, steeply-dipping shear zones containing
siliceous lodes or quartz veining, within a relatively undeformed granodiorite.
The bodies have variable true thicknesses, ranging from less than 1m to more
than 15m.
A resource drilling programme has identified a suite of Inferred and Indicated
Resources, from which a mining inventory for the four most significant
deposits, shown in Table 3.5, have been derived.
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Table
3.5 Hiré Feasibility Study Mining Inventory
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Mining Inventory
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Waste
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Gold Grade
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Contained Gold
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Deposit
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(Mt)
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(Mbcm)
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(g/t)
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(koz)
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Akissi So
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2.99
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22.5
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3.51
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338
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Chappelle
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1.61
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14.89
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3.15
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|
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163
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Assondji So
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0.81
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7.11
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3.35
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88
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Agbalé
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|
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0.32
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3.17
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2.91
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30
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Total
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5.74
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47.71
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3.35
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619
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|
The mining inventory was determined through pit optimisation applied to both
Indicated and Inferred mineralisation. The optimisation accounted for mining
losses, dilution, pit slope angles, revenue, and cost parameters, followed by
pit design evaluation.
Metallurgical testwork has been conducted, using drill core, for analysis and
generation of comminution options. The results were generally very similar to
those for the Bonikro Gold Mine. No results from the leaching, gravity
recoverable gold or rheological analyses were available at the time of AMC’s
review.
Amalgamation of the Hiré mining inventory with the current Bonikro Gold Mine
mining inventory formed the basis for scenario building within the Hiré
feasibility study. The production scenarios for the Bonikro and Hiré mines are
shown in Table 3.6.
Table 3.6 Hiré Feasibility Study Production Scenarios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Two milling rate options, 2.0 Mtpa and 3.5 Mtpa, were evaluated for each of
the four scenarios (excluding the 3.5 Mtpa option for the first scenario). The
resulting seven cases were modelled to determine an incremental NPV. The two
cases which yielded the highest incremental NPV’s were based on the last
scenario (Bonikro 1, 2, Deeps and Hiré).
LGL subsequently concluded that expansion of the Bonikro Gold Mine plant to 3.5
Mtpa is justified, and commissioned development of a flowsheet and capital
estimate for the expanded plant. The capital estimate includes provision for a
new primary crusher.
Infrastructure considerations highlight the following issues:
|
•
|
|
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.
|
3.11 AMC Modelling Scenarios
AMC has developed two production scenarios for the Bonikro Gold Mine, AMC Case 1
and AMC Case 2. The cases are summarised in Table 3.7 to 3.8.
63
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
364
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
3.11.1 AMC Case l
AMC Case 1 has been based on a Target case prepared by LGL. It consumes the
current Bonikro Gold Mine Ore Reserve and includes the following additions to the
mining inventory:
|
|
|
|
|
|
|
•
|
|
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.
|
A summary of AMC Case 1 is shown in Table 3.7.
Table 3.7 AMC Case 1 — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.11.2 AMC Case 2
AMC Case 2 is based on the same assumptions as AMC Case 1 with the additions of:
|
•
|
|
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.
|
A summary of AMC Case 2 is shown in Table 3.8.
64
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
365
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Table 3.8 AMC Case 2 — Production and Cost Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.12 Risks and Opportunities
The resources modelled at Bonikro and Hiré gold mines are limited by the extent
of drilling and have significant potential for expansion, adding additional
resources amenable to open pit extraction.
LGL has established a risk management process with four risk rating categories
that have been derived according to company-wide definitions of likelihood and
consequence. Risks are rated as Category I, II, III or IV with Category I being
the highest rating and IV the lowest. LGL’s has identified three Category I risk
areas at the Bonikro Gold Mine.
The three risks are:
|
•
|
|
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.
|
The program has identified 17 risk areas rated as Category II risks. Such risks
include potential shortages of critical supplies, limited local mining
competency, ore body delineation, HIV, management information, risk to staff in
transit, fire, civil unrest, incident response, cyanide management, site access,
development of the Hiré deposits, and water supply.
A range of controls have been established by LGL in response to the key risk areas.
65
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
366
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
4 VALUATION OF LGL’S EXPLORATION PROJECTS
4.1 Introduction
AMC has been requested to value LGL’s regional exploration projects. AMC is of the opinion that in
the case of the value of the exploration projects associated with Lihir Island and Mt Rawdon mines
will be adequately accounted for by valuations prepared by Grant Samuel based on AMC’s modelling
scenarios, which take account of reasonable levels of exploration success in the vicinity of the
existing resources and reserves.
In the case of exploration projects in Côte d’Ivoire, AMC has assumed production from the Hiré
published resources (Akissi So, Asonji So, Agbale, and Chappelle), and Dougbafla East deposits in
its modelling scenario. AMC has valued the remaining exploration projects in Côte d’Ivoire.
4.2 Exploration Valuation Methods
AMC uses a range of industry valuation methods to value exploration assets. Where possible, AMC
applies more than one method to each asset and generates ranges of values. Values are rounded and
outliers sometimes excluded before selecting a most likely value range and a preferred value for
the asset. The valuation methods used are described as follows:
|
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 AMC’s estimate of a resource reasonably likely to be delineated by
further work. The yardstick values used are based on AMC’s assessment of transactions in
recent years, the likely complexity of mining and processing and AMC’s 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.
|
4.2.1 Côte d’Ivoire Regional Exploration Valuation
In Côte d’Ivoire, further afield from the Bonikro local area, LGL has around 10,700 km
2
of exploration licences approved and a further 7,200 km
2
of exploration licences in
application. Exploration has been conducted on a suite of tenements, some of which are clustered
close to the Bonikro Gold Mine (Hiré and Oume Projects), with the remainder distributed along the
strike of Birimian stratigraphic units, as far as both the southern and northern boundaries of
Côte d’Ivoire. Active, tenements granted to LGL Mines CISA are grouped into the ten projects as
shown in Table 4.1. The Table also shows LGL’s interest in the tenements and the exploration
expenditure on each tenement up to March 2009.
66
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
367
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
Table 4.1 LGL Mines CISA Exploration Projects — Tenement Details
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
The status of exploration ranges from prospects with untested geochemical soil anomalies,
through those with anomalous drill intersections requiring follow up, to five projects with
declared resources. Table 4.2 summarises work completed to date on the various tenements. All the
projects are scheduled for exploration work during calendar 2010.
Table 4.2 LGL Exploration Projects — Exploration Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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).
|
67
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
368
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
The exploration strategy employed by LGL has identified anomalous gold
occurrences over a considerable extent of tenement holdings. Follow-up drilling
has successfully delineated a number of targets of interest, some of which have
sufficient definition to have allowed resources to be estimated, namely Akissi
So, Asondji So, Agbale, Chappelle and Doublafla East. Of particular significance
is the proximity (<15 km) of those prospects with defined resources to the
Bonikro Gold Mine.
AMC has adopted a several approaches to valuing LGL’s Côte d’Ivoire exploration
properties. For those prospects with resource estimates, the Expected Value
method has been used. This has been achieved by incorporating the Akissi So,
Asondji So, Agbale, Chappelle and Doublafla East resources within AMCs
production modelling.
For the remaining prospects, AMC considered two valuation methods, namely the
Past Expenditure (PE) and the Comparable Transaction (CT).
LGL has provided project summary information on the nature of exploration
carried out to date, information on past expenditure, and the 2010 exploration
budget for each tenement area. In the case of past expenditure, the information
is current to March 2009, as no more recent information has been received. AMC
has given consideration to the specific circumstances under which the
exploration to date has been conducted and consequently whether, under these
conditions, PE represents a suitable means of valuing the prospectivity of
tenements. AMC has concluded that PE would likely significantly undervalue the
properties.
With respect to the CT option, significant recent exploration and mining
activity in Côte d’Ivoire has been limited to a few large mining companies, and
consequently the availability of information on comparable property transactions
is limited. However, the Birimian stratigraphy, a primary target for LGL’s
exploration activities, persists into neighbouring countries (Ghana, Burkina
Faso) where it is host to a large number of operating gold mines and the focus
of considerable exploration activity. AMC has identified six transactions in
Ghana and one in Burkina Faso, within the last five years, with attributes that
make them suitable for comparison with the LGL tenements.
In deriving a present value per km
2
of tenement holding from these
transactions, AMC has taken account of the following:
|
•
|
|
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.
|
The present value estimates for the identified property transactions are
summarised in Table 4.3.
Table 4.3 LGL Exploration Projects — Value per
Unit Area Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
68
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
369
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
The present values per unit area for the suite of transactions are distributed
across a wide range, five of which are relatively clustered, while one value is
substantially lower and another substantially higher. AMC has excluded the
extreme high and low values from its analysis and has selected a representative
range of values for the transactions, being from US$2,000 to US$4,000 per
km
2
. These values have been assigned to the LGL tenements, weighted
according to LGL’s interest and, in the case of Hiré and Oume, with portions of
tenement areas with declared resources excluded. On this basis AMC has obtained
a value range for the LGL tenements of US$13M to US$27M, with a preferred value
of US$20M.
69
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
370
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
5 QUALIFICATIONS
AMC is a firm of mineral industry consultants whose activities include the
preparation of due diligence reports and reviews on mining and exploration
projects for equity and debt funding and for public reports.
AMC has completed assignments of a similar nature for Grant Samuel. AMC and its
subconsultants have also carried out technical consulting assignments for LGL
and for many of its operations and projects. In all the assignments referred to
above, AMC and its subconsultants have acted as independent parties.
Neither AMC nor its subconsultants have any business relationship with either
Grant Samuel or LGL other than the carrying out of individual consulting
assignments as engaged.
While some employees of AMC and its subconsultants may have small direct or
beneficial shareholdings in LGL, neither AMC nor the contributors to this
report, nor members of their immediate families have any interests in LGL that
could be reasonably construed to affect their independence. AMC has no pecuniary
interest, association or employment relationship with Grant Samuel or LGL.
AMC is being paid a fee according to its normal per diem rates and out-of-pocket
expenses in the preparation of this report. AMC’s fee is not contingent upon the
outcome of the transaction subject to this report.
In letters relating to our engagement, LGL agreed to comply with those
obligations of the commissioning entity under the VALMIN Code including that to
the best of their knowledge and understanding, complete, accurate and true
disclosure of all relevant material information has been made.
In preparing this report, AMC has relied on information provided by LGL and AMC
has no reason to believe that information is materially misleading or incomplete
or contains any material errors. LGL has been provided with drafts of those
sections of our report relating to its operations to enable correction of any
factual errors and notation of any material omissions. The views, statements,
opinions and conclusions expressed by AMC are based on the assumption that all
data provided to it by LGL are complete, factual and correct to the best of
LGL’s knowledge.
LGL has separately represented in writing that to the best of its knowledge, it
has provided AMC with all material information relevant to the operations and
projects described in this report.
This report and the conclusions in it are effective at May 2010. Those
conclusions may change in the future with changes in relevant metal prices,
exploration and other technical developments in regard to the projects and the
market for mineral properties.
LGL has provided AMC with indemnities in regard to damages, losses and
liabilities related to or arising out of our engagement other than those arising
from illegal acts, bad faith or negligence on our part or our reliance on
unauthorised statements from third parties.
This report has been provided to Grant Samuel for the purposes of forming its
opinion as to the value of LGL’s mineral assets. AMC has given its consent for
its report to be appended to Grant Samuel’s report and for it to be provided to
shareholders and has not withdrawn that consent before their lodgement with the
Australian Securities & Investments Commission. Neither this report nor any part
of it may be used for any other purpose without written consent.
The signatories to this report are corporate members of the AusIMM and bound by its Code
of Ethics.
|
|
|
|
|
|
|
|
|
A M Chuk
|
|
L J Gillett
|
|
M AusIMM
|
|
M AusIMM (CP)
|
|
Principal Consultant
|
|
Director
|
70
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
371
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
APPENDIX A — ABBREVIATIONS
|
|
|
|
|
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 d’Electricite
|
|
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.
|
Appendix A
|
|
|
|
|
12 Independent technical specialist’s report continued
|
|
372
|
LIHIR GOLD LIMITED
Independent Technical Specialist’s Report
APPENDIX B — QUALIFICATION OF PRINCIPAL CONTRIBUTORS
Project Management
|
|
|
|
|
|
|
|
|
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.
|
Lihir Gold Mine
|
|
|
|
|
|
|
|
|
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.
|
Mt Rawdon 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.
|
Bonikro 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.
|
Exploration
|
|
|
|
|
|
|
|
|
Name
|
|
Qualifications
|
|
Affiliation
|
|
Involvement
|
|
Chris Arnold
|
|
MSc (Natural
Resource
Management), BSc
Geology (Hons),
DipEd
|
|
AMC Principal Geologist
|
|
Exploration valuation.
|
Appendix B
|
INVESTIGATING ACCOUNTANT’S REPORT
|
|
An aerial view of Bonikro’s open pit in Côte d’lvoire.
|
|
|
|
|
|
13
Investigating accountant’s 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
|
21 July 2010
Dear Directors
Subject: Investigating Accountant’s Report on Historical Financial Information
PricewaterhouseCoopers Securities Ltd has been engaged by the Directors of Lihir
Gold Limited (
LGL
) to prepare this report on historical financial information for
inclusion in a Scheme Booklet dated on or about 22 July 2010 (the
Scheme Booklet
)
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)
.
Expressions defined in the Scheme Booklet have the same meaning in this report.
The nature of this report is such that it should be given by an entity which
holds an Australian financial services licence under the Corporations Act 2001
(Cth). PricewaterhouseCoopers Securities Ltd, which is wholly owned by
PricewaterhouseCoopers, holds the appropriate Australian financial services
licence. This report is both an Investigating Accountant’s Report, the scope of
which is set out below, and a Financial Services Guide, as attached at Appendix
A.
Scope
You have requested PricewaterhouseCoopers Securities Ltd to prepare an
Investigating Accountant’s Report (the
Report
) covering the following
information:
LGL Financial Information
|
|
(a)
|
|
LGL’s 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)
|
|
LGL’s 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
|
Liability limited by a scheme approved under Professional Standards
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
375
|
|
|
(c)
|
|
LGL’s 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
).
|
Newcrest Financial Information
|
|
(a)
|
|
Newcrest’s 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)
|
|
Newcrest’s 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)
|
|
Newcrest’s
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
).
|
Merged Group Pro Forma 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
).
|
The LGL Financial Information, the Newcrest Financial Information and the Merged
Group Pro Forma Financial Information together form the
Financial Information
.
The Financial Information is presented in an abbreviated form insofar as it does
not include all of the disclosures required by the Australian Accounting
Standards applicable to financial reports and/or half-year financial reports
prepared in accordance with the Corporations Act 2001.
This Report has been prepared for inclusion in the Scheme Booklet. We disclaim any
assumption of responsibility for any reliance on this Report or on the Financial
Information to which it relates for any purposes other than the purpose for which
it was prepared.
(2)
|
|
|
|
|
13
Investigating accountant’s report continued
|
|
376
|
Scope of work on LGL Financial Information
The LGL Financial Information set out in section 7.9 of the Scheme Booklet has been
extracted without modification from the audited financial statements of LGL for the
years ended 31 December 2009 and 31 December 2008. The financial statements were
audited by the Papua New Guinea firm of PricewaterhouseCoopers in accordance with
International Standards on Auditing. The audit opinions issued to the members of
LGL relating to those financial statements were unqualified.
The Directors of LGL are responsible for the preparation of the LGL Financial Information.
We have performed the following procedures on the extraction of the LGL Financial Information:
|
|
(a)
|
|
Confirmed that the LGL Financial Information is properly extracted from the relevant source
documentation, as follows:
|
|
|
(i)
|
|
LGL’s audited consolidated statements of financial position as at 31 December 2009
and 31 December 2008;
|
|
|
|
|
(ii)
|
|
LGL’s audited consolidated statements of comprehensive income for the years ended 31
December 2009 and 31 December 2008; and
|
|
|
|
|
(iii)
|
|
LGL’s 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.
|
Our work in respect of the LGL Financial Information has been performed in
accordance with Australian Auditing Standard AUS 904 “Engagements to Perform
Agreed Upon Procedures” and other relevant standards.
Because the above procedures do not constitute either an audit in accordance with
Australian Auditing Standards or a review in accordance with the Australian
Auditing Standard AUS 902 “Review of Financial Reports”, we do not express any
assurance on the LGL Financial Information included in section 7.9 of the Scheme
Booklet. Had we performed additional procedures or had we performed an audit in
accordance with Australian Auditing Standards or a review in accordance with the
Australian Auditing Standard AUS 902 “Review of Financial Reports”, other matters
might have come to our attention that would have been reported to you.
Report on LGL Financial Information
Based on our agreed upon procedures over the LGL Financial Information set out in section 7.9 of
the Scheme Booklet, we report the following:
|
|
•
|
|
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
|
Scope of work on the Newcrest Financial Information
A. Extraction of Newcrest Financial Information presented in Australian Dollars
The Newcrest Financial Information presented in Australian Dollars (
AUD
) set out in
section 8.10 of the Scheme Booklet has been extracted from the audited financial
statements of Newcrest for the years ended 30 June 2009 and 30 June 2008, and the
reviewed financial statements for the half-year ended 31 December 2009.
The Newcrest financial statements for the years ended 30 June 2009 and 30 June 2008
have been audited, and the financial statements for the half-year ended 31 December
2009 reviewed, by Ernst & Young in accordance with Australian Auditing Standards.
The audit and review opinions issued to the members of Newcrest relating to those
financial statements were unqualified.
We have performed the following procedures on the extraction of Newcrest
Financial Information presented in AUD:
|
|
(a)
|
|
Confirmed that the Newcrest Financial Information, presented in AUD, is properly extracted
from the relevant source documentation, as follows:
|
|
|
(i)
|
|
Newcrest’s reviewed consolidated balance sheet as at 31 December 2009 and audited
consolidated balance sheets as at 30 June 2009 and 30 June 2008;
|
|
|
|
|
(ii)
|
|
Newcrest’s 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)
|
|
Newcrest’s 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.
|
B. Translation of Newcrest Financial Information from Australian Dollars to US Dollars
As set out in section 8.10(a) of the Scheme Booklet, the Newcrest Financial Information presented
in AUD has been translated into US Dollars (
USD
) to present the Newcrest Financial Information in
the same currency as the LGL Financial Information (that is, USD) in accordance with AASB 121 as
follows:
|
|
•
|
|
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 accountant’s report continued
|
|
378
|
This approach does not lend itself to detailed checking of detailed
translation calculations by way of agreed upon procedures. Therefore, at the
request of LGL, we performed the following in relation to the translation of
Newcrest Financial Information, presented in AUD, to USD:
|
|
(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.
|
The Directors of Newcrest are responsible for the preparation of the
Newcrest Financial Information.
Our work in respect of the Newcrest Financial Information has been performed in
accordance with Australian Auditing Standard AUS 904 “Engagements to Perform
Agreed Upon Procedures” and other relevant standards.
(5)
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
379
|
Because the above procedures do not constitute either an audit in accordance
with Australian Auditing Standards or a review in accordance with the Australian
Auditing Standard AUS 902 “Review of Financial Reports”, we do not express any
assurance on the LGL Financial Information included in section 7.9 of the Scheme
Booklet. Had we performed additional procedures or had we performed an audit in
accordance with Australian Auditing Standards or a review in accordance with the
Australian Auditing Standard AUS 902 “Review of Financial Reports”, other matters
might have come to our attention that would have been reported to you.
Report on Newcrest Financial Information
A. Extraction of Newcrest Financial Information presented in Australian Dollars
Based on our agreed upon procedures over the Newcrest Financial Information, presented in AUD, set
out in section 8.10 of the Scheme Booklet, we report the following:
|
|
•
|
|
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.
|
B. Translation of Newcrest Financial Information from Australian Dollars to US Dollars
Based on our agreed upon procedures in relation to the translation of Newcrest Financial
Information, presented in AUD, to USD, we report the following:
|
|
•
|
|
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 accountant’s report continued
|
|
380
|
Scope of work on Merged Group Pro Forma Financial Information
The Merged Group Pro Forma Financial Information has been compiled from the LGL
Financial Information and the Newcrest Financial Information set out in sections
7.9 and 8.10 of the Scheme Booklet respectively. The Merged Group Pro Forma
Financial Information is presented to illustrate the financial position of the
Merged Group as at 31 December 2009 as though the proposed merger occurred at this
date.
The Directors of Newcrest are responsible for the preparation of the Merged
Group Pro Forma Financial Information.
We have reviewed the compilation of the Merged Group Pro Forma Financial
Information in order to report whether anything has come to our attention that
would cause us to believe that:
|
|
•
|
|
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.
|
Our review of the Merged Group Pro Forma Financial Information has been conducted in accordance
with the Australian Auditing Standard AUS 902 “Review of Financial Reports” and other relevant
standards. We made such enquiries and performed such procedures as we, in our professional
judgement, considered reasonable in the circumstances, including:
|
|
•
|
|
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.
|
These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance provided is less than that given in an audit.
We have not performed an audit and, accordingly, we do not express and audit
opinion on the compilation of the Merged Group Pro Forma Financial Information.
(7)
|
|
|
|
|
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We do not express any opinion, or make any statement of negative assurance,
as to whether the Merged Group Pro Forma Financial Information contained in the
Scheme Booklet is presented fairly in accordance with the recognition and
measurement principles prescribed in the International Financial Reporting
Standards and accounting policies disclosed in the Scheme Booklet.
Limitation of Scope of work on Merged Group Pro Forma Financial Information
In preparing the Merged Group Pro Forma Financial Information, only preliminary
adjustments have been made to the fair values of acquired assets and
liabilities in accordance with IFRS 3 Business Combinations as described in
section 9.4 of the Scheme Booklet.
Accordingly, the Merged Group Pro Forma Financial Information does not necessarily
contain all of the adjustments to the reported amounts of assets and liabilities
that will be required to reflect their fair values at acquisition date.
Report on Merged Group Pro Forma Financial Information
Based on our review of the compilation of the Merged Group Pro Forma Financial
Information, which is not an audit, nothing has come to our attention which
would cause us to believe that:
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•
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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:
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LGL Financial Information
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Newcrest Financial Information
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Pro Forma Adjustments described in section 9.4 of the Scheme Booklet
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•
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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.
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Subsequent events
Apart from the matters dealt with in this Report, and having regard to the scope
of our Report, to the best of our knowledge and belief no material transactions or
events outside of the ordinary course of business of LGL and Newcrest have come to
our attention that would require comment on, or adjustment to, the information
referred to in our Report or that would cause such information to be misleading or
deceptive.
Independence or disclosure of interest
PricewaterhouseCoopers Securities Ltd does not have any interest in the outcome of
the Scheme other than the preparation of this Report and participation in due
diligence procedures for which normal professional fees will be received.
(8)
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Investigating accountant’s report continued
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382
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Liability
PricewaterhouseCoopers Securities Ltd has consented to the inclusion of this
Report in the Scheme Booklet in the form and context in which it is included. The
liability of PricewaterhouseCoopers Securities Ltd is limited to the inclusion of
this Report in the Scheme Booklet. PricewaterhouseCoopers Securities Ltd makes no
representation regarding, and has no liability for, any other statements or other
material in, or any omissions from, the Scheme Booklet.
Financial Services Guide
We have included our Financial Services Guide as Appendix A to our Report. The
Financial Services Guide is designed to assist retail clients in their use of
any general financial product advice in our Report.
Yours faithfully
Wim Blom
Authorised Representative
PricewaterhouseCoopers Securities Ltd
(9)
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Lihir Gold Limited Scheme Booklet
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PricewaterhouseCoopers
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Securities Ltd
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ACN 003 311 617
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ABN 54 003 311 617
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Holder of Australian Financial
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Services Licence No 244572
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Riverside Centre
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123 Eagle Street
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BRISBANE QLD 4000
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GPO Box 150
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Appendix A — Financial Services Guide
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BRISBANE QLD 4001
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DX 77 Brisbane
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Australia
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Telephone +61 7 3257 5000
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Facsimile +61 7 3257 5999
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PRICEWATERHOUSECOOPERS SECURITIES LTD
FINANCIAL SERVICES GUIDE
This Financial Services Guide is dated 21 July 2010
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1.
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About us
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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 Accountant’s 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.
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2.
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This Financial Services Guide
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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.
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3.
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Financial services we are licensed to provide
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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.
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Liability limited by a scheme approved under Professional Standards Legislation
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13
Investigating accountant’s report continued
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384
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4.
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General financial product advice
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The Report contains only general financial product advice. It was prepared
without taking into account your personal objectives, financial situation or
needs.
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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.
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5.
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Fees, commissions and other benefits we may receive
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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.
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6.
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Associations with issuers of financial products
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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 Company’s auditors.
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7.
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Complaints
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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.
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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.
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8.
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Contact Details
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PwC Securities can be contacted by sending a letter to the following address:
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Wim Blom
PricewaterhouseCoopers Securities Ltd
GPO Box 150
Brisbane, QLD, 4001
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IMPLeMentAtIon 385
oF tHe ScHeMe 14
Shovel loading a haul
truck at Lihir Island.
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14 Implementation of the Scheme continued
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386
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14.1 Process
The steps to implement the Scheme are set out below:
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(a)
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On 4 May 2010, LGL and Newcrest entered into the Merger Implementation Agreement under which
LGL agreed to propose the Scheme to LGL Shareholders.
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(b)
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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.
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(c)
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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.
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(d)
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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.
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(e)
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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.
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(f)
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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.
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(g)
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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.
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(h)
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Once the Scheme becomes Effective, LGL and Newcrest will become bound to implement the Scheme
in accordance with its terms.
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(i)
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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).
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(j)
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Once the Scheme becomes Effective, LGL will give notice of that event to ASX, POMSoX and
NASDAQ.
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(k)
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If the Scheme becomes Effective, then on the Implementation Date:
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(i)
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all of the Scheme
Shares will be transferred to Newcrest; and
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(ii)
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in consideration, Newcrest will provide the Scheme
Consideration to the Scheme Participants in accordance with the Scheme.
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(l)
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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).
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(m)
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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).
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(n)
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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.
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14.2 Conditions precedent to the implementation of the Scheme
The Scheme will only be implemented if all of the conditions precedent to the implementation of
the Scheme are satisfied (or waived, where permitted).Those conditions precedent are outlined in
section 15.20.
14.3 Quotation of New Newcrest Shares
Newcrest intends, within seven days after the date of this Scheme Booklet, to apply for official
quotation on ASX and POMSoX of the New Newcrest Shares issued as Share Consideration. 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), and on a
normal basis following despatch of confirmations of issue for New Newcrest Shares (which must occur
within five Business Days after implementation of the Scheme). Newcrest has no reason to believe
that the New Newcrest Shares will not be admitted to the official list of ASX and POMSoX.
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Lihir Gold Limited Scheme Booklet
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387
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14.4 Provision of the Scheme Consideration
Newcrest has executed the Deed Poll in favour of each Scheme Participant under which, subject to
the Scheme becoming Effective, on or following the Implementation Date, Newcrest must provide the
Scheme Consideration to the Scheme Participants in accordance with the Scheme.
14.5 Issue of confirmations of issue
Confirmations of issue for New Newcrest Shares issued are expected to be sent to Scheme
Participants within five Business Days after the Implementation Date by prepaid post at their
respective addresses as shown in the LGL Register at the Record Date.
14.6 Payment of Cash Consideration
The Cash Consideration will be paid by cheque sent to Scheme Participants within five Business
Days after the Implementation Date by prepaid post to their respective addresses as shown in the
LGL Register at the Record Date.
14.7 Rights attaching to LGL Shares
The rights attaching to LGL Shares are set out in the PNG Companies Act and the LGL
Constitution, and are regulated by the PNG Securities Act, the Listing Rules, ASTC Settlement
Rules and general law.
LGL Shares are held subject to the LGL Constitution. A copy of the LGL Constitution is available
for inspection at LGL’s registered office. In particular, LGL Shareholders are entitled to receive
notices of and attend and vote at general meetings where they have one vote on a show of hands and
one vote per ordinary share on a poll.
Subject to the LGL Constitution, the PNG Companies Act and
the Listing Rules, LGL Shares are freely transferable. Dividends are payable to LGL Shareholders in
proportion to the LGL Shares held by them. In the event that LGL is wound up, any deficiency or
excess in LGL’s assets available for repayment of capital will be borne or enjoyed by the LGL
Shareholders in proportion to the capital paid up or which ought to be paid up at the commencement
of the winding up.
14.8 Dealings in LGL Shares
If the Scheme becomes Effective, LGL will apply to ASX, POMSoX and NASDAQ for suspension of trading
in LGL Shares on those exchanges from the close of trading on the Effective Date.
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.
LGL will close the LGL Register at the Record Date. Any dealing in LGL Shares made or entered into
before the close of trading and received by the LGL Registry before the Record Date will be
recognised, but no dealing in LGL Shares (whenever effected) will be recognised if received by the
LGL Registry after the Record Date.
14.9 Delisting of LGL
Applications will be made to ASX, POMSoX and NASDAQ for removal of LGL from the official list of
each of those exchanges after the Implementation Date.
Canadian LGL Shareholders should also note that LGL voluntarily filed an application with TSX
requesting delisting of LGL Shares from TSX. The delisting took effect from 12 July 2010, Toronto
time.
In the United States, LGL ADSs will be delisted from NASDAQ following implementation of the Scheme,
and Newcrest has stated that it does not intend to list its ADRs on NASDAQ or any other US national
securities exchange after the Scheme becomes Effective. In addition, although Newcrest will be
deemed to succeed to LGL’s registration with the SEC under the US Exchange Act when the Scheme
becomes Effective, Newcrest has further advised that, provided it satisfies the applicable
requirements under the US Exchange Act and the rules and regulations under that Act, it intends to
terminate such registration under the US Exchange Act as soon as practicable following the time the
Scheme becomes Effective. See section 9.3(c) for additional information.
14.10 Restrictions in the LGL Constitution
There are no restrictions on the right to transfer LGL Shares in the LGL Constitution.
14.11 Scheme Participants with an existing holding of Newcrest Shares in a CHESS holding
If a Scheme Participant is an existing holder of both LGL Shares and Newcrest Shares in the same
CHESS HIN, the standing instructions recorded in the LGL Register for their LGL Shares will apply
to their New Newcrest Shares (and any other Newcrest Shares they hold).
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14 Implementation of the Scheme continued
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388
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14.12 Scheme Participants with an existing holding of Newcrest Shares in an issuer sponsored
holding and Scheme Participants who do not own Newcrest Shares
For Scheme Participants who are existing holders of Newcrest Shares in an issuer sponsored holding
or who are not already a holder of Newcrest Shares, the compatible standing instructions which
currently apply to Scheme Participants’ LGL Shares will, to the extent it is reasonably practical
to execute, from the Record Date be deemed to be new standing instructions to, and accepted by,
Newcrest in respect of New Newcrest Shares issued to those shareholders. This will include
compatible instructions relating to payment of dividends (but not dividend reinvestment plan
elections) and written and electronic communications from LGL. Scheme Participants can revoke or
amend those instructions by notifying the Newcrest Share Registry in writing.
14.13 Instructions relating to tax file numbers and dividend reinvestment plan elections
In all cases, each Scheme Participant’s tax file number or tax file number exemption disclosures
and dividend reinvestment plan elections for LGL are not compatible with their holding for New
Newcrest Shares and will not be transferred to the Newcrest Share register.
Accordingly, each Scheme Participant’s instructions relating to:
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(a)
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tax file numbers and tax file
number exemption disclosures; and
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(b)
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elections under Newcrest’s dividend reinvestment plan,
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will
need to be given to the Newcrest Share registry after New Newcrest Shares have been issued to them.
Newcrest encourages Scheme Participants to therefore contact the Newcrest Share registry separately
to provide these instructions as soon as possible after receiving their confirmations of issue for
their New Newcrest Shares.
14.14 Overseas LGL Shareholders
An LGL Shareholder whose 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 People’s
Republic of China, Indonesia, France, Japan, Ireland or Switzerland, may be considered to be an
Ineligible Overseas Shareholder for the purposes of the Scheme, and may not be able to receive New
Newcrest Shares under the Scheme.
Restrictions in certain foreign countries make it impractical or unlawful for Newcrest to
offer, or for LGL Shareholders to receive, New Newcrest Shares in those countries.
Accordingly, Newcrest is not issuing New Newcrest Shares to Scheme Participants whose 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 People’s Republic of China, Indonesia,
France, Japan, Ireland or Switzerland, unless Newcrest determines 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.
(a) United Kingdom
Certain LGL Shareholders in the United Kingdom may qualify as ‘qualified investors’ (
Qualified
Investors
) as defined in the Directive 2003/71/EC (the
Prospectus Directive
). Newcrest is satisfied
that the issue of New Newcrest Shares to Qualified Investors is legally permissible under
applicable United Kingdom law and that Qualified Investors will not be classified as Ineligible
Overseas Shareholders for the purposes of the Scheme. Consequently, it is not necessary for
Qualified Investors to make a written application seeking to participate in the Scheme. LGL
Shareholders in the United Kingdom that do not qualify as Qualified Investors will be treated as
Ineligible Overseas Shareholders for the purposes of the Scheme in accordance with section
14.14(l).
This Scheme Booklet has not been submitted for approval to the Financial Services Authority
acting in its capacity as the competent authority in the United Kingdom under the
Financial
Services and Markets Act 2000
(UK). This Scheme Booklet shall be read as an offer of Newcrest Shares
to Qualified Investors only, as defined in the Prospective Directive.
LGL Shareholders in the United Kingdom who are not Qualified Investors are not eligible to receive
Newcrest Shares and are participating in the Scheme on the same basis as Qualified Shareholders in
the United Kingdom, except:
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(i)
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that they will not receive the Newcrest Shares which they would
otherwise receive under the Scheme; and
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(ii)
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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).
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Lihir Gold Limited Scheme Booklet
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(b) United States
The New Newcrest Shares have not been and will not be registered under the US Securities Act or
the securities laws of any state or other jurisdiction in the United States. Newcrest and LGL
intend to rely on an exemption from the registration requirements of the US Securities Act provided
by Section 3(a)(10) of that Act in connection with the implementation of the Scheme and the
issuance of New Newcrest Shares. Approval of the Scheme by the Court will be relied upon by
Newcrest and LGL for the purpose of qualifying for the Section 3(a)(10) exemption. Newcrest is
satisfied, based upon the availability of the Section 3(a)(10) exemption, that the issue of New
Newcrest Shares to Scheme Participants in the United States, including issuance of Newcrest ADSs to
holders of LGL ADSs, is permissible under applicable United States securities law and LGL
Shareholders in the United States will not be classified as Ineligible Overseas Shareholders for
the purposes of the Scheme.
See section 14.15 for additional information regarding LGL ADS holders.
(c) Canada
New Newcrest Shares to be distributed to Scheme Participants in Canada under the Scheme will not be
qualified by a Canadian prospectus, but will rely on the prospectus exemption contained in section
2.11 of NI 45-106 of the Canadian Securities Administrators. Newcrest is satisfied, based upon the
availability of the section 2.11 exemption, that the issue of New Newcrest Shares to Scheme
Participants in Canada is legally permissible under applicable Canadian law and Canadian resident
LGL Shareholders will not be classified as Ineligible Overseas Shareholders
for the purposes of the Scheme. Consequently, it is not necessary for Canadian resident LGL
Shareholders to make a written application seeking to participate in the Scheme.
Canadian resident shareholders who will receive any New Newcrest Shares in the Scheme will be
permitted to resell those shares on ASX or on a market outside of Canada provided that:
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(i)
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Newcrest is not a reporting issuer in Canada at the date of the resale; and
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(ii)
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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.
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None of the TSX nor any Canadian securities commission has passed comment upon or endorsed the
merits of the Scheme or the accuracy, adequacy or completeness of this Scheme Booklet. Any
representation to the contrary is a criminal offence.
Canadian LGL Shareholders should also note that LGL filed an application with TSX requesting
delisting of LGL Shares from TSX. The delisting took effect from 12 July 2010, Toronto time.
Residents of Canada should also note that LGL is a reporting issuer in the Province of Ontario, but
by application of National Instrument 71-102
(Continuous Disclosure and Other Exemptions Relating to Foreign Issuers)
, this Scheme Booklet has
not been prepared in accordance with Canadian disclosure standards.
(d) New Zealand
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in New Zealand is legally permissible under applicable New Zealand law and that
New Zealand based LGL Shareholders will not be classified as Ineligible Overseas Shareholders for
the purposes of the Scheme. Consequently, it is not necessary for New Zealand based LGL
Shareholders to make a written application seeking to participate in the Scheme.
The offer of New Newcrest Shares to any LGL Shareholder in New Zealand under the Scheme is made
in New Zealand in reliance upon the
Securities Act (Overseas Companies) Exemption Notice 2002
(New
Zealand). This Scheme Booklet has not been registered, filed with or approved by any New Zealand
regulatory authority or under or in accordance with the
Securities Act 1978
(New Zealand).
This Scheme Booklet is, therefore, not a prospectus or an investment statement under New Zealand
law, and may not contain all the information that a prospectus or investment statement under New
Zealand law is required to contain. LGL Shareholders in New Zealand should seek their own advice
and satisfy themselves about the Australian and New Zealand tax consequences of participating in
the Scheme.
(e) Singapore
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in Singapore is legally permissible under applicable Singapore law and that
Singapore based LGL Shareholders will not be classified as Ineligible Overseas Shareholders for the
purposes of the Scheme. Consequently, it is not necessary for Singapore based LGL Shareholders to
make a written application seeking to participate in the Scheme.
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14 Implementation of the Scheme continued
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390
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This offer of New Newcrest Shares is made in reliance on the exemption under 273(1)(c) of the
Securities and Futures Act of Singapore (
SFA
). In accordance with section 257 of the SFA, the New
Newcrest Shares may not be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to the public or any member of the public
in Singapore other than in circumstances where the registration of a prospectus is not required.
This Scheme Booklet has not been lodged or registered with the Monetary Authority of Singapore
(
MAS
) and is not made in or accompanied by a prospectus that is registered by the MAS. The MAS
assumes no responsibility for the contents of this Scheme Booklet. The MAS has not in any way
considered the merits of the New Newcrest Shares being offered pursuant to the Scheme as described
in this Scheme Booklet. This Scheme Booklet has been provided to shareholders in Singapore on the
basis that they are a shareholder of LGL pursuant to the Scheme and that the offer is made in
connection with a proposed compromise or arrangement between a company incorporated outside
Singapore which is not listed on the Singapore Exchange Limited and its members, and the Scheme
complies with the laws relating to schemes of arrangement in the place of incorporation of such
company.
(f) Indonesia
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in Indonesia is legally permissible under applicable Indonesian law and that
Indonesian based LGL Shareholders will not be classified as Ineligible Overseas Shareholders for
the purposes of the Scheme. Consequently, it is not necessary for Indonesian based LGL Shareholders
to make a written application seeking to participate in the Scheme.
The Scheme will not be conducted in a manner which constitutes a public offering of securities
under applicable laws and regulations of the Republic of Indonesia.
(g) People’s Republic of China (PRC)
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in PRC is legally permissible under applicable PRC law and that PRC based LGL
Shareholders will not be classified as Ineligible Overseas Shareholders for the purposes of the
Scheme. Consequently, it is not necessary for PRC based LGL Shareholders to make a written
application seeking to participate in the Scheme.
This Scheme Booklet is for the exclusive use of LGL Shareholders in connection with their
consideration of the Scheme. Accordingly, this Scheme Booklet must not be distributed, published,
reproduced or disclosed (in whole or in part) by LGL Shareholders to any other person in the PRC or
used for any purpose in the PRC other than in connection with LGL Shareholders’ consideration of
the Scheme. This Scheme Booklet has not been filed with or approved by the China Securities
Regulatory Commission or any other government authority in the PRC. LGL Shareholders in the PRC
should consult with their professional advisers as to whether any governmental or other consents
are required or other formalities need to be observed to enable them to receive the New Newcrest
Shares under the Scheme.
(h) Hong Kong
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in Hong Kong is legally permissible under applicable Hong Kong
law and that Hong Kong based LGL Shareholders will not be classified as Ineligible Overseas
Shareholders for the purposes of the Scheme. Consequently, it is not necessary for Hong Kong based
LGL Shareholders to make a written application seeking to participate in the Scheme.
The Scheme Booklet is for the exclusive use of LGL Shareholders in connection with the Scheme.
Accordingly, this Scheme Booklet must not be distributed, published, reproduced or disclosed (in
whole or in part) by LGL Shareholders to any other person in Hong Kong or used for any purpose in
Hong Kong other than in connection with LGL Shareholders’ consideration of the Scheme. This Scheme
Booklet does not constitute an offer or invitation for the subscription, sale or purchase of
securities in Hong Kong and shall not form the basis of any contract.
(i) Germany
German LGL Shareholders are not eligible to receive New Newcrest Shares. German LGL Shareholders
are Ineligible Overseas Shareholders.
(j) Switzerland
Newcrest is satisfied that the issue of New Newcrest Shares to LGL Shareholders under the Scheme to
Scheme Participants in Switzerland is legally permissible under applicable Switzerland law and that
Switzerland based LGL Shareholders will not be classified as Ineligible Overseas Shareholders for
the purposes of the Scheme.
|
|
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|
|
Lihir Gold Limited Scheme Booklet
|
|
391
|
Consequently, it is not necessary for Switzerland based LGL Shareholders to make a written
application seeking to participate in the Scheme.
This Scheme Booklet is being communicated in Switzerland to a small number of selected investors
only. Each copy of this Scheme Booklet is addressed to a specifically named recipient and may not
be passed on to third parties. The New Newcrest Shares are not being offered to the public in
Switzerland, and neither this Scheme Booklet nor any other offering materials relating to the New
Newcrest Shares may be distributed in connection with any such public offering.
(k) European Union
This Scheme Booklet has not been submitted for review or approval to the national shares
regulator of any country in the European Economic Area and has not been prepared in accordance with
the laws of any country in the European Economic Area and may not contain all information required
where a document is prepared pursuant to these laws.
This Scheme Booklet is not and shall not be
read as any offer of Newcrest Shares to the public in any country of the European Economic Area.
Newcrest Shares are not being offered, nor will they be offered, to the public in any Member State
of the European Economic Area (including Members of the European Union, plus Iceland, Liechtenstein
and Norway) which has implemented Directive 2003/71/EC (the
Prospectus Directive
) (each a
Relevant
Member State
). As a result, the New Newcrest Shares may only be offered in Relevant Member States:
|
(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,
|
in each case in accordance with the national regulations of the
Relevant Member State, provided that no such offering of Newcrest Shares shall result in a
requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive
or pursuant to national regulations of the Relevant Member State.
As used above, the expression ‘offered to the public’ in relation to any shares in any Relevant
Member State means the communication in any form and by any means of sufficient information on the
terms of the offer and the Newcrest Shares so as to enable an investor to decide to purchase or
subscribe for the Newcrest Shares, as the same may be varied in the Relevant Member State by any
measure implementing the Prospectus Directive.
(l) Other foreign countries
In the case of all other LGL Shareholders whose 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 People’s Republic of China, Indonesia, France, Japan, Ireland or
Switzerland, unless Newcrest is satisfied in its absolute discretion that it is permitted to allot
and issue New Newcrest Shares to an LGL Shareholder pursuant to the Scheme by the laws of that
place (including as disclosed in this Scheme Booklet), the number of New Newcrest Shares which the
Ineligible Overseas Shareholder would otherwise receive under the Scheme will be issued to the Sale
Agent 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 information.
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.
There is no assurance as to the average price the Sale Agent will receive for all New Newcrest
Shares sold under this process. The average price received will depend on prevailing market
conditions (including the prevailing market price of Newcrest Shares), the prevailing market demand
for Newcrest Shares, maintaining an orderly market in Newcrest Shares and the fact that there is
only a limited time within which to sell the New Newcrest Shares.
|
|
|
|
|
14 Implementation of the Scheme continued
|
|
392
|
If an Ineligible Overseas Shareholder does not wish to have the Sale Agent sell New Newcrest Shares
which they would have otherwise received, they can choose not to participate in the Scheme by
selling their LGL Shares before the Effective Date (expected to be 30 August 2010).
LGL Shareholders whose 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 People’s
Republic of China, Indonesia, France, Japan, Ireland or Switzerland, who wish to make any
application to receive New Newcrest Shares under the Scheme should do so in writing:
|
(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.
|
Applications and accompanying documents should be directed to:
The Company Secretary
Newcrest Mining Limited
8th Floor
600 St Kilda Road
Melbourne Victoria 3004
Australia
Applications must be received by no later
than 9.00pm on 6 September 2010. Any applications received after that date will not be considered or
processed by Newcrest.
14.15 LGL ADS holders
In the case of holders of LGL ADSs, the LGL ADS Depositary, as the registered holder of the
relevant LGL Shares, and subject to the terms of the LGL ADS Deposit Agreement, will vote in
accordance with instructions it receives from LGL ADS holders in connection with the Scheme. If the
Scheme is implemented, the LGL ADS Depositary will receive the Scheme Consideration on behalf of
LGL ADS holders.
Pursuant to the terms of the LGL ADS Deposit Agreement, the LGL ADS Depositary will provide each
registered LGL ADS holder with this Scheme Booklet and such other information relating to the
Scheme distributed to LGL Shareholders. The LGL ADS Depositary will provide each LGL ADS holder with
a voting instruction card by which the LGL ADS holder may instruct the LGL ADS Depositary how to
vote the LGL Shares represented by the LGL ADS holder’s ADSs. LGL ADS holders should contact the
LGL ADS Depositary for any additional information.
The LGL ADS Depositary will vote the number of LGL Shares underlying an LGL ADS in accordance
with instructions from holders of such ADSs. To the extent the LGL ADS Depositary does not receive
instructions, it may, if LGL so requests, vote the LGL Shares in accordance with instructions from
LGL.
LGL ADS holders who wish to attend or vote at the Scheme Meeting or be represented at the Second
Court Hearing should take steps to present their LGL ADSs to the LGL ADS Depositary for
cancellation, pay any fees to the LGL ADS Depositary for the withdrawal of those LGL Shares, and
take delivery of those LGL Shares so as to become LGL Shareholders before the record date for
voting at the Scheme Meeting.
To the extent that the LGL ADS Depositary does not make a Scheme Consideration election on behalf
of some or all of the LGL ADSs (or that Scheme Consideration election is not valid), it will be
deemed to have elected the Maximum Share Consideration (subject to scale-back) for all LGL Shares
represented by LGL ADSs.
The Share Consideration will be issued in the form of New Newcrest Shares (subject to
scale-back) to the LGL ADS Depositary. The LGL ADS Depositary will then deposit those New Newcrest
Shares for issuance of the corresponding number of Newcrest ADSs to the LGL ADS holders. If LGL ADS
holders wish to receive New Newcrest Shares instead of Newcrest ADSs, they will need to instruct
the LGL ADS Depositary to cancel their LGL ADSs (in the manner, and prior to the time, advised by
the LGL ADS Depositary) and participate directly in the Scheme as an LGL Shareholder.
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
393
|
All LGL ADS holders will receive a separate package containing the ADS Election Form and Letter of
Transmittal with further details and instructions. LGL is extending the Scheme Consideration
election to the holders of LGL ADSs. LGL ADS holders may elect to receive Mixed Consideration,
Maximum Share Consideration or Maximum Cash Consideration under the Scheme. LGL ADS holders who do
not make a valid Scheme Consideration election will be deemed to have elected the Maximum Share
consideration (subject to scale-back).
LGL ADS holders registered on the books of the LGL ADS Depositary should complete, sign and return
the ADS Election Form and Letter of Transmittal, together with the LGL ADRs evidencing the holder’s
LGL ADSs, where applicable, to be received by the LGL ADS Depositary not later than 5.00pm, New
York time, on 31 August 2010 (the
ADS Expiration Date
).
If the holder’s LGL ADSs are held in a
“street name”, that is, through a broker or other financial intermediary, they should contact their
broker or other financial intermediary directly to provide election instructions on their LGL ADSs.
Please note that a broker or financial intermediary may have an earlier deadline than the ADS
Expiration Date. Holders of LGL ADSs should also consult with their broker or other financial
intermediary as to whether or not it charges any transaction fees or service charges to make an
election.
If an LGL ADS holder makes an election with respect to their LGL ADSs, their LGL ADSs will be
immobilised from that time until the earlier of the Implementation Date or an announcement that the
Scheme has been abandoned, and they will not be able to trade their LGL ADSs or surrender them for
the purpose of withdrawing LGL Shares. If an LGL ADS holder wishes to receive Scheme Consideration
in the form of New Newcrest Shares (instead of Newcrest ADSs) or Australian dollars (instead of US
dollars), they should not return the ADS Election Form and Letter of Transmittal, but should
surrender their LGL ADSs and arrange to receive delivery of the underlying LGL Shares before the
Record Date.
After the ADS Expiration Date, the LGL ADS Depositary will make Scheme Consideration elections with
respect to LGL Shares represented by LGL ADSs to the extent it has received valid Scheme
Consideration elections from LGL ADS holders.
When the LGL ADS Depositary receives Scheme Consideration, it will deposit into the Newcrest ADR
program the New Newcrest Shares it receives for issuance of Newcrest ADSs and it will convert the
Australian dollars it receives into US dollars at the spot market rate available to it on the day
it receives notice that the Australian dollars have been received by its Australian custodian. The
LGL ADS Depositary will then call for surrender of all LGL ADSs. LGL ADSs with respect to which
valid elections were made will be deemed to have been surrendered at the Implementation Date. Upon
surrender of the LGL ADSs and payment of the fees of the LGL ADS Depositary, including any fees for
the cancellation of the LGL ADSs or charged by the Newcrest ADS Depositary for issuance of the
Newcrest ADSs, the LGL ADS Depositary will deliver the Newcrest ADSs and US dollars (less any
currency conversion expense, fees and taxes) to the former LGL ADS holders entitled to them.
However, the LGL ADS Depositary will not deliver any fraction of a Newcrest ADS, but, instead, will
aggregate those fractional entitlements, sell the Newcrest ADSs and distribute the net proceeds of
that sale to the former LGL ADS holders entitled to them.
Newcrest ADSs delivered in respect of LGL
ADSs that were held through brokers or other intermediaries will be delivered to the accounts at
those brokers and intermediaries where the LGL ADSs were held. Newcrest ADSs delivered in respect
of LGL ADSs that were held directly on the books of the LGL ADS Depositary will be registered in
the names of those holders in uncertificated form and former registered holders of LGL ADSs will
receive Direct Registration Transaction Statements confirming that registration.
14.16 Creditors of LGL
If implemented, the Scheme will not materially prejudice LGL’s ability to pay its creditors as no
new liability (other than costs associated with the Scheme) is expected to be incurred by LGL as a
consequence of the implementation of the Scheme.
14.17 Right of LGL Shareholders to appear at the Second Court Hearing
LGL Shareholders are entitled to appear and be heard by the Court in relation to its consideration
of the Scheme at the Second Court Hearing. The Second Court Hearing is expected to be held in the
Court in Port Moresby on Friday, 27 August 2010. Further details of the time and location of the
Second Court Hearing will be announced on ASX and POMSoX and advertised in
The Australian
newspaper
in Australia,
The National
and the
Papua New Guinea Post-Courier
newspapers in PNG,
The Wall Street
Journal
in New York and in the
Financial Times
in London.
|
additional
The Bonikro process plant
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
395
|
15.1 LGL Directors’ interests in marketable securities of LGL
As at the date of this Scheme Booklet, the LGL Directors and their Relevant Interests in LGL
securities are:
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Hunt’s 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.
|
No LGL Director has a Relevant Interest in any LGL security except as disclosed in this section
15.1. Except as set out in this section 15, no LGL Director or any person associated with an LGL
Director acquired or disposed of LGL securities in the period of four months ending on the day
immediately before the date of this Scheme Booklet.
15.2 Interests in Newcrest held by LGL and LGL Directors
As at the date of this Scheme Booklet, neither LGL nor any LGL Director has a Relevant Interest in
any securities of Newcrest. Neither LGL nor any LGL Director acquired or disposed of a Relevant
Interest in any securities of Newcrest in the period of four months ending on the day immediately
before the date of this Scheme Booklet.
15.3 Payments and other benefits to LGL Directors and officers of LGL
Other than as disclosed in this Scheme Booklet, no LGL Directors, secretaries or executive officers
of LGL will receive any payment or other benefit through the Scheme other than an allocation of New
Newcrest Shares or a payment of cash on equivalent terms to all Scheme Participants in respect of
LGL Shares to which they are entitled.
15.4 Other agreements or arrangements with LGL Directors
If the Scheme is implemented, Newcrest presently intends to restructure or reconstitute the boards
of directors of LGL and its Related Bodies Corporate to take into account that LGL will no longer
be listed on ASX. If the Scheme is implemented, all of the non-executive directors of LGL will
resign from the board.
Except as described in this section 15, there is no payment or other benefit that is proposed to be
made or given to any director, secretary or executive officer of LGL (or any of its Related Bodies
Corporate) as compensation for the loss of, or as consideration for or in connection with his or
her retirement from, office in LGL or any of its Related Bodies Corporate.
Other than as set out in this Scheme Booklet, there is no agreement or arrangement made between any
LGL Director and any other person in connection with, or conditional upon, the outcome of the
Scheme and no LGL Director has agreed to receive, or is entitled to receive, any benefit from
Newcrest which is conditional on, or connected with, the Scheme (other than in their capacity as an
LGL Shareholder).
15.5 No collateral benefits offered by Newcrest in last four months
During the period of four months before the date of this Scheme Booklet, none of Newcrest, any
Newcrest Director or any associate of Newcrest gave, or offered to give or agreed to give a benefit
to another person which was likely to induce the person or an associate of the other person to:
|
(a)
|
|
vote in favour of the Scheme; or
|
|
|
|
(b)
|
|
dispose of any LGL Shares,
|
where the benefit was not offered to all LGL Shareholders.
|
|
|
|
|
|
|
|
|
15
Additional information continued
|
|
396
|
15.6 LGL Directors’ interests in contracts with Newcrest
No LGL Director has any interest in any contract entered into by Newcrest, except as described
below.
Mr Brook is a non-executive director of Boart Longyear Limited which provides drilling services to
Newcrest. Contracts are entered into in the normal course of business, on an arm’s length basis.
15.7 LGL Executive Share Plan and LGL Employee Share Ownership Plan
LGL introduced the LGL Executive Share Plan in 2006 following its approval by shareholders at the
2006 annual general meeting. The LGL Executive Share Plan was designed to provide long-term
incentives for senior employees to deliver long-term shareholder returns. Under the LGL Executive
Share Plan, participants are granted share rights which vest if and to the extent certain
performance conditions are met. On vesting, the participants are entitled to exercise the share
rights and receive one LGL Share for each vested share right. In accordance with the rules of the
LGL Executive Share Plan, the LGL Board has determined that, if LGL Shareholders approve the Scheme
at the Scheme Meeting, then unvested share rights will vest with pro-rata entitlements calculated
by reference to the scheduled Implementation Date of the Scheme. It is the intention of the LGL
Board that any LGL Shares required to satisfy the exercise of the share rights will be purchased
on-market.
LGL introduced the LGL Employee Share Ownership Plan in 2008 to assist in motivation and retention
of employees at the Lihir Island operation. Under the LGL Employee Share Ownership Plan, LGL Shares
were to be acquired and would have been held in trust for the benefit of employees who continue to
be employed with LGL as at 1 January 2011. If LGL Shareholders approve the Scheme at the Scheme
Meeting, LGL proposes to offer participants the ability to vary their rights under the LGL Employee
Share Ownership Plan to receive a cash payment from LGL in satisfaction of their rights and in lieu
of LGL acquiring LGL Shares on their behalf. If participants do not elect to receive this cash
payment, then LGL proposes that, in accordance with the terms of the trust deed for the LGL
Employee Share Ownership Plan, the LGL Employee Share Ownership Plan shares will vest on the
Effective Date of the Scheme and will be acquired by Newcrest under the Scheme.
This will ensure that outstanding share rights under the LGL Executive Share Plan and share grants
under the LGL Employee Share Ownership Plan are acquired by Newcrest or are otherwise able to be
dealt with before the Record Date.
15.8 LGL Board’s intentions
If the Scheme becomes Effective, the Scheme Shares will be transferred from the Scheme Participants
to Newcrest, the LGL Directors will retire and Newcrest has informed LGL that it intends to appoint
in their place nominees of Newcrest (see section 9.3(e)). Until that time, the LGL Board intends to
continue to conduct the businesses of LGL in the ordinary course. If the Scheme does not become
Effective, the LGL Board intends to continue to conduct the businesses of LGL in the best interests
of LGL Shareholders.
15.9 Newcrest Directors’ interests in marketable securities of Newcrest
As at the date of this Scheme Booklet, the Newcrest Directors and their Relevant Interests in
Newcrest securities are:
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
No Newcrest Director had a Relevant Interest in any Newcrest security except as disclosed in this
section 15.9. Except as set out in this section 15, no Newcrest Director, or any person associated
with a Newcrest Director, acquired or disposed of Newcrest securities in the period of four months
ending on the day immediately before the date of this Scheme Booklet.
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
397
|
15.10 Interests in LGL held by Newcrest and Newcrest Directors
As at the date of this Scheme Booklet, Newcrest has no Relevant Interest in any securities of LGL.
As at the date of this Scheme Booklet, the Relevant Interests in LGL securities held by Newcrest
Directors are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
No Newcrest Director, or any person associated with a Newcrest Director, acquired or disposed of
LGL securities in the period of four months ending on the day immediately before the date of this
Scheme Booklet.
15.11 No dealings in securities of LGL in previous four months
Except for the Scheme Consideration, neither Newcrest nor any of its associates acquired or
disposed of a Relevant Interest in any securities of LGL in the period of four months ending on the
day immediately before the date of this Scheme Booklet.
15.12 Payments and other benefits to Newcrest Directors
Other than as disclosed in this Scheme Booklet, or as permitted pursuant to the provisions of
Newcrest’s Constitution in relation to additional services performed by any Newcrest Director which
in the Newcrest Board’s opinion are outside the scope of the ordinary duties of a Newcrest
Director, including serving on board committees, no Newcrest Director will receive any payment or
other benefit through the Scheme.
15.13 Exploration Results, Mineral Resources and Ore Reserves information
The information in this Scheme Booklet that relates to Ore Reserves at Bonikro and Mount Rawdon is
based on information compiled by Nicholas Spicer. Nicholas Spicer is an employee of LGL Services
Australia Pty Ltd (a company that provides management services to LGL), and is not independent for
NI 43-101 purposes. Nicholas Spicer is a member of the Australasian Institute of Mining and
Metallurgy, a Competent Person under the JORC Code, and a qualified Person for purposes of NI
43-101 in Canada. Nicholas Spicer consents to the inclusion in this Scheme Booklet of the matters
based on his information in the form and context in which it appears.
The information in this Scheme Booklet that relates to Mineral Resources at Lihir Island, Bonikro
and Mount Rawdon, and Exploration Results from Côte d’Ivoire is based on information compiled by
Roy kidd. Roy kidd is an employee of LGL Services Australia Pty Ltd (a company that provides
management services to LGL), and is not independent for NI 43-101 purposes. Roy kidd is a member of
the Australian Institute of Geoscientists, a Competent Person under the JORC Code, and a qualified
Person for purposes of NI 43-101 in Canada. Roy kidd consents to the inclusion in this Scheme
Booklet of the matters based on his information in the form and context in which it appears.
The information in this Scheme Booklet that relates to Ore Reserves at Lihir Island is based on
information compiled by David Grigg. David Grigg is an employee of LGL, and is not independent for
NI 43-101 purposes. David Grigg is a member of the Australasian Institute of Mining and Metallurgy,
a Competent Person under the JORC Code, and a qualified Person for purposes of NI 43-101 in Canada.
David Grigg consents to the inclusion in this Scheme Booklet of the matters based on his
information in the form and context in which it appears.
The information in this Scheme Booklet that relates to Exploration Results, Mineral Resources and Ore
Reserves with regard to Newcrest is based on information compiled by C. Moorhead. C. Moorhead is
Newcrest’s Executive General Manager Minerals, and is not independent for NI 43-101 purposes. C.
Moorhead is a Member of the Australasian Institute of Mining and Metallurgy, a Competent Person as
defined under the JORC Code, and a qualified Person for purposes of NI 43-101 in Canada. C.
Moorhead consents to the inclusion in the Scheme Booklet of the matters based on his information in
the form and context in which it appears.
Ore Reserves and Mineral Resources included herein are presented in accordance with the JORC Code.
For NI 43-101 purposes, if presented in accordance with CIM Definition Standards on Ore Resources
and Mineral Reserves adopted by the CIM counsel, the presentation would be materially the same.
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15
Additional information continued
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398
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Investors should note that it is a requirement of the Listing Rules of ASX that the reporting of
Ore Reserves and Mineral Resources in Australia comply with the JORC Code, whereas mining companies
in other countries may be required to report their mineral reserves and/or resources in accordance
with other guidelines. Investors should note that while Newcrest’s Ore Reserve and Mineral Resource
estimates comply with the JORC Code, they may not comply with the relevant guidelines in other
countries. See section 15.15 for a discussion of certain differences between reporting obligations
under the JORC Code and SEC Industry Guide 7.
15.14 Cautionary note to foreign shareholders
This Scheme Booklet has been prepared having regard to PNG and Australian disclosure requirements.
Financial information in this Scheme Booklet has been prepared in accordance with IFRS and is
presented in abbreviated form and does not contain all the disclosures that are usually provided in
an annual report prepared in accordance with the PNG Companies Act (in the case of financial
information of LGL) or in an annual report prepared in accordance with the Australian Corporations
Act (in the case of financial information of Newcrest and the Merged Group).
PNG and Australian disclosure requirements and IFRS may be different from those applicable in other
jurisdictions.
LGL Shareholders whose 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 People’s
Republic of China, Indonesia, France, Japan, Ireland or Switzerland, should refer to section 14.14.
15.15 United States shareholders
(a) US securities laws
This Scheme Booklet is neither an offer to sell nor a solicitation of an offer to buy securities as
such terms are defined under the US Securities Act. The New Newcrest Shares to be issued under the
Scheme have not been and will not be registered under the US Securities Act.
Newcrest and LGL intend to rely on an exemption from the registration requirements of the US
Securities Act provided by Section 3(a)(10) thereunder in connection with the implementation of the
Scheme and the issue of New Newcrest Shares. Approval of the Scheme by the Court will be relied
upon by Newcrest and LGL for the purpose of qualifying for the Section 3(a)(10) exemption.
None of the SEC, any US state securities commission or any other US regulatory authority has passed
comment upon or endorsed the merits of the Scheme or the accuracy, adequacy or completeness of this
Scheme Booklet. Any representation to the contrary may be a criminal offence.
The Scheme involves the securities of Newcrest, a non-US company. The Scheme is subject to
disclosure requirements under PNG law that are different from those of the United States. Financial
information included in this Scheme Booklet has been prepared in accordance with IFRS that may not
be comparable to the financial statements and financial information provided by US companies.
It may be difficult for US LGL Shareholders and LGL ADS holders to enforce their rights and any
claim they may have arising under US federal or state securities laws. LGL is incorporated in PNG
and Newcrest is incorporated in Australia, and some or all of their respective officers and
directors are residents of Australia. US LGL Shareholders may not be able to sue a PNG or
Australian company or its officers or directors in a PNG or Australian court for violations of US
securities laws. It may be difficult to compel a PNG or Australian company and its affiliates to
subject themselves to a US court’s judgment.
(b) Pro forma financial information
The pro forma historical financial information included in this Scheme Booklet does not purport to
be in compliance with Article 11 of Regulation S-X of the SEC. Under Article 11, pro forma income
statements must be presented assuming the Scheme has been consummated at the beginning of the
first fiscal year presented and may only include adjustments which give effect to events that are:
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•
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directly attributable to the transaction;
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•
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expected to have a continuing impact on the entity; and
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•
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factually supportable.
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Many of the pro forma adjustments made in arriving at the pro forma historical financial
information included in this Scheme Booklet would not be permissible under the SEC’s rules and
regulations on pro forma financial presentations.
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Lihir Gold Limited Scheme Booklet
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(c) Delisting from NASDAQ and termination of SEC registration
LGL’s ADSs currently are listed on NASDAq. After the Scheme becomes Effective, Newcrest Shares will
continue to be listed on ASX and Newcrest’s “level 1” ADR program (which is not listed on a US
national securities exchange) will remain in place (refer to section 8.23). However, LGL ADSs will
be delisted from NASDAq following implementation of the Scheme, and Newcrest has stated that it
does not intend to list its ADRs on NASDAq or any other US national securities exchange after the
Scheme becomes Effective. In addition, although Newcrest will be deemed to succeed to LGL’s
registration with the SEC under the US Exchange Act when the Scheme becomes Effective, Newcrest has
further advised that, provided it satisfies the applicable requirements of Rule 12h-6(d) under the
US Exchange Act, it intends to terminate such registration under the US Exchange Act as soon as
practicable following the time the Scheme becomes Effective. If Newcrest is able to terminate the
registration of its shares under the US Exchange Act, it will not be subject to reporting
obligations under, and other requirements of, the US Exchange Act and the rules and regulations
thereunder, including the obligation to file an annual report on Form 20-F with the SEC, and will
continue to maintain the exemption from registration under the US Exchange Act (and the reporting
obligations under that Act) pursuant to Rule 12g3-2(b) under the US Exchange Act.
(d) Reserve and resource reporting
This Scheme Booklet includes certain information relating to LGL’s and Newcrest’s resources and
reserves, as defined under the JORC Code. It is a requirement of the Listing Rules of ASX that
reporting of reserves and resources in Australia must comply with the JORC Code. The JORC Code
recognises a fundamental division between resources and reserves.
This Scheme Booklet uses the terms “Measured Mineral Resources”, “Indicated Mineral Resources” and
“Inferred Mineral Resources”. LGL Shareholders resident in the United States, including holders of
LGL ADSs, are advised that while such terms are recognised and required by the JORC Code (use of
which is mandated by ASX and permitted to be used in Canada under NI 43-101), the SEC does not
recognise them. “Inferred Mineral Resources” have a great amount of uncertainty as to their
existence, and as to their economic and legal feasibility. It cannot be assumed that all or any
part of an Inferred Mineral Resource will ever be upgraded to a higher category. LGL Shareholders
resident in the United States, including holders of LGL ADSs, are cautioned not to assume that all
or any part of resources, including Measured Mineral Resources or Indicated Mineral Resources, will
ever be converted into Ore Reserves. LGL Shareholders resident in the United States, including
holders of LGL ADSs, are also cautioned not to assume that all or any part of an Inferred Mineral
Resource exists, or is economically or legally mineable.
Mining
companies that file registration statements or periodic reports with the SEC are required to
report their reserves in accordance with SEC Industry Guide 7. The reporting requirements under the
JORC Code and SEC Industry Guide 7 are different in certain material respects. In particular, SEC
Industry Guide 7 does not recognise the classification referred to as “resources” in the JORC Code.
As a result, SEC registrants are permitted only to report proven and probable reserves, and not
resources.
15.16 Exclusivity arrangements
Under the Merger Implementation Agreement, prior to the commencement of the Exclusivity Period, LGL
was permitted to enter into, continue or participate in any negotiation, discussion, arrangement or
understanding with a third party in connection with a possible LGL Control Transaction (which was
not solicited, invited or initiated (whether directly or indirectly) by a member of the LGL Group
or any of their respective representatives or advisers after the date of the Merger Implementation
Agreement) (
Third Party Discussions
).
LGL undertook that at the date of the Merger Implementation Agreement it would cease any existing
negotiations or discussions in respect of any Competing Proposal, other material asset disposal or
spin-off or other restructuring, other than Third Party Discussions.
LGL also undertook that, in the absence of a Superior Proposal being announced and recommended by
the LGL Board, LGL would, at the commencement of the Exclusivity Period, cease any Third Party
Discussions.
LGL agreed that except for Third Party Discussions prior to the commencement of the Exclusivity
Period, on or after the date of the Merger Implementation Agreement, LGL would not (and would 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 (the
No-Shop
Restriction
).
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15
Additional information continued
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400
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LGL has also undertaken that, as and from commencement of the Exclusivity Period, it will not (and
will not communicate an intention to), except with the prior written consent of Newcrest:
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(a)
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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
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(b)
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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.
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The Exclusivity Period commenced on 8 June 2010.
These restrictions will not apply to the extent they require the LGL Board to take action or refuse
to take any action with respect to a Competing Proposal (which was not solicited, invited or
initiated (whether directly or indirectly) by an LGL Group member or any of its representatives or
advisers in contravention of the No-Shop Restriction), if the LGL 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.
If LGL proposes to provide any non-public information in respect of any LGL Group member to a third
party, it must also be provided to Newcrest at the same time (to the extent it has not already been
disclosed to Newcrest).
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 and, with that notice, provide
Newcrest with all material terms of that Competing Proposal to allow Newcrest to propose a
variation to the terms of the Scheme so that the Scheme would be superior to the Competing
Proposal. LGL must consider the proposed variation in good faith, and if it considers that the
proposed variation would result in the Scheme, as varied, being superior to the Competing Proposal,
it must use its best endeavours to agree any amendments to the terms of the Scheme and the Merger
Implementation Agreement.
LGL also undertook to procure that no member of the LGL Group would take or refuse to take any
action that would breach the arrangements set out in the Merger Implementation Agreement.
15.17 Break fee
Under the Merger Implementation Agreement, LGL must pay to Newcrest an amount of US$60 million
(only once and without withholding or set off) as compensation for the actual costs (including
adviser costs and out of pocket expenses) and reasonable opportunity costs of Newcrest if any of
the following occurs:
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(a)
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the LGL Board or any LGL Director:
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(i)
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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
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(ii)
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makes any public statement that is fundamentally inconsistent with the statement and
recommendation referred to in paragraph 15.17(a)(i) above,
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in either case other than where, in the Independent Expert’s Report, the Independent Expert opines
that the Scheme is not in the best interests of LGL Shareholders (provided that the reasons for the
Independent Expert’s conclusions do not include the existence of a Competing Proposal);
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(b)
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a Superior Proposal is announced and recommended or supported by the LGL Board or any LGL
Director;
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(c)
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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
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(d)
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the Merger Implementation Agreement is terminated by Newcrest pursuant to:
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(i)
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a material breach of the Merger Implementation Agreement by LGL (other than for a breach
of LGL’s 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
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(ii)
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the occurrence of an LGL Regulated Event.
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Lihir Gold Limited Scheme Booklet
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15.18 Termination of Merger Implementation Agreement
The Merger Implementation Agreement may be terminated by either LGL or Newcrest by notice to the
other:
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(a)
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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 Court’s failure to approve the Scheme in
accordance with section 250 of the PNG Securities Act); or
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(b)
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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).
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Newcrest may terminate the Merger Implementation Agreement at any time before 8.00am on the Second
Court Date by notice to LGL if:
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(a)
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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
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(b)
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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.
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LGL may terminate the Merger Implementation Agreement at any time before 8.00am on the Second
Court Date by notice to Newcrest if:
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(c)
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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
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(d)
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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).
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15.19 Other information material to the decision by LGL Shareholders in relation to the Scheme
Except as set out in this Scheme Booklet, there is no 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 the LGL Directors, at the date of this Scheme Booklet, and which has not
previously been disclosed to the LGL Shareholders.
15.20 Conditions precedent to the implementation of the Scheme
Implementation of the Scheme is subject to the following conditions precedent:
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(a)
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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.
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(b)
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Independent Expert’s Report –
The Independent Expert providing an opinion that the Scheme is
in the best interests of LGL Shareholders.
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(c)
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LGL Shareholder approval –
The Scheme is approved by the Required Majority of LGL
Shareholders at the Scheme Meeting.
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(d)
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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).
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(e)
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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.
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(f)
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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.
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(g)
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Regulatory approvals –
Before 8.00am on the Second Court Date, all Regulatory Approvals
required to implement the Scheme are obtained and not withdrawn.
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(h)
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ASx quotation –
ASX approving the quotation of the New Newcrest Shares.
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15
Additional information continued
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402
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(i)
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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).
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(j)
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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.
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(k)
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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.
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(l)
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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.
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(m)
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No restraint –
No order or legislative restraint, whether permanent or temporary, being
issued by a Governmental Agency that restricts the implementation of the Scheme.
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(n)
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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.
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The conditions precedent to the implementation of the Scheme are set out in full in the Merger
Implementation Agreement, a copy of which is included as Attachment B to this Scheme Booklet.
As at the date of this Scheme Booklet, neither Newcrest nor LGL is aware of any reason why any of
the conditions precedent to the implementation of the Scheme will not be satisfied by the required
date. LGL and Newcrest have applied for all the Regulatory Approvals they believe are required to
implement the Scheme.
15.21 Comparison of corporations and takeovers regulation in PNG and Australia
While the regime in Australia in relation to the regulation of corporations and takeovers is
generally similar to the equivalent regime in PNG, there are some differences (for example, the
Australian regime in general is more detailed). Some of the key elements of corporations and
takeovers regulation are summarised in the table below. The comparison below is not an exhaustive
statement of all relevant laws, rules and regulations and is intended as a general guide only. LGL
Shareholders should consult with their own legal adviser if they require further information.
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AUSTRALIA
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PNG
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Source of corporate
regulation
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Corporations are
regulated principally
by the Australian
Corporations Act, and
by Australian general
law.
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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.
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Regulatory
supervision of
corporations
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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.
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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).
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Lihir Gold Limited Scheme Booklet
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AUSTRALIA
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PNG
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Calling shareholder
meetings
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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.
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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.
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Voting requirements
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Unless required by the Australian
Corporations Act or a company’s
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.
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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
company’s constitution requires a higher
majority) including:
•
the adoption, alteration or revocation of
a company’s 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.
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Where the company directors have
exceeded their powers in the conduct of
the company’s 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).
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Major transactions
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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 company’s
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).
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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.
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Additional information continued
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AUSTRALIA
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PNG
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Minority
shareholder buy-out
rights
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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 company’s 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
company’s 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.
|
|
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|
|
|
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|
|
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
else’s 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
company’s
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
director’s or
officer’s total
remuneration, but
that has now been
reduced to the
equivalent of one
year’s 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
arm’s 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 entity’s
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 arm’s
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
company’s 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 company’s
shareholdings), subject to the offer being an
offer for a set proportion of each offeree’s
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 bidder’s 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
Australia’s 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
|
15.22 Status of Regulatory Approvals
Newcrest has obtained from ASIC (on its own behalf and, where applicable, on behalf of LGL and
others) the following exemptions from and modifications to the Australian Corporations Act:
|
•
|
|
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 abovementioned exemptions from and modifications of the Australian Corporations Act are subject to certain conditions, including the following:
|
•
|
|
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.
|
ASX has granted waivers from Listing Rules 7.1 and 10.1 to the extent necessary to permit Newcrest
to issue New Newcrest Shares to Scheme Participants (and any nominee in respect of a nominee share
sale facility) under the Scheme without obtaining the approval of Newcrest Shareholders.
On 23 June 2010, Newcrest provided voluntary notification to the Foreign Investment Review Board of
the Scheme under section 25 of the FATA for approval of the acquisition by Newcrest of all the LGL
Shares and the issue of the New Newcrest Shares component of the Scheme Consideration. FIRB
confirmed to Newcrest on 17 July 2010 that it had no objections to the proposal under the
Australian Government’s foreign investment policy.
Newcrest has applied to the PNG Securities Commission (on its own behalf and, where applicable, on
behalf of LGL and other relevant persons) for the following exemptions:
|
(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.
|
Newcrest will apply to the Investment Promotion Authority of PNG (on its own behalf and, where
applicable, on behalf of LGL and its subsidiaries) for certification and re-certification under
sections 30 and 32 of the
Investment Promotion Act 1992
(PNG) after the Implementation Date.
As at the date of this Scheme Booklet, to the knowledge of Newcrest and LGL there are no other
Regulatory Approvals necessary to implement the Scheme.
|
|
|
|
|
|
|
|
|
15
Additional information continued
|
|
412
|
15.23 Formal disclosures by LGL
(a) Interests of advisers
Other than as set out in this section 15 or elsewhere in this Scheme Booklet, no person named in
this Scheme Booklet as performing a function in a professional, advisory or other capacity in
connection with the preparation or distribution of this Scheme Booklet holds, or held at any time
during the last two years before the date of this Scheme Booklet, any interest in:
|
(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.
|
Other than as set out in this section 15 or elsewhere in this Scheme Booklet, no amounts have been
paid or agreed to be paid and no value or other benefit has been given or agreed to be given to any
of these persons for services rendered by them in connection with the preparation of this Scheme
Booklet or in connection with the formation or promotion of LGL or in connection with the Scheme.
(b) LGL’s experts and fees
The persons performing a function in a professional or advisory capacity in connection with the
Scheme and with the preparation of this Scheme Booklet on behalf of LGL are:
|
(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 Expert’s Report;
|
|
|
|
(vii)
|
|
AMC Consultants Pty Ltd as the author of the Independent Technical Specialist’s Report; and
|
|
|
|
(viii)
|
|
PricewaterhouseCoopers Securities Ltd as the author of the Investigating Accountant’s Report.
|
Each of them will be entitled to receive professional fees charged in accordance with their normal
basis of charging.
The fee for professional services paid or payable to the Independent Expert which has provided an
Independent Expert’s Report is A$1,900,000 (plus GST). The fee for professional services paid or
payable to the Independent Technical Specialist which has provided an Independent Technical
Specialist’s Report is A$295,000 (including GST). The fee for professional services paid or payable
to the Investigating Accountant which has provided an Investigating Accountant’s Report is
US$250,000 (plus GST).
15.24 Consents and disclaimers
The following parties have given, and have not withdrawn before the date of this Scheme Booklet, their consent:
|
•
|
|
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,
|
and has not withdrawn that consent as at the date of 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 Expert’s Report set out in section 11;
|
|
|
|
(i)
|
|
AMC Consultants Pty Ltd as Independent Technical Specialist and to inclusion of the
Independent Technical Specialist’s Report set out in section 12;
|
|
|
|
(j)
|
|
PricewaterhouseCoopers Securities Ltd as Investigating Accountant and to inclusion of
the Investigating Accountant’s 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 Newcrest’s
exploration results (see section 8); and
|
|
|
|
(m)
|
|
Roy kidd, Nicholas Spicer and David Grigg as Competent Persons in relation to the
compilation of LGL’s Mineral Resources, Ore Reserves and Exploration Results (as the case may
be) (see section 7.4).
|
Each of these persons:
|
•
|
|
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 Expert’s Report, Independent Technical
Specialist’s Report, Investigating Accountant’s 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.
|
Newcrest has given, and has not withdrawn before the date of this Scheme Booklet, its consent to be
named in this Scheme Booklet in the form and context in which it is named, on the basis set out in
the “Responsibility for information” paragraph contained in the Important Notices section at the
start of this Scheme Booklet.
15.25 Concise prospectus under PNG law
This Scheme Booklet contains the same disclosure required as if it were a concise prospectus
prepared in accordance the PNG Securities Regulation. Sections 5.15, 7.9, 7.14, 7.15, 8.5, 8.10,
8.12, 8.20, 8.21, 8.22 and 10.1 refer to information contained in other documents not included in
this Scheme Booklet. As well as being available free of charge to any LGL Shareholder on request,
copies of these documents may be inspected at the PNG registered office of LGL at:
Level 7,
Pacific Place
Cnr Champion Parade and Musgrave Street
Port Moresby NCD
Papua New Guinea, 121
The information contained in these documents will primarily be of interest to professional
analysts, advisers or investors. These documents are not incorporated by reference in this Scheme
Booklet.
15.26 Privacy
LGL may collect personal information in the process of implementing the Scheme. Such information
may include the name, contact details and shareholdings of LGL Shareholders and the name of persons
appointed by LGL Shareholders to act as a proxy, attorney or corporate representative at the Scheme
Meeting. The primary purpose of the collection of personal information is to assist LGL to conduct
the Scheme Meeting and implement the Scheme. Personal information of the type described above may
be disclosed to the LGL Registry, print and mail service providers, authorised securities brokers
and Related Bodies Corporate of LGL. LGL Shareholders have certain rights to access personal
information that has been collected. LGL Shareholders should contact the LGL Registry in the first
instance, if they wish to access their personal information. LGL Shareholders who appoint a named
person to act as their proxy, attorney or corporate representative should ensure that they inform
that person of these matters.
|
|
|
|
|
|
|
|
|
15
Additional information continued
|
|
414
|
15.27 Supplementary information
To the extent required by the Listing Rules, the Australian Corporations Act, PNG Companies Act,
PNG Securities Act or any other applicable law, LGL will issue a supplementary document to this
Scheme Booklet if it becomes aware of any of the following between the date of this Scheme Booklet
and the date of the Scheme Meeting:
|
(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.
|
Depending on the nature and timing of the changed circumstances and subject to obtaining any
relevant approvals, LGL may circulate and publish the supplementary document by any or all of:
|
(e)
|
|
placing an advertisement in a prominently published newspaper that is circulated in PNG and
Australia;
|
|
|
|
(f)
|
|
posting the supplementary document on LGL’s 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 year’s 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 Expert’s 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 Specialist’s 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 People’s 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 Accountant’s 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 Expert’s Report, the Investigating Accountant’s Report and the Independent Technical
Specialist’s 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.
|
|
|
|
|
|
|
|
|
|
A Notice of Meeting continued
|
|
424
|
NOTICE OF MEETING
LIHIR GOLD LIMITED (ARBN 069 803 998) (LGL)
NOTICE OF COURT ORDERED MEETING OF REGISTERED HOLDERS OF FULLY PAID ORDINARY SHARES IN LGL
NOTICE IS HEREBY GIVEN, that by Order of the National Court of Papua New Guinea
(Court),
made on 22
July 2010 under section 250(2)(b) of the
Companies Act 1997
(PNG), the Court has ordered that a
meeting of LGL Shareholders, be held at the Crowne Plaza Hotel, Corner Hunter and Douglas Streets,
Port Moresby, Papua New Guinea on Monday, 23 August 2010 at 11.00am (Port Moresby time).
Purpose of meeting
The purpose of the meeting is to consider and, if thought fit, to agree to the scheme of
arrangement (with or without modification) between LGL and the Scheme Participants described in the
Resolution below.
Resolution
LGL Shareholders will be asked to consider and, if thought fit, to pass the following resolution:
“That pursuant to and in accordance with section 250 of the
Companies Act 1997
(PNG), the scheme of
arrangement proposed to be entered into between LGL and the Scheme Participants, as contained in
and more particularly set out in the Scheme Booklet of which the notice convening this meeting
forms part (Scheme), is agreed to and the LGL Board is authorised to agree to such alterations or
conditions as are thought fit by the Court and, subject to approval of the Scheme by the Court, to
implement the Scheme with any such alterations or conditions.”
By order of the Board of Lihir Gold Limited
Stuart MacKenzie
Group Secretary
22 July 2010
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
425
|
Notes
Terminology
Capitalised terms which are defined in the LGL Constitution or in the Scheme Booklet
which accompanies this Notice of Scheme Meeting have the same meaning when used in this notice
(including these notes) unless the context requires otherwise.
|
•
|
|
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 Shareholder’s
voting rights. If proportions or numbers are not specified, each proxy may exercise half the LGL
Shareholder’s 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
|
|
|
|
|
|
|
|
|
|
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:
|
LGL Registry
C/- Computershare Investor Services Pty Limited
GPO Box 52
Melbourne Victoria 3001 Australia
By Fax:
(within Australia) 1800 268 260
(outside Australia) + 61 3 9473 2083
|
MERGER IMPLEMENTATION AGREEMENT
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
428
|
Merger Implementation
Agreement
Lihir Gold Limited
ARBN 069 803 998
Newcrest Mining Limited
ABN 20 005 683 625
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
429
|
Merger Implementation Agreement
|
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.
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
430
|
Merger Implementation Agreement
|
|
|
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, Newcrest’s 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 Shareholder’s 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.
|
|
|
|
|
|
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|
|
|
Lihir Gold Limited Scheme Booklet
|
|
431
|
Merger Implementation Agreement
|
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 Expert’s 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;
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
432
|
Merger Implementation Agreement
|
|
(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).
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
433
|
Merger Implementation Agreement
|
|
|
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 Board’s unanimous
recommendation pursuant to clause 9.1(a) and each Lihir Director’s 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 Expert’s 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
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
434
|
Merger Implementation Agreement
|
|
|
|
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 Court’s 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
Expert’s 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, Newcrest’s 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
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
435
|
Merger Implementation Agreement
|
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, Newcrest’s 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 Group’s 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
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
436
|
Merger Implementation Agreement
|
|
|
|
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 Newcrest’s 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 director’s 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 Lihir’s 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:
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
437
|
Merger Implementation Agreement
|
|
(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 Board’s
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
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
438
|
Merger Implementation Agreement
|
|
|
constitutes its legal, valid and binding obligations enforceable against it in accordance with its terms.
Representations and warranties for the benefit of Lihir alone
|
|
|
|
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 Expert’s 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
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|
|
|
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(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
|
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Lihir Gold Limited Scheme Booklet
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439
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Merger Implementation Agreement
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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
|
|
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(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,
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B Merger Implementation Agreement continued
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440
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Merger Implementation Agreement
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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)
|
|
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(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
|
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|
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Lihir Gold Limited Scheme Booklet
|
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441
|
Merger Implementation Agreement
|
|
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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 Expert’s
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.
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
442
|
Merger Implementation Agreement
|
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
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
443
|
Merger Implementation Agreement
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
444
|
Merger Implementation Agreement
|
|
|
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 Expert’s 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 Lihir’s 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:
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
445
|
Merger Implementation Agreement
|
|
(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 D’lvoire:
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
446
|
Merger Implementation Agreement
|
|
(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 Expert’s 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;
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|
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(g)
|
|
creation of any security interest or encumbrance, individually or in aggregate, over the whole
or a substantial part of the business or assets;
|
|
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|
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(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;
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Lihir Gold Limited Scheme Booklet
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447
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Merger Implementation Agreement
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(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;
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(j)
|
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the provision of any financial accommodation or capital contributions to a person other
than another Lihir Group member in excess of US$50 million;
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(k)
|
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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
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(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,
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other than to the extent it is provided for in the Approved Budget or consented to in writing by
Newcrest.
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Lihir Share
means a fully paid ordinary share in the capital of Lihir.
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Lihir Shareholder means
a
person who is registered as a holder of Lihir Shares.
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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.
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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:
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(a)
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has a term of one year or more; or
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(b)
|
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contemplates, during its entire term, payments of US$30 million or more in aggregate,
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and, in any case, includes the Key Material Contracts.
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Maximum Cash Consideration
is defined in
clause 3.3(b).
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Maximum Share Consideration
is defined in clause 3.3(c).
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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.
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Million Ounce Plant Upgrade
means the project titled ‘Million Ounce Plant Upgrade’ undertaken to
upgrade the operations of Lihir on Lihir Island, PNG.
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Mixed Consideration
has
the meaning given in clause 3.3(a).
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B Merger Implementation Agreement continued
|
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448
|
Merger Implementation Agreement
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Newcrest
means Newcrest Mining Limited.
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Newcrest Board
means the Board of Directors of Newcrest.
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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 Group’s past, present or future operations, affairs,
business or strategic plans.
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Newcrest Group
means Newcrest and its subsidiaries.
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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):
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|
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(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
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|
|
(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
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|
(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,
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|
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other than any event or occurrence:
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|
(i)
|
|
which is a direct result of general economic or securities markets conditions;
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|
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(ii)
|
|
which is required to be done or undertaken pursuant to the Scheme;
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|
|
(iii)
|
|
which is done with the prior approval of Lihir; or
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(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).
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|
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|
|
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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)
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|
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(a)
|
|
any matter referred to in section 652C(1) or (2) of the Australian Corporations Act;
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|
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|
|
(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
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
449
|
Merger Implementation Agreement
|
|
|
|
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 Expert’s Report, scheme of arrangement by Lihir, the deed poll by Newcrest and the
Notice of Meeting and Proxy Form as required by the Court.
|
|
|
|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
450
|
Merger Implementation Agreement
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
451
|
Merger Implementation Agreement
|
|
(f)
|
|
A reference to a party to this agreement or another agreement or document includes the party’s
successors, permitted substitutes and permitted assigns (and, where applicable, the party’s 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.
|
|
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|
|
|
|
|
|
|
B Merger Implementation Agreement continued
|
|
452
|
Merger Implementation Agreement
Schedule
Timetable
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
453
|
Merger Implementation Agreement
Executed as an agreement on 4 May 2010
Executed
by Newcrest Mining Limited:
|
|
|
|
|
|
|
|
|
|
|
|
|
Director/Secretary Signature
|
|
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|
Print Name
|
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|
Print Name
|
|
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|
|
|
|
|
|
Executed
by Lihir Gold Limited:
|
|
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|
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Director Signature
|
|
|
|
Director/Secretary Signature
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
Print Name
|
|
|
|
Print Name
|
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
455
|
Scheme of Arrangement
Lihir Gold Limited
ARBN 069 803 998
LGL Shareholders
Blake Dawson
Level 36, Grosvenor Place
225 George Street
Sydney NSW 2000
Australia
T 61 2 9258 6000
F 61 2 9258 6999
Reference
PHM SZMC SZD
02-2013-4463
©
Blake Dawson 2010
|
|
|
|
|
C
Scheme of Arrangement continued
|
|
456
|
Blake Dawson
Contents
|
|
|
|
|
|
|
CONTENTS
|
|
|
2
|
|
|
|
|
|
|
|
|
1. PRELIMINARY
|
|
|
3
|
|
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|
|
|
|
|
2. CONDITIONS
|
|
|
3
|
|
|
|
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|
|
|
|
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
|
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
457
|
Blake Dawson
SCHEME OF ARRANGEMENT
pursuant to section 250 of the
Companies Act 1997
(PNG)
between
Lihir Gold Limited
ARBN 069 803 998
(LGL)
and
each
LGL Shareholder
|
|
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 Newcrest’s 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.
|
|
|
2.1
|
|
Conditions of Scheme
|
|
|
|
|
|
|
The Scheme is conditional on:
|
|
|
|
|
|
C
Scheme of Arrangement continued
|
|
458
|
Blake Dawson
|
|
(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.
|
|
|
3.1
|
|
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.
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|
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|
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3.3
|
|
PNG Register
|
|
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(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
|
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|
|
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|
Lihir Gold Limited Scheme Booklet
|
|
459
|
Blake Dawson
|
|
|
|
Participant authorises and directs the PNG Broker to execute a transfer of
the Scheme Shares on the PNG Register on their behalf.
|
|
|
|
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(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.
|
|
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(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:
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(i)
|
|
an ASTC Regulated Transfer;
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(ii)
|
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a Holding Adjustment; or
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(iii)
|
|
a Scheme Transfer,
|
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|
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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:
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(iv)
|
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executing and delivering, or causing to
be executed and delivered, any documents;
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(v)
|
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giving instructions to any relevant
Participant under the ASTC Settlement Rules; or
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|
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(vi)
|
|
Transmitting, or causing to be Transmitted, any Message.
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(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.
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|
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|
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(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.
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|
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(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.
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3.5
|
|
Agreement by Scheme Participants
|
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|
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|
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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
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|
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|
C
Scheme of Arrangement continued
|
|
460
|
Blake Dawson
|
|
|
|
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 Newcrest’s
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.
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|
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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.
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|
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|
|
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.
|
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|
|
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 Participant’s 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
|
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|
|
|
(b)
|
|
must take all other actions in the capacity of the
registered holder of LGL Shares as Newcrest directs.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
461
|
Blake Dawson
|
|
4.1
|
|
Provision of Scheme Consideration
|
|
|
(a)
|
|
In consideration of Newcrest’s 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
|
|
|
|
|
|
C
Scheme of Arrangement continued
|
|
462
|
Blake Dawson
|
|
|
|
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 Participant’s 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.
|
|
|
(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
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
463
|
Blake Dawson
|
|
|
|
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.
|
|
|
(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:
|
|
|
|
|
|
C
Scheme of Arrangement continued
|
|
464
|
Blake Dawson
|
|
|
|
{(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 Newcrest’s 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
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
465
|
Blake Dawson
|
|
(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 Newcrest’s 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
|
|
|
|
|
|
C
Scheme of Arrangement continued
|
|
466
|
Blake Dawson
|
|
|
|
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.
|
|
|
(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.
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|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
467
|
Blake Dawson
|
|
(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.
|
|
|
|
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(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.
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|
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|
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(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.
|
|
|
6.1
|
|
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.
|
|
|
7.1
|
|
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
|
|
|
|
|
|
C Scheme of Arrangement continued
|
|
468
|
Blake Dawson
|
|
|
|
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 LGL’s 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.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
469
|
Blake Dawson
|
|
|
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 LGL’s 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 Year’s
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.
|
|
|
|
|
|
C Scheme of Arrangement continued
|
|
470
|
Blake Dawson
|
|
|
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 Expert’s 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 People’s 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.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
471
|
Blake Dawson
|
|
|
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 LGL’s 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.
|
|
|
|
|
|
C Scheme of Arrangement continued
|
|
472
|
Blake Dawson
|
|
|
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 person’s 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;
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
473
|
Blake Dawson
|
|
(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.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
475
|
Deed Poll
Newcrest Mining Limited
ABN 20 005 683 625
Scheme Participants
Blake Dawson
Level 36, Grosvenor Place
225 George Street
Sydney NSW 2000
Australia
T 61 292586000
F 61 292586999
Reference
PHM SZMC SZD
02-2013-4463
©Blake
Dawson 2010
|
|
|
|
|
D Deed Poll continued
|
|
476
|
Blake Dawson
Deed Poll
DATE:
20 July 2010
PARTIES
Newcrest Mining Limited
ABN 02 005 683 625 of Level 9, 600 St Kilda
Rd, Melbourne, VIC 3004 (
Newcrest
)
Each Scheme Participant
OPERATIVE PROVISIONS
|
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 Newcrest’s 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.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
477
|
Blake Dawson
|
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:
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(a)
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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
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(b)
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in respect of the New Newcrest Shares component of the Scheme
Consideration:
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(i)
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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;
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(ii)
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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;
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(iii)
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on the Implementation Date, entering into the register of
members of Newcrest the name and address of:
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(A)
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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
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(B)
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the Sale Agent in respect of the aggregate number of New
Newcrest Shares issued to them under clause
2.2(b)(ii);
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(c)
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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:
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(i)
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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
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(ii)
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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,
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a holding statement or notices 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 the Scheme;
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D Deed Poll continued
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478
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Blake Dawson
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(d)
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as soon as reasonably practicable, Newcrest must procure that the Sale
Agent:
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(i)
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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
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(ii)
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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).
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(e)
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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 Newcrest’s 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.
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2.3
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Sending cheques
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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.
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2.4
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Joint holders
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In the case of LGL Shares held in joint names:
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(a)
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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
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(b)
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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.
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3.
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NEWCREST WARRANTIES
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Newcrest warrants that:
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(a)
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it is validly existing
corporation registered under the laws of its place of
incorporation;
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Lihir Gold Limited Scheme Booklet
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479
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Blake Dawson
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(b)
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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;
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(c)
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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;
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(d)
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this deed poll is valid and binding on it; and
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(e)
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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.
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4.
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CONTINUING OBLIGATIONS
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This deed poll is irrevocable and, subject to clause 1, remains in full
force and effect until:
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(a)
|
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Newcrest has fully performed its obligations under this deed poll; or
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(b)
|
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the earlier termination of this deed poll under clause 1.2.
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5.
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NOTICES
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5.1
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Form
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Any communications in connection with this deed poll must be:
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(a)
|
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in writing;
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(b)
|
|
addressed to Newcrest at the address
shown below and marked for the attention
of Stephen Creese, the General Counsel and Company Secretary:
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Newcrest
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Address:
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Level 9, 600 St Kilda Road
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Melbourne, VIC 3004
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OR
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PO Box 6213
St Kilda Road Central, VIC 8008
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Fax No:
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+61 3 9521 3564
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For the attention of:
|
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General Counsel and Company Secretary
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(c)
|
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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.
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5.2
|
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Delivery
|
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They must be:
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(a)
|
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left at the address set out in clause 5.1 (b) of this deed poll;
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D Deed Poll continued
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480
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Blake Dawson
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(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
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(c)
|
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sent by fax to the fax number set out or referred to in clause 5.1 (b) of
this deed poll,
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However, if Newcrest has notified a changed postal address or changed
fax number, then the communication must be to that address or number.
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5.3
|
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When effective
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They take effect from the time they are received unless a later time is specified.
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5.4
|
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Receipt postal
|
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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).
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5.5
|
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Receipt-fax
|
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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.
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5.6
|
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Receipt-general
|
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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.
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6.
|
|
STAMP DUTY
|
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|
|
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
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|
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(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.
|
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|
|
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.
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Lihir Gold Limited Scheme Booklet
|
|
481
|
Blake Dawson
|
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.
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|
|
|
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.
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|
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.
|
|
|
|
|
|
D Deed Poll continued
|
|
482
|
Blake Dawson
|
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 party’s 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.
|
|
|
|
|
|
Lihir Gold Limited Scheme Booklet
|
|
483
|
Blake Dawson
EXECUTED
and delivered as a deed poll.
Executed by
Newcrest Mining Limited
|
|
|
|
|
|
/s/ G. J. Robinson
|
|
/s/ S. E. N. Creese
|
|
|
Signature of director
|
|
Signature of Secretary
|
|
|
|
|
|
|
|
G. J. ROBINSON
|
|
S. E. N. CREESE
|
|
|
Name
|
|
Name
|
|
This page has been intentionally left blank.
This page has been intentionally left blank.
This page has been intentionally left blank.
This page has been intentionally left blank.
This page has been intentionally left blank.
CORPORATE
DIRECTORY
Lihir Gold Limited
Papua New Guinea
Head Office
Level 7
Pacific Place
Corner Champion Parade and Musgrave Street
Port Moresby
Papua New Guinea
Tel: +67 5 321 7711
Australia
Corporate Office
LGL Services Australia Pty Ltd
Level 32
400 George Street
Brisbane QLD 4000
Australia
Tel: +61 7 3318 3300
Newcrest Merger -Shareholder Information Line
Share holders located in Australia: 1300 749 597
Share holders located outside Australia: +613 9415 4665
Lihir Gold United Registry
Computershare Investor Services Pty Limited
Papua New Guinea
C/-Kina Securities
Level 2
Deloi tte Tower
Douglas Street
Port Moresby
Papua New Guinea
Tel: +675 308 3888
Fax: +675 308 3899
Australia
Level 19
307 Queen St
Bri sbane QLD 4000
Australia
Tel: +61 7 3237 2100
Fax: +61 7 3237 2152
Website: www.computershare.com
ADR Depositary
The Bank of NewYork Mellon
101 Barclay, 22 West
NewYork
NewYork 10286
United States of America
Tel: 1888 BNYADRs (US residents)
Tel: +1610 312 5315 (non US residents)
Website: www.adrbnymellon.com
Financial Advisers to LGL
Greenhill Caliburn Pty Limited
Level 30
101 Collins Street
Melbourne VIC 3000
Australia
Macquarie Capital Advisers Limited
Level 23
101 Collins Street
“Melbourne VIC 3000
Australia
Legal Adviser to LGL
Blake Dawson
Level 36
Grosvenor Place
225 George Street
Sydney NSW 2000
Australia
Independent Expert
Grant Samiel & Associates Pty Limited
Level 6
1 Collins Street
Melbourne VIC 3000
Australia
Independent Technical Specialist
AMC Consultants Pty Ltd
Ground Floor
9 Have lock Street
West Perth WA 6005
Australia
Investigating Accountant
PricewaterhouseCoopers Securities Ltd
Riverside Centre
123 Eagle Street
Brisbane QLD 4000
Australia
Lihir Gold United
ARBN 069 803 998
Papua New Guinea
Head Office
Level 7
Pacific Place
Corner Champion Parade and Musgrave Street
Port Moresby
Papua New Guinea
Tel: +67 5 321 7711
Australia
Corporate Office
LGL Services Australia Pty Ltd
Level 32
400 George Street
Brisbane QLD 4000
Australia
Tel: +61 7 3318 3300
Lihir Gold, Limited (MM) (NASDAQ:LIHR)
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Lihir Gold, Limited (MM) (NASDAQ:LIHR)
過去 株価チャート
から 5 2023 まで 5 2024
