Felicity WilliamsMarch 21, 2008 12:00amGOLD miner Lihir Gold is...

Felicity Williams

March 21, 2008 12:00am
GOLD miner Lihir Gold is poised to acquire smaller rival Equigold in a $1.1 billion friendly deal that will create the world's ninth biggest producer of the precious metal by next year.

Analysts expect the merged Lihir-Equigold to continue with an aggressive takeover strategy by snapping up local gold juniors but added that it could also be on the radar of big global producers amid record high gold prices.

The deal combines Lihir's flagship operations on Lihir Island in PNG and its mine development in Ballarat with Equigold's mines at Mount Rawdon in Queensland and Kirkalocka in WA as well as its 85 per cent stake in the highly prospective Bonikro deposit on the Ivory Coast in West Africa.

By joining forces the companies will increase their geographical spread -- thus reducing the sovereign risk of operating in PNG and West Africa. Equigold will also get access to Lihir's strong balance sheet to fund the development of Bonikro.

"Lihir Gold is in the process of building a major global gold producer and this is an important part of that construction," Lihir chairman Ross Garnaut told journalists.

The combined entity will have output of more than 1.2 million ounces of gold by 2009 at a cash cost in the lowest quartile of global producers and reserves of around 25 million ounces.

It will have market capitalisation of about $9 billion, placing it among the top 30 companies in Australia.

Stock Resource independent analyst Peter Strachan told BusinessDaily the combined Lihir-Equigold is likely to swoop on smaller players in the local gold sector to further grow its operations.

Possible takeover targets included Perth-based juniors Troy Resources and Avoca Resources, he said.

Asked whether the world's big gold companies would eye the combined Lihir-Equigold as a potential takeover target, Mr Strachan responded: "They could do".

Equigold shares jumped 33 or nearly 8 per cent to $4.63, but remained below the offer price.

Lihir Gold shares tumbled 44 or nearly 11 per cent to $3.60 on the back of the bid.