Disagree you are assuming that PNG would sell at takeover and...

Disagree you are assuming that PNG would sell at takeover and not agree to a takeover. PNG don't necessarily have to sell their stake if there was a takeover, unless you know something I (or we) don't know...........

Takeover talk in The Australian 01/10/07:


Gold takeover fever hits foreign venturers Print Andrew Trounson | October 01, 2007

THE Australian gold sector may be heading for another bout of foreign takeovers as the world's second-largest gold miner, Newmont, highlights their attraction by warning of rising costs and falling reserves.

The world's gold giants are battling rising costs, declining ore grades and reserves and falling exploration success.

That is stoking speculation that the large resource bases and comparatively lower costs offered by locally listed majors Newcrest Mining and Lihir Gold will make them increasingly attractive targets.

Brokerage Credit Suisse says Newcrest and Papua New Guinea-based Lihir could be "in the crosshairs" given their comparatively lower costs and high reserve bases.

"We see potential for further consolidation within the gold industry, both domestically and abroad," Credit Suisse says in a report on Friday.

"Our outlook on gold is increasingly bullish, and in our view both Lihir and Newcrest appear attractive takeover targets," the report says.

Based on forecast earnings and the historical multiples paid in major gold takeovers in the past 10 years, Newcrest and Lihir look expensive at current share prices, Credit Suisse notes.

The big difference for Credit Suisse is the increasing importance of costs and reserves, and on valuation multiples relative to costs and reserves rather than earnings, Newcrest and Lihir look attractive compared with historical deals, it notes.

The broker also says its earnings multiples on Newcrest and Lihir are based on gold averaging $US700 an ounce in the next 12 months, which looks increasingly unlikely given that spot last week touched $US745.50. In the current market Credit Suisse says there is potential for Newcrest and Lihir to command takeover premiums of 30-40 per cent.

At the Denver Gold Forum last week Newmont chief executive Richard O'Brien warned it was facing higher than expected costs because of more expensive production at its Nevada operations, which account for 40-45 per cent of its gold production.

Newmont has been hit by higher than expected startup costs at its Phoenix mine in Nevada, while its lower cost Midas mine has been shut since June because a miner was killed in an accident.

"Across the world in the industry we continue to see grades of reserve and production coming down. We continue to be challenged by projects that take longer to bring into production," Mr O'Brien said.

In recent months both Newcrest and Lihir have moved to close out their gold forward sales and maximise their exposure to a buoyant spot market. The close-out makes them potentially more attractive to global majors such as Newmont and Barrick, which also have closed out their forward hedging.

Spot gold hit a fresh 28-year high on Friday of $US743.60 an ounce.

The yellow metal is being driven up by a combination of factors, including its attractiveness as a hedge against US dollar weakness and inflation.

The rising gold price has been a boon for miners, but for Australian miners the price increase has been muted by the strength of the Australian dollar. In US dollar terms the gold price has risen 16 per cent so far this year, but in Australian dollar terms it is up just 4.4 per cent.

Newcrest shares ended last week at $28, valuing it at $12 billion, while Lihir shares ended at $3.94, valuing it at $7.5 billion.