Rport from Wilsons FYI, may help "Lihir is making an...

Rport from Wilsons FYI, may help



"Lihir is making an institutional placement to raise US$325M. Although we see this as unnecessary given robust earnings outlook and existing, undrawn debt facilities, we acknowledge the benefit of securing the additional cash while it is available. It will enable the company to remain
debt free through the expansion of Lihir Island and facilitate additional mill components being added early. These will provide operational optimisation and redundancy. The impacts of the raising are minimal on
our EPS forecasts (+1 to 3%). On a PER of 17x LGL is still trading below peers and remains our preferred large cap gold exposure.

On our estimates Lihir could have funded the planned capex from operating cashflow and a temporary drawdown of the debt facilities already in place. However now it can be done from cash and operating cashflow, allowing the company to remain un-geared over the medium term. We have added US$50M to our assumed capex in CY09 (now
US$465M) for additional plant additions at Lihir Island. After factoring in the additional shares on issue, cash position and capex spend our EPS estimates have increased 1 to 3%due to the additional interest earned on
the higher net cash position. Our target price was unchanged at $4.20/sh."