Lihir to take over Ballarat (October 17, 2006)

Lihir Gold (LIHR-Q, LHG-A) has offered to take over Ballarat Goldfields (BGF-L, BGF-A) in an all-paper merger that values Ballarat at A$350 million. The proposal is to trade five Lihir shares for 54 Ballarat, the equivalent (at recent closing prices) of A28.8.

The deal is a friendly one under a plan of arrangement. Ballarat shareholders are to vote on the plan in January. The price is a 28% premium to Ballarat’s share price before the announcement.

Ballarat Goldfields has been developing the Ballarat East gold project in Victoria state and Lihir has subscribed for 149 million shares valued at A$41.7 million to finance the project. The placement is not conditional on the takeover offer’s success.

Lihir’s major asset is its gold mine on Lihir Island in Papua New Guinea, which produced 596,000 oz. in 2005. Expansion will see the mine produce 800,000 oz. in 2007 and plans are on the drawing board to bring that to 1 million oz. in 2010.

Ballarat’s project is scheduled to start production in 2009. It has a capital cost of A$120 million.