Lihir plans merger with Niugini

Lihir Gold (LIHRY-Q) has offered to acquire all the outstanding shares of Australian-listed Niugini Mining.

Niugini, which is 50.5%-owned by Battle Mountain Gold (BMG-N), owns a 17% interest (equivalent to 161.5 million shares) in the Papua New Guinea-based company that owns the Lihir mine. Its only other asset is US$52 million in cash.

Lihir proposes to trade one new share of Lihir for every old share of Lihir held by Niugini shareholders, plus exchange as many as 45 million new shares of Lihir for Niugini’s US$52 million in cash.

Lihir would then cancel the 161.5 million shares previously held by Niugini. The only additional shares in the arrangement would be the 45 million issued to buy the cash.

As a result, Lihir’s outstanding shares would grow to 990 million. Battle Mountain, through its interest in Niugini, will receive 104 million of those.

To offer major shareholders a chance to maintain their ownership, Lihir offered to place as many as 141 million shares, bringing the final total to more than 1.12 billion.

Rio Tinto (RTP-N) has agreed to subscribe to the offering to maintain its 17.15% stake in the company.

Lihir is offering the same deal to Mineral Resource Lihir, a trust for the people of Lihir island, as a non-transferable option to maintain its 8.19% stake in the mine.

Vancouver-based Vengold (VEN-T), formerly Lihir’s largest shareholder, chose not to subscribe.

During the summer, Vengold sold 120 million shares in Lihir to finance debt relief; it now controls only 4.8% of the company, representing 53.8 million shares.

The merger agreement between Lihir and Niugini is conditional on raising US$90 million through the placement, and on regulatory and shareholder approvals.

Lihir plans to use the funds to reduce the company’s debt load and restructure its hedgebook.

Production remains on track at Lihir to produce more than 600,000 oz. gold in 1999. In the third quarter, it contributed 188,000 oz.