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Lihir Gold Limited (LGL) said it has rejected an offer from Newcrest Mining Limited (NCM) to acquire 100% of Lihir’s issued ordinary shares through a scheme of arrangement. Lihir also announced the appointment of former BHP senior executive Graeme Hunt as Managing Director and CEO.

Lihir said the offer, received on 29 March, was on the basis of one Newcrest share for every nine Lihir shares plus $0.225 cash per Lihir share, less any interim dividend declared for the half year ended June 2010.

The company said based on Newcrest’s closing share price as at 31 March 2010, the offer was equivalent to $3.87 per share and valued the company at approximately $9.2 billion.

Lihir’s directors determined that the offer did not represent good value for LGL shareholders.

Lihir chairman, Ross Garnaut, said the offer undervalued the company, both in terms of its existing business, and in terms of the potential value the company expects to deliver in the future.

“It also did not include a sufficient premium for control,” Dr Garnaut said.

Lihir said it provided Newcrest with access to limited due diligence items, subject to a confidentiality deed and nine month standstill agreement.

”We have major growth projects currently being developed in PNG and in West Africa, which will deliver increasing returns over the coming years, lifting average annual gold production by approximately 40% from current levels to 1.45 million ounces from 2012 to 2016,” Mr Garnaut said.

“There is considerable option value in the huge gold resource at Lihir Island, which increased 31% to 43 million ounces in 2009, and also in the company’s assets in West Africa.”

Mr Garnaut went on to say the board is strongly of the view that the company is undervalued in the marketplace and that the Newcrest offer failed to provide full value for the underlying assets with an appropriate takeover premium.

Meanwhile, Mr Garnaut said Mr Hunt was the ideal candidate for the CEO role due to his knowledge of the mining industry and extensive experience, including 34 years with BHP Billiton.

Mr Hunt’s most recent role at BHP was President of Uranium before leaving the company in March 2009.

At the close of trade yesterday, Lihir shares were trading at $3.03, while Newcrest shares were trading at $32.82.

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