THE proposed $A9.5 billion tie-up between gold miners Newcrest Mining and Lihir Gold took a major step forward today after an independent expert declared the takeover bid fair and in the best interests of Lihir shareholders.

Process plant at Lihir

Lihir today released the scheme booklet for the proposed merger, which included an independent expert’s report prepared by Grant Samuel and Associates.

In a letter to shareholders, Lihir chairman Ross Garnaut said the recommendation from the company’s directors was supported by the independent expert’s conclusion that “the proposal is in the best interests of [Lihir] shareholders, in the absence of a superior proposal”.

“This proposed merger will allow LGL shareholders to maintain an exposure to the company’s operations and participate in the strategic and financial benefits of the combination with Newcrest,” Garnaut said.

The independent expert made its decision based on the estimated value of the scheme consideration of $4.20-$4.32 per Lihir share, based on Newcrest’s recent trading prices, compared to the underlying value of Lihir which it estimated to be in the range of $4.28-$4.83 per share.

“The Independent Expert noted that the Scheme Consideration is fair, albeit marginally, on the basis of a comparison of these valuation ranges,” the letter said.

In addition, the independent expert was of the view that Lihir’s share price would likely fall, potentially significantly, if the proposed bid does not proceed and in the absence of an alternative proposal.

Lihir’s shareholders will now vote on the scheme at a meeting to be held at 11am on August 23 in Port Moresby, Papua New Guinea.

In May the gold miners announced they had entered into a merger implementation agreement under which Newcrest would purchase all of Lihir’s shares under a scheme of arrangement.

Newcrest is offering one Newcrest share for every 8.43 Lihir shares plus cash of 22.5c per Lihir share, less any interim dividend declared or paid by Lihir for the 2010 half-year.

Lihir directors unanimously recommended its shareholders vote in favour of the scheme, in the absence of a superior proposal.

The merger is expected to create a $25 billion company, the leading gold producer in the Asia-Pacific region and fifth largest in the world.

Shares in Newcrest have slipped 31c to close the day at $33, while Lihir dipped 3c to $4.07.

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