LGL - Lihir Gold

[Sean K]

Re: LHG - Lihir Gold

Current market cap + new value of shares to be issued (1.2billion)

I had quick flick of announcement and they are raising funds at $2.30

so 1.2billion / 2.30 ~ number of new shares

(market cap + 1.2billion) divided by
(number of new shares + number of old shares)


~4.4 + 1.2 / ~0.52 + 1.4
(5.6/1.92)

2.92 that way ( i used excel to get 2.93)

Thanks, I didn't even see the placement ann.

News article:

Lihir looks to raise $1.2bn in share offer
17/04/2007 By: Nicholas Grove

Lihir Gold Limited (LHG) today said it would raise up to $1.2 billion in new equity to close out its hedge book, repay debt and fund development. The company said it would raise the funds through a one-for-three accelerated entitlement offer to shareholders and a placement of shares to institutional investors.

Under the entitlement offer, the Papua New Guinea-focussed gold miner said eligible shareholders would be invited to subscribe for new shares at a price of $2.30 per share, raising up to $1.07 billion.

Lihir said the offer price represents a discount of 32% to yesterday’s closing price of its shares on the Australian Stock Exchange and a 26% discount to the theoretical ex-entitlements price.

The placement would raise an additional $120 million at a price to be determined through a global bookbuild process, the miner added.

Lihir said the funds raised would be used for the close out of the company's gold hedge contracts, totalling 934,500 ounces and the early repayment of the company's 480,000 ounce gold loan.

The funds would also go towards the repayment of all of Lihir's other secured debt facilities and would also provide capital expenditure to complete development of the Ballarat East Project.

The balance of the proceeds would be available to help fund the proposed expansion of production at Lihir Island to more than 1 million ounces of annual gold production, other mining and exploration projects in the Ballarat region and general working capital.

In a statement, chief executive officer Arthur Hood said the restructure represented the next logical step in the rapid transformation of Lihir.

“The company has made excellent progress in improving its operational performance over the last eighteen months, demonstrated by the record production achieved in 2006,” he said.

“This restructure we have announced today enables us to reorganize our balance sheet, improve our financial structure and create a solid platform for the future.”

The gold miner also announced today that it achieved gold production for the first quarter ended 31 March 2007 of 193,302 ounces, which was the second highest quarterly production on record.

Operating revenues for the quarter totalled $96 million, which was down from $112 million in the December quarter. Lihir said the fall was primarily due to lower gold sales.

Going forward, the company said it remains on track to achieve full year production of 800,000 to 830,000 ounces.

Shares in Lihir Gold remained halted at 1109 AEST Tuesday and last traded at $3.36.

 

[Pommiegranite]

Re: LHG - Lihir Gold

Right...I'm a total newbie..and having read through the press releases..am pretty confused by the terminology/logic etc

So would really be greatful for a translation into laymans' terms on LHG's press releases .

To my understanding the follwing is happening:

LHG are trying to raise cash and so are restructuring the number of shares/price on the market.

They are offering a discount to retail/institutional investors.

Because more shares will be in circulation, doesn't this mean that this 'discount' is not as juicy as it seems.

What is bookbuild?

I am on holiday from Friday for 1 week...and will have no access to the post..and only little access to email. Will I not be able to partake?

Am I an institutional or retail investor?

Thanks

PG

 

[Sean K]

Re: LHG - Lihir Gold

Right...I'm a total newbie..and having read through the press releases..am pretty confused by the terminology/logic etc

So would really be greatful for a translation into laymans' terms on LHG's press releases .

To my understanding the follwing is happening:

LHG are trying to raise cash and so are restructuring the number of shares/price on the market.

They are offering a discount to retail/institutional investors.

Because more shares will be in circulation, doesn't this mean that this 'discount' is not as juicy as it seems.

What is bookbuild?

I am on holiday from Friday for 1 week...and will have no access to the post..and only little access to email. Will I not be able to partake?

Am I an institutional or retail investor?

Thanks

PG

Discount might be juicy, depending on what happens to the sp post halt. If Mr Market thinks the money raised for whatever is a good thing for LHG mid to long term, then it might stay up. Paying off the hedge book is a big plus IMO.

Bookbuild refers to LHGs advisors trying to sell stock to institutions.

You should have time to fix it once you get back. More detail will follow on dates for acceptance.

You are retail I think.

 

[Pommiegranite]

Re: LHG - Lihir Gold

Discount might be juicy, depending on what happens to the sp post halt. If Mr Market thinks the money raised for whatever is a good thing for LHG mid to long term, then it might stay up. Paying off the hedge book is a big plus IMO.

Bookbuild refers to LHGs advisors trying to sell stock to institutions.

You should have time to fix it once you get back. More detail will follow on dates for acceptance.

You are retail I think.

Thanks Kennas.

Having reread the release...I can see its a 1 for 3 offer. This is the part that confuses me.

If I hold 300 shares, I will be given 100? OR will I have to purchase these 100? (at $2.30)?

..and what if I want more than the 1 in 3 offer?...can I still by more at the discounted rate?

Whatever happens...I reckon this raising of capital gives me confidence in LHG as a long term hold.


PG

 

[Sean K]

Re: LHG - Lihir Gold

Thanks Kennas.

Having reread the release...I can see its a 1 for 3 offer. This is the part that confuses me.

If I hold 300 shares, I will be given 100? OR will I have to purchase these 100? (at $2.30)?
PG

You'll have to purchase them unfortunately. I'll be taking up my entitlement.

 

[muddywaters]

Re: LHG - Lihir Gold

Kennas,

I'm new too and only bought a batch of these yesterday...

Looking at the last announcement (12.15 pm) it appears i'll miss out on the offer and just cop a loss on the price when it trades next week. Can you confirm where I stand and what it's likely to do in the near future.

Am i in for some pain here?

Thanks in advance.

 

[Pommiegranite]

Re: LHG - Lihir Gold

You'll have to purchase them unfortunately. I'll be taking up my entitlement.

...providing the share price doesn't head south big-time over the next few weeks..I will too

 

[Pommiegranite]

Re: LHG - Lihir Gold

Am i in for some pain here?

Thanks in advance.

Depends if you are a long termer.

Any company which reduces debts and is therefore less levereged, will be in a healthier position once the eventual market downturn materialises.

This is what impresses me about LHG.

Kind of like paying off your mortgage early

 

[Sean K]

Re: LHG - Lihir Gold

Kennas,

I'm new too and only bought a batch of these yesterday...

Looking at the last announcement (12.15 pm) it appears i'll miss out on the offer and just cop a loss on the price when it trades next week. Can you confirm where I stand and what it's likely to do in the near future.

Am i in for some pain here?

Thanks in advance.

I'm not exactly sure on your entitlement myself. Call your broker I think.

As far pain goes, depends on what the market thinks. Closing out the hedge book looks to be a very positive move IMO, because I think gold has still someway to run, and LHG will get maximum benefit at a time where they are closing in on 1m oz a year. On the other hand, if gold turns to pie, then it's not that great.

 

[hos11au]

Re: LHG - Lihir Gold

So come monday will the share price will be approx $2.90 or less?

 

[bvbfan]

Re: LHG - Lihir Gold

A book build is a particular way of conducting a float where the price at which shares are sold is not fixed, but rather is determined following a process in which interested investors bid for shares. This is quite a common way of determining the price paid for shares by institutional investors.

So the institutional part may end up being higher than 2.30 so my previous calculation may be cheap. I think overseas bidders may be interested in this now it will be an unhedged gold producer of nearly 1million ounces in a few years.

Still the P/E will be a huge number and increase on previous number too.

If you bought yesterday then looks like you are still eligible for the rights issue.

 

[chops_a_must]

Re: LHG - Lihir Gold

I am rather happy with this.

I'm not convinced it will have that huge an impact on the share price. The way it has been received domestically and internationally speaks volumes. On CNBC this morning they were saying that it is quite clearly even more of a take over target now. The extra forward looking revenue from getting rid of the hedging may more than offset the dilution.

At $2.30 to increase my long term holdings in the company? I don't think I can complain. I see the long term value in the company as much much higher.

The only concern that I have is that I wont be able to get my full allotment due to it being oversubscribed. It doesn't appear that they have written that scenario into the announcements, so perhaps the $1.2b takes into account full subscription?

 

[ta2693]

Re: LHG - Lihir Gold

Therefore, a person who is a registered shareholder at 7.00pm on 20 April 2007 as a result of a dealing (including a borrowing/lending transaction) after the announcement of the trading halt on 16 April 2007 (other than the registration of a transaction effected through SEATS before the announcement of the trading halt on 16 April 2007) may not be entitled to
receive an entitlement under the Entitlement Offer.

What does that mean? If I buy tomorrow, what the chance of my receiving the entitlement under the entitlement?

 

[Pommiegranite]

Re: LHG - Lihir Gold

Therefore, a person who is a registered shareholder at 7.00pm on 20 April 2007 as a result of a dealing (including a borrowing/lending transaction) after the announcement of the trading halt on 16 April 2007 (other than the registration of a transaction effected through SEATS before the announcement of the trading halt on 16 April 2007) may not be entitled to
receive an entitlement under the Entitlement Offer.

What does that mean? If I buy tomorrow, what the chance of my receiving the entitlement under the entitlement?

You can't buy tomorrow. Sharetrading of LHG is Frozen ..I believe.

 

[rederob]

Re: LHG - Lihir Gold

Still the P/E will be a huge number and increase on previous number too.

An example?

 

[bvbfan]

Re: LHG - Lihir Gold

Using figs from tradingroom LHG EPS is 0.05 and current P/E of 58

New EPS value would be ~0.036 and at $3 P/E would be 82 and using last price 92

If my calcs are right

Not that P/E is something I use in detail

 

[stoxclimber]

Re: LHG - Lihir Gold

The PE doesnt change, the decreased price of the shares is exactly offset by the decrease EPS.

 

[stoxclimber]

Re: LHG - Lihir Gold

sorry, didnt see that it was a placement

in that case pe increases as bvb said [earnings constant but market cap increases]

 

[Sean K]

Re: LHG - Lihir Gold

I've read various reports on this and some think it's a good move, while others think it adds some risk to what is already a relatively high risk play. I'm on the fence atm.

DJ UPDATE: Lihir Gold Restructures, Plans Output Surge17/04/2007 06:24PM AEST

SYDNEY (Dow Jones)--Lihir Gold Ltd. (LHG.AU) said Tuesday it will raise up to A$1.2 billion in equity to fund a major financial restructure as it aims to double production over the next three years.

The company will use the funds to close-out its seven year forward gold commitments, effectively remove all of its other secured debt facilities, and complete the development of its Ballarat East project in Victoria state and expansion of its principal Lihir Mine in Papua New Guinea.

"We'll create an unhedged gold producer with full leverage to the gold price," said Lihir chief executive Arthur Hood.

"We'll be essentially a debt free company with a really strong growth profile, and we'll have substantially improved cashflows and increased financial flexibility," Hood told a media briefing.

Lihir is forecasting gold production to increase from a record 651,000 ounces in 2006 to more than 1.25 million ounces when its two projects move into full production in 2010.

Hood said this was "a growth profile to die for," and reduced the need for Lihir to make any further acquisitions after it paid around A$350 million in scrip for Ballarat Goldfields NL. earlier this year.

"We're under no pressure to go out and do additional M&A activity. Having said that if the right opportunity comes along that we think will add shareholder value then we'll look at that, as and when the time comes," said Hood, noting Lihir will have up to A$200 million in working capital available if all offers are fully subscribed.

Lihir will raise up to A$1.07 billion through a one for three entitlement offer to existing shareholders at A$2.30 a share, and A$120 million from a share placement to institutions through a global bookbuild. Pricing for this offering will finalized Friday.

Around A$856 million under the entitlement offer will be raised from institutional investors, underwritten by Goldman Sachs JBWere and Macquarie Equity Capital Markets. The retail offer could raise up to A$214 million if all the estimated 20% of retail investors on the share register take it up.

Analysts expect Lihir shares to fall sharply when trading recommences Monday, with an issue price 32% lower than Lihir's last trade at A$3.36 Monday.

"It's an equity raising at a deep discount so the share price will react to that," said one analyst who asked not to be named. Other analysts said the size of the equity issue will make it difficult for the removal of forward sale commitments to add to per share earnings.

"It's a very, very big issue so you need to have a lot of earnings growth to offset that," said ABN Amro resources analyst Warren Edney.

Comex gold futures are trading around US$695 per ounce, at 11 month highs and near last May's record levels when they briefly spiked above US$700 per ounce.

"If you're very, very, bullish about the gold price it would be a positive for earnings. However I think it's probably only marginally EPS positive because they're issuing so many shares," said Edney.

The announcements coincided with Lihir unveiling production of 193,300 ounces of gold during the first quarter to March, its second best result but down 14% on the 226,000 ounces produced in the last quarter of 2006.

Production this year is forecast between 800,000 and 830,000 ounces, with cash production costs for the rest of the year to average in the mid-US$200 range, said the company.

 

[nomore4s]

Re: LHG - Lihir Gold

I've read various reports on this and some think it's a good move, while others think it adds some risk to what is already a relatively high risk play. I'm on the fence atm.

Kennas, wouldn't this depend alot on the time frame of the various investors/traders holding this stock? IE - Longer term investors will eventually see some value but for shorter term holders it's not so good?