Australia's Lihir Gold seen as good acquisition for Newmont...

Australia's Lihir Gold seen as good acquisition for Newmont Mining
Australian gold miner Lihir Gold Ltd. is on the block after it received a US$8.45-billion hostile bid from another Australian miner, Newcrest Mining Ltd. According to Scotia Capital analyst David Christie, Colorado-based Newmont Mining Corp. should now look to acquire Lihir.
In a note to clients, Mr. Christie wrote that Lihir could immediately increase Newmont's production by 9%, and drop equity cash costs by 2%. That would bring Newmont's cash costs below US$500 an ounce.
"In our view, the Lihir mine would be a good fit for Newmont's Australia-Asia operating group, and [Lihir's] Bonikro mine and vast exploration ground would fit well into Newmont's African operating unit," he wrote.
Newmont needs to consider acquisitions because it has a negative growth profile. Mr. Christie wrote that production is expected to decline by 8.7% in 2015 compared to 2010. However, the company is also in a good position for M&A activity with US$5.8-billion in available liquidity, he noted.
Mr. Christie initiated coverage on Newmont with a "sector perform" rating and a one-year target price of US$67 a share.
He wrote that Newmont trades at a price-to-net-asset-value multiple of 1.98 times, which is well ahead of its large-cap gold peers at 1.49 times. However, Newmont is cheaper than its rivals on other metrics.