PERTH -
Newcrest (ASX: NGM, OTC: NCMGF) revealed today that it had revised an earlier offer for Lihir Gold Ltd (ASX: LGL, TSX: LGG, NAS: LIHR) that valued the Lihir Island gold miner at A$9.2 billion (US$8.45 billion). This, however, did not shift the view of Lihir directors that the company would continue to provide strong profits and growth by continuing to go it alone.

The second and elevated offer was on the basis of one Newcrest share for every 9 Lihir shares, plus A$0.225 cash per share, less any interim dividend declared for the June 2010 half year.

Clearly, outside of a lust for Lihir Gold, Newcrest is wanting to ramp up its asset profile in Papua New Guinea where it is 50/50 partner with Harmony Gold of South Africa in the big Hidden Valley mine and the advancing and nearby Wafi and Golpu gold and copper projects.

One prominent Australian mining identity who may have been feeling he was in the hot seat was Graeme Hunt, who was today announced as the new chief executive of Lihir Gold, following the departure a few months ago of Arthur Hood who had to wear the stigma of the company's disastrous investment in the Ballarat gold mining centre in Victoria.

Hunt, a metallurgist, surprised many by quitting BHP Billiton when he was running the proposed multi-billion dollar expansion of the Olympic Dam copper-uranium-gold mine in South Australia.

Lihir's chairman Ross Garnaut said the revised Newcrest offer undervalued the company, both in terms of its existing business, and in terms of the potential value the company expected to deliver to shareholders in the future.

David Fuller's view Lihir is the 4th largest component, in terms of weighting, for the NYSE Arca Gold Bugs Index (HUI US), at 5.64% before the takeover bid. Consequently it is a factor in today's upward dynamic for HUI (daily & weekly). For a number of months many analysts have been recommending gold mining shares but few have really delivered. Consequently, HUI has lagged well behind bullion (daily & weekly) in being unable to clear its 2008 peak.

This should change if: 1) the bid for Lihir sparks renewed interest and perhaps other takeover attempts within the gold mining sector and, 2) if gold bullion is completing its lengthy consolidation prior to new highs in the next few weeks. This latter possibility will look like a probability when bullion maintains a push back above $1150.

I am currently undecided as to whether I should take the profit in Lihir or hold on to see how this takeover offer pans out. I do not feel under pressure to make this decision hastily and I am sure that Australian based subscribers, who may also hold Lihir, will have more insights regarding any additional developments.