Like the guy in those annoying cell phone commercials, I have frequently felt like a broken record over the past several years. Can you Lihir me now?
You see, even near the worst levels of a gut-wrenching correction in precious metals back in 2008 that led scores of investors to believe the gold run was over, I sat right here at this keyboard tapping out every combination of words I could muster to convey my conviction that this long-term bull market for gold still has at least a $2,000 price target firmly in its sights.
Nearly 18 months have passed since I declared an end to that corrective phase well before that end was visible in U.S. dollar terms. A strong counter-cyclical rally in the U.S. dollar caused the gold recovery to reveal itself first in a set of foreign currencies like the Australian dollar. When I singled out Australia-listed gold producer Lihir Gold
Lihir has politely refused a friendly takeover bid from leading Australian gold miner Newcrest Mining, arguing rather convincingly that the roughly $8.5 billion cash-and-stock offer from Newcrest undervalues the company's internal growth potential. On the heels of a strategic takeover of its own that added mines in Australia's Queensland state and the West African republic Cote d'Ivoire, and an impressive 31% surge in estimated resources to 43 million ounces of gold at the flagship Lihir Island mine, I agree that Lihir's shares had not adequately reflected those achievements.
On the other hand, Lihir's statement of refusal was quick to point out the attractiveness of a pairing between these two gold portfolios. Both miners are active in Papua New Guinea and Australia, and the addition of Indonesia to the combined portfolio would build a solid global force in the industry with some 72 million ounces in gold reserves and a production profile approaching 3 million ounces per year. For comparison, consider that quality intermediate miners Yamana Gold
If Newcrest and Lihir can come to terms that Lihir considers more favorable to existing shareholders, then the elite club of gold's megaminers could be bound to admit a new member. I don't think that titans like Barrick Gold