Lihir Gold (LHG) Share Update

Submitted by Craig Strzelecki on 15 February, 2007 - 13:05

Lihir Gold (LHG) has a Neutral 2 share recommendation and a $3.40 share price target according to a share update from analyst UBS. Their price target is based on a premium to NPV of 2.3x and they have a valuation of $1.46 for Lihir Gold. UBS as some commentary: "The upgrade to 23.6Moz reserves is largely due to an increase in gold price assumption from US$380/oz to US$475/oz and a reduction in cut-off grades. The revised estimate accounts for cost benefits expected from geothermal power, and the flotation project currently under construction, but does not account for proposed capacity expansions beyond 1Moz which should increase reserves further." As a result global multiples look attractive: "Although the upgrade is attributable to a change in assumptions, these do come into line with other gold stocks. Newcrest uses A$600/oz (US$420/oz @ 70c) and Oxiana used US$600/oz for Prominent Hill. A common comparable for gold stocks is market cap/reserve oz where the average is US$200/oz which on the old reserves 21Moz valued Lihir at $4.14 and at 23.6Moz reserves values Lihir at $4.65." Finally UBS sums up their share update: "We remain positive on the outlook for gold and expect an average of US$700/oz in 07. We also expect to hear more about the proposed capacity expansion to >1Moz and further reserve upgrades which this project should enable. Next news is the Q4 result and preliminary financials on 30 Jan and the scheme vote by BGF shareholders on Feb 12."

Lihir Gold Limited is listed on the Australian Stock Exchange (ASX) under stock code LHG. You can view their investor website here. Find out the meaning of the recommendations in this primer. Lihir Gold is involved in the mining and production of Gold on Lihir Island in Papua New Guinea (PNG). Browse for other stockbroker recommendations. You can use Instalment Warrants to trade LHG. Check your charts and good luck with your share trading!