Lihir Gold Limited (LGL) Operating Result

Submitted by Jim Thesiger on 1 May, 2008 - 20:56

Here is the Macquarie Research Equities (MRE) insights into the results and expectations for the rest of the year and operating results for the Lihir Gold Limited (LGL).

LGL: Operating Result

The current strength in the markets has seen the price of gold fall from its highs in March to currently be at its lowest level this year. Lihir Gold Limited (LGL) has inturn also seen its share price fall, recently trading at its lowest point in the past 6 months. Lihir has reported its first quarter operating result that has come in within expectations with production of 139koz. In today’s note, Macquarie Research Equities (MRE) provides an insight into the result and into expectations for the rest of the year.

MRE highlight that their cost assumptions have been revised for the year with cash costs of US$410/oz in the previous quarter. The increase in costs has been mainly due to increased oil prices and currency movements. Production guidance for the calendar year has been revised and is now 700-770koz which is at the lower end of MREs numbers. MRE believe that the Equigold (EQI) merger will go ahead under its current terms, although they mention that a counter offer cannot be ruled out but consider that the size of the Bonkiro project is not sufficient enough to be of interest to the gold majors. EQI shareholders vote on 30 May.

LGL has maintained its outperform recommendation with a $4.70 price target. This represents upside of over 50% from its current share price. MRE have identified future catalysts for price movements to be the completion of the merger and the first production from Bonkiro.