BGF Ballarat Gold

RNS Number:5623K
Ballarat Goldfields N.L.
17 October 2006


Ballarat Goldfields NL
17 October 2006


                             JOINT ASX ANNOUNCEMENT
                          LIHIR AND BALLARAT TO MERGE



Lihir Gold Ltd and Ballarat Goldfields NL have proposed a merger of the two
companies, creating a major Asia-Pacific pure gold producer.


The combined company will have two world class assets in Australia and Papua New
Guinea, a strong growth profile, reducing costs and significant exploration
opportunities.


The company is expected to achieve annual gold production of more than 900,000
ounces in 2008, around 1 million ounces in 2009, and well in excess of 1 million
ounces per annum thereafter.


Importantly, the transaction also will secure the future of the Ballarat
operation by providing the financial resources required to take the project to
full development.


The Merger Proposal


The merger will be achieved through a scheme of arrangement (Scheme).


Under the Scheme, Ballarat shareholders will receive 5 Lihir shares for every 54
Ballarat shares held which equates to a value of 28.8 cents per Ballarat share
based on the closing price of Lihir's shares on the day prior to the
announcement of the transaction. This offer values Ballarat at $350 million,
based on its fully diluted share capital.


This offer price represents a 28% premium to the last traded price of Ballarat
prior to its trading halt on 13 October 2006.


Based on the last traded price of Lihir shares, at the completion of the Scheme,
the combined company will have a market capitalisation of more than A$4 billion,
with Ballarat shareholders holding approximately 8% of the combined group.


It is proposed that the two Non-Executive Ballarat Directors, Alister Maitland
and Mike Etheridge, will join the Lihir Board of Directors, and Ballarat's
existing management will join the combined company's management team, under
Chief Executive Officer Arthur Hood.


Ballarat Chief Executive Richard Laufmann will be appointed as the merged
company's Executive General Manager Australian Operations and Business
Development, and will continue to be directly responsible for the Ballarat
operation.


The corporate head office of the combined entity will be in Brisbane and
operational headquarters of the Ballarat mine will remain in Ballarat.


The proposed acquisition is subject to the approval of Ballarat shareholders and
the Supreme Court of Victoria. Ballarat shareholders will be provided with a
Scheme Booklet outlining the proposal in greater detail which will include an
independent expert's report prepared by Grant Samuel & Associates Pty Ltd. This
is expected to be provided to Ballarat shareholders during December with the
meeting of Ballarat shareholders to approve the proposal to be held during
January 2007.


Ballarat Directors' Recommendation


Ballarat's directors intend to unanimously recommend that shareholders vote in
favour of the scheme in the absence of a superior proposal and provided that
Grant Samuel determines that the proposal is in the best interests of
shareholders.



Ballarat Funding


Lihir is committed to the development of the Ballarat East gold project in
accordance with Ballarat's development plans over the next 18 months which have
been previously announced to the market.


To cover interim funding requirements for the Ballarat East gold project
development during the period up to the Ballarat shareholders' meeting to
approve the Scheme, Lihir has agreed to provide Ballarat with A$41.7 million
through the unconditional subscription for 149 million Ballarat shares at 28
cents per share.



Compelling Merger


Lihir Chairman, Dr Ross Garnaut, said that for both Lihir and Ballarat, the
merger was compelling.


"The deal creates genuine value for shareholders of the merged group, by
creating a Tier One Asia-Pacific gold producer with strongly growing
production," he said.


"This merger will take Lihir into a new era in its development, building on the
great progress that has been achieved during the past few years, and consistent
with our goal of developing a diversified, profitable, pure gold producer," he
said.


Mr Hood said the merger established a combined entity with significant
exploration upside, expansion potential and long mine life.


"The combination of these two companies will create a major new force in the
gold sector and an attractive investment option for global funds looking for
pure gold exposure," he said.


"Furthermore, Ballarat's management brings to the team valuable complementary
underground mining skills that will advance our expansion strategy and provide
enhanced management capability."


Mr Laufmann said the merger represented a landmark in the development of the
Ballarat project.


"This merger secures the future of the Ballarat operation. It means that the
shareholders and employees can be confident in the long term future and
prosperity of this operation.


"As a cornerstone of a larger, multi-mine company, we will have the financial
resources required to ensure that this project is properly developed," he said.


Conditions to the Scheme


The principal conditions to the implementation of the Scheme are the approval of
Ballarat shareholders, the Supreme Court of Victoria, and applicable regulatory
bodies.



Merger Implementation Agreement (MIA)


Lihir and Ballarat have entered into the MIA under which they have agreed to
proceed with the merger by way of the Scheme. Implementation of the merger is
conditional on the satisfaction of a number of conditions precedent. The
conditions precedent and key terms of the MIA are summarised in Appendix A.


Following approval of the Scheme by Ballarat shareholders and the Court, all
shares in the company will be acquired by Lihir and Ballarat will be delisted.


Ballarat shareholders are not required to take any action at this stage in
relation to the scheme of arrangement.






Advisers


Lihir is being advised by Caliburn Partnership and Blake Dawson Waldron.
Ballarat is being advised by RFC Corporate Finance Ltd and Baker & McKenzie.



Contact details


For further information, please contact:


Lihir Gold Ltd

Joe Dowling

Manager IR

0421 587 755


Josie Brophy

Communications Officer

0448 177 502



Ballarat Goldfields

Joel Forwood

Manager Corporate and Markets

(03) 5327 1111





About Lihir Gold


Lihir Gold owns and operates one of the world's largest gold mines and
processing facilities on the island of Lihir, 900 kilometres north-east of Port
Moresby in New Ireland province of Papua New Guinea. The company is
headquartered in Brisbane, Australia.


Lihir Gold is publicly listed, with 1.28 billion shares on issue and a market
capitalisation of approximately US$3 billion. Lihir Gold's shares are traded on
the Australian, Port Moresby and Nasdaq stock exchanges.


The Lihir ore body is very large and rich by global standards. According to the
company's last resource and reserve statement, in February 2005, the estimated
resource is 422 million tonnes averaging 2.95 grams of gold per tonne for 40.0
million ounces of contained gold. It includes proved and probable reserves of
188 million tonnes, averaging 3.48 grams of gold per tonne for 21.0 million
ounces of contained gold. This estimate is based on a long-term price assumption
of US$380 per ounce.


The Lihir gold mine is an open pit mining operation consisting of three adjacent
pits. The pits supply high grade ore for direct processing and lower grade ore
for stockpiling for future processing. Nearly all of the ore is refractory
sulphide ore which must be oxidised before the gold can be recovered.


The mine has been in operation since 1997 and has produced more than 5 million
ounces of gold. Production for the year ended 31 December 2005 was 596,000
ounces, with substantially higher production for 2006. Production will increase
to more than 800,000 ounces in 2007, following the expansion of the process
plant through the construction of a 3Mt per annum flotation circuit. The company
is also currently evaluating a range of options designed to expand annual gold
production to in excess of 1 million ounces per annum after 2009.


Under the current mine plan open pit mining is scheduled to continue at Lihir
until at least 2021, during which period higher grade ore will be fed directly
into the processing plant and lower grade ore will be stockpiled. Processing of
lower grade stockpiles will continue until beyond 2040.


Lihir Gold has a large workforce comprising approximately 1,300 staff and 1,900
contractors. Over 36% of employees are Lihirian Nationals, with a further 54%
originating from other provinces in PNG.


The Lihir Project is located within a geothermally active area that produces a
natural abundance of geothermal steam. Since 2003 Lihir Gold has been harnessing
this underground steam reserve to generate electricity, replacing heavy fuel oil
powered electricity. The company is due to commission its third geothermal power
station by the end of 2006. The new 20 Megawatt (MW) plant will take Lihir
Gold's total geothermal capacity to 56MW and meet all of Lihir Gold's current
electrical power requirements. Geothermal power will save the company an
estimated US$20 million per year, compared to the cost of heavy fuel oil powered
generation. The geothermal plant is also formally certified as a facility that
will lead to reductions in greenhouse gas emissions, enabling the company to
generate carbon credits and sell them on global markets. This is expected to
generate revenues in excess of US$5 million per year.


For further information, please visit Lihir Gold's website at www.lihir.com.pg



About Ballarat Goldfields NL


Ballarat Goldfields has exploration and mining tenements covering the historic
Ballarat East and Ballart West goldfields. Before its premature closure around
the time of the fist world war, the Ballarat region produced over 12 million
ounces of gold. Ballarat Goldfields is seeking to recover gold from the strata
beneath the old workings. The company is headquartered in Ballarat.

Ballarat Goldfields is publicly listed on the ASX in Australia and on AIM in the
United Kingdom and has approximately 1.2 billion shares on issue.


In 2004, for the first time following discovery in the 1850's, the leases over
the entire Ballarat field were consolidated under the sole ownership of Ballarat
Goldfields. This has resulted in Ballarat Goldfields constructing a
comprehensive geological model of the entire field, demonstrating what many had
suspected, that Ballarat had massive unexplored prospectivity. Following a
pre-feasibility study, based on Ballarat Goldfields' geological model,
underground development at Ballarat East recommenced in December 2004. In line
with this plan, drilling has continued to increase confidence in the geological
model.


Exploration activities by Ballarat Goldfields have defined an Inferred Resource
of 1.4 million ounces at Ballarat East and an additional exploration potential
of over 9 million ounces of gold within the company's Ballarat portfolio.

Ballarat Goldfields completed stage one of the processing plant in December 2005
only 6 months after work began. The plant design is unique and based around
Gekko Systems Ltd gravity technology. Final concentrate treatment will use an
inline leach reactor.

Mine development is continuing with over 5km of development complete to date.
The recent extended mine design will focus on the recently discovered high grade
mineralisation at depth. The extension of the mine will delay full gold
production until 2009 and will cost an estimated A$120m.


For further information, please visit Ballarat Goldfields' website at
www.ballarat-goldfields.com.au.





Appendix A


Summary of Key Terms of the Merger Implementation Agreement

Conditions     The principal conditions precedent to the implementation of the
precedent to   Scheme include:
the Scheme
               approvals from applicable regulatory bodies such as FIRB, ASIC
               and ASX;
               unanimous approval of the Ballarat Goldfields Board;
               approval by the PNG Exchange Control;
               Ballarat Goldfields shareholder approval of the Scheme at the
               Scheme Meeting by the requisite majorities under the Corporations
               Act;
               Court approval of the Scheme in accordance with s411(4)(b) of the
               Corporations Act;
               no Ballarat Goldfields or Lihir Material Adverse Change occurs;
               no Ballarat Goldfields or Lihir Prescribed Event occurs;
               the Independent Expert issues a report which concludes that the
               Scheme is in the best interests of Ballarat Goldfields
               shareholders;
               the MIA has not been terminated;
               no person (other than Lihir, a subsidiary of Lihir or any
               institutional or portfolio investor in Ballarat Goldfields at the
               date of the MIA) acquires an interest in Ballarat Goldfields
               securities so as to have a relevant interest in 10% or more of
               Ballarat Goldfields shares;
               Ballarat Goldfields has not entered into a Competing Transaction;
               the Gold Price does not fall below USD 500 per ounce;
               the S&P ASX 200 Index does not fall below 4,500 on any trading
               day; and
               all Ballarat Goldfields options to subscribe for shares having
               been exercised, cancelled or transferred to Lihir.
No talk and no Ballarat Goldfields must ensure that during the period from the
shop           date of the MIA to the earlier of termination of the MIA, the
obligations    Second Court Date and 28 February 2007 ("Non-Solicitation
               Period") that:
               (No Shop) Ballarat Goldfields nor any of its related parties
               directly or indirectly solicits, invites, facilitates, encourages
               or initiates any enquiries, negotiations or discussions, or
               communicates any intention to do any of these things, with a view
               to obtaining any expression of interest, offer or proposal from
               any other person in relation to a Competing Transaction; and
               (No Talk) Ballarat Goldfields nor any of its related parties
               negotiates or enters into, participates in negotiations or
               discussions with any other person regarding a Competing
               Transaction or potential Competing Transaction or grants any
               other person any right or access to conduct due diligence in
               respect of Ballarat Goldfields.
Limitations to The no talk provisions summarised above do not apply if Ballarat
no talk        Goldfields' Board of Directors has determined, based on the
obligation     written opinion of Queen's Counsel or Senior Counsel, that
               failing to respond to a publicly announced Competing Transaction
               would be reasonably likely to be a breach of their fiduciary
               duties or statutory obligations ("Fiduciary Carve-out").
Competing      If Ballarat Goldfields is approached by another person during the
Transactions   Non-Solicitation Period with a Competing Transaction to which the
and Lihir's    No Talk or No Shop provisions apply, Ballarat Goldfields must
right to       immediately notify Lihir of the identity of that person and the
respond        key terms of their Competing Transaction and a copy of the
               proposal.
               Ballarat Goldfields must not enter into any agreement in relation
               to that Competing Transaction unless, after notifying Lihir,
               Lihir has not within 2 business days of notification submitted a
               written proposal to Ballarat Goldfields which is on terms no less
               favourable than the Competing Transaction. If Lihir's proposal is
               on terms no less favourable than the Competing Transaction, then
               in the absence of a more favourable offer, Ballarat Goldfields
               must proceed exclusively with Lihir's proposal, otherwise
               Ballarat Goldfields may proceed exclusively with the Competing
               Transaction.
Break fee         * A break fee of approximately $A3.5 million is payable by
                   Ballarat Goldfields to Lihir if:

                  * any director of Ballarat Goldfields makes any public
                   statement prior to the approval of the Scheme by the Court to
                   the effect that he or she does not support (or no longer
                   supports) the Scheme, other than because the Independent
                   Expert has concluded that the Scheme is not in the best
                   interests of Ballarat Goldfields shareholders;

                  * any director of Ballarat Goldfields fails to recommend
                   the Scheme or, having done so, any director of Ballarat
                   Goldfields publicly withdraws or varies his or her favourable
                   recommendation of the Scheme (or any part of it) prior to the
                   approval of the Scheme by the Court, other than because the
                   Independent Expert has concluded that the Scheme is not in
                   the best interests of Ballarat Goldfields shareholders;

                  * any director of Ballarat Goldfields publicly recommends,
                   promotes or otherwise endorses a Competing Transaction; or

                  * before the Scheme becomes effective, a Competing
                   Transaction more favourable to Scheme participants in
                   relation to Ballarat Goldfields is announced or open for
                   acceptance and a person under the Competing Proposal acquires
                   more than a 20% interest in Ballarat Goldfields' issued
                   shares,

                  * provided that the break fee will not be payable by
                   Ballarat Goldfields if:

                  * prior to any event referred to above occurring, the MIA
                   has already been validly terminated; or

                  * the Scheme becomes Effective notwithstanding the
                   occurrence of any event referred to above.



There are various capitalised terms used in this Summary which are defined in
the MIA.




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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