Sydney, May 1, 2008 (ABN Newswire) - A combination of a three month low for the world gold price and a sharp fall in first quarter production made for a rough day yesterday for shareholders in Lihir Gold.

Gold rose in Asian trading yesterday after it hit a three month low on the back of a slide in other commodities and a small rally in the US dollar's value.

Gold fell below $US870 an ounce for the first time since January 22, but recovered on scattered trade buying in Asia from jewellers and others taking a punt ahead of tonight's US Federal Reserve interest rate decision.

Spot gold prices rose by almost $US4 in Asia to around $US874.45 an ounce and traded a touch lower last night

It then dropped sharply overnight, hitting a new three month low of just over $US864 an ounce, before finishing around $US865, down around $US11 an ounce.

The Fed's rate cut and suggestion of a pause won't be good for the metal in coming days.

That price pressure added to Lihir's slightly surprising news of a drop in first quarter output because of scheduled plant maintenance.

Lihir shares fell to a low of $2.83 on the lower price and news of the lower output, before recovering a touch in the afternoon as bullion rose. Lihir's shares closed up one cent to $2.94 after touching $3.01 in earlier trade. Shares in its merger partner, Equigold closed up five cents at $3.92 after hitting $3.99 in intraday trade.

Lihir says gold production fell 28% in the first quarter, following a scheduled shut down of a processing plant in Papua New Guinea for maintenance.

The company said it produced 138,525 ounces of gold in the three months to March 30, down from 193,302 ounces in the same quarter last year.

Lihir maintained its production guidance for calendar 2008, saying that ''For the full year 2008, the company now expects to produce in excess of 850,000 ounces, with production boosted by the merger with Equigold, subject to completion as scheduled in June".

That forecast assumes production of 700,000 to 770,000 ounces from its Lihir Island operations, 40,000 to 50,000 ounces from Ballarat, 60,000 to 70,000 ounces from Bonikro and 50,000 ounces from Mt Rawdon after the Equigold merger completes.

Lihir said the cash gold price received for the March quarter rose to $US928 an ounce, from $US794 in the December quarter, understandable given the fact that it has quit its hedge book to expose itself more to world price movements, and world gold prices hits a record $US1,032 in the quarter.

Total cash cost rose to $US462 an ounce in the quarter, boosted by the costs associated with the plant maintenance shutdown.

But management says unit costs will decline over the rest of 2008 as the company processes more ore.

However rising diesel and HFO (explosives) prices and continued weakness of the US dollar will mean costs end up 'slightly' higher than previously planned.

Lihir said while costs continue to increase across the mining industry, the company's relative cost position remains very competitive.

Managing director Arthur Hood said in the statement that ''The ongoing transformation of the company is continuing to gather momentum and I look forward to reporting a successful completion of the Equigold merger and further operational progress during the remainder of the year''.

Lihir and gold miner Equigold agreed in March of this year to a $1.1 billion merger via a scheme of arrangement.

Lihir has offered 33 shares for every 25 Equigold shares, valuing the target's stock at $5.33 each.

The merger will create a $9 billion group with assets in Australia, West Africa and PNG, and output rising to 1.2 million ounces a year from 2009.

Two of our credit crunch corporate basket cases seem to be on the verge of good news.

Allco Finance Group shares headed north strongly yesterday as the May 2 deadline approaches, while the first and biggest casualty, Centro Properties Group, has been given a seven-day interim extension on $2.3 billion in debt owed to its lenders.

The interim extension granted yesterday will expire on May 7. Centro had until April 30 to reach a deal.

The further extension will also cover another $450 million owed in private notes as the property fund finalises a longer-term extension with its financiers.

In addition $US1.2 billion ($A1.29 billion) falls due on September 30 relating to US Centro's joint venture.

Centro's troubles emerged in the middle of last December when it reported problems in getting finance to rollover a $3.9 billion on loans incurred after borrowing heavily to pay for acquisitions to spearhead its expansion, in the US.

It said the higher interest cost of any refinancing because of the credit crunch, would hurt earnings.

Its shares plunged on December 17 when it revealed it couldn't get the money, and kept falling as more loans fell due and doubt emerged about the true extent of its financial state and its survival. The then CEO was replaced, a new one brought from the US property business acquired earlier in 2007, and he set about trying to deal with the banks.

It has an 800 property portfolio spanning Australia, New Zealand and the US and around $25 billion in assets under management: all that makes Centro Australia's second largest shopping centre owner after Westfield.

The news resulted in a near 80% fall in its share price. The shares hit a low of 23c at one stage. Last year they traded above $10.

Centro is trying to sell off some of its portfolio, including one of its Australian wholesale funds which has 28 properties. But finding buyers isn't easy with property sectors in the US, Australia and Britain under pressure from the credit crunch, slowing sales or a slowing economy. It's likely to be broken up piecemeal and sold off, unless there's a significant recovery in sentiment in retailing and commercial property.

The shares closed at 45.5c, down 2c after trading resumed in the wake of a halt ahead of the announcement on the seven day extension.

Centro's main local bankers are ANZ, Commonwealth Bank, National Australia Bank and St. George Bank. The ANZ has already provided for a loss on its Centro loan.

It also has US bank creditors including JP Morgan and Bank of America.

Meanwhile, the troubled Allco Finance Group must be expecting good news.

Why else would the shares recover the $1 mark in trading yesterday?

Did investors think the seven day extension for Centro Properties was good news for Allco ahead of the deadline tomorrow for bankers to review the company's plan to restructure loans?



Allco shares jumped 28% to $1.05, a rise of 23c. That was after a couple of days of indifferent trading.

That means Allco shares are now down only 80% so far this year. The stock has climbed from its record low of 21c last month as some investors expect the company and bankers to come to an agreement.

The Sydney-based company is investigating selling assets and focusing on its portfolio of ships, aircraft and ports to win back shareholder confidence and ease concern that it may be unable to refinance its loans.

Allco has $250 million of debt due on May 2 and $900 million due in September 2009. A further $350 million in loans, which were not included in this review, expire in November 2012, with an option to be reset for a further five years.

There are also debts in associated listed and unlisted funds.

The company's lenders include ABN Amro, the Commonwealth Bank and Westpac. The National Australia Bank is a creditor of Allco Principals Investments and will take a loss of around $87 million on a margin loan of around $110 million


 

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