StoneBridge Snapshot – Lihir Gold Limited (LGL)

StoneBridge Snapshot – Lihir Gold Limited (LGL $2.88) – Ballarat to be written down by US$250-350M

• LGL has announced that it will write down the value of the Ballarat project by US$250-350M.
• The write down is attributable to the long-term production guidance for the project being lowered to 80-100kozpa.
• Production for CY09 has also been downgraded from ~50koz to 20koz.
• The downgrade of Ballarat’s long-term production is disappointing but is largely immaterial to our investment case for LGL.
• LGL offers excellent exposure to gold prices through its 100% owned Lihir Gold mine in PNG, which boasts 21.7Moz in reserve and 36.3Moz in resource.
• With the inevitable downgrade of Ballarat now a reality we believe the market will begin to focus on the production growth at Lihir and the excellent exploration potential of the company’s large tenement holding in Côte d’Ivoire.
• We are upgrading our recommendation on LGL from Hold to BUY and set a price target of $3.30/share.

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