Market waits for Newcrest to beef up bid

While Australia's largest goldminer is saying its $3.87 pre-Easter share offer is "still on the table", analysts say it might have to find another billion dollars before its offer will be acceptable to the Lihir board.

Under the terms of a stand-still agreement signed during negotiations with Lihir, Newcrest cannot submit another bid for nine months unless it is an offer favourable to Lihir's board and new chief executive, Graeme Hunt.

Lihir rejected an offer on Thursday that would give shareholders one Newcrest share for every nine Lihir shares, plus 22.5? cash per Lihir share.

Most commentators believe $3.87 was always going to be a starting point for further talks, particularly given Newcrest's surprise at Lihir's public rejection of its offer.

"Newcrest seemed to feel there was more to be worked out in the negotiating room," a market source said. "If there was more to be said then that would likely include a better price."

Lihir shares finished Thursday's session at $4.04, indicating the market is also betting on a higher offer.

Deutsche Bank analysts said the upper limits of a new offer could be about $4.30 a share, which assumes an offer of one Newcrest share for every eight Lihir shares, plus 22.5? cash per Lihir share.

A spokesman for RBS Morgans said both parties should watch out for one of the other gold majors "coming in over the top" of any offer.

"Valuation doesn't look stretched. There is more room for a higher offer."

Deutsche also believes a combined Australian gold major could help ward off predators of both companies, such as Canada's Barack Gold or the Colorado-based Newmont Mining.

Newcrest has avoided calling the transaction a takeover, but Lihir chairman Ross Garnaut thinks otherwise. "If it waddles like a duck and quacks like a duck. I think it is a duck," he said last week.

Newcrest could provide an update on its bid to the market this week after canvassing shareholders.