A former BHP senior executive and metallurgist, Graeme Hunt is the company’s new CEO and managing director and will relocate to Brisbane from Melbourne.

On the same day of his appointment, the Lihir board rejected an offer from Newcrest which equated to $3.87 per Lihir share (one Newcrest share for every nine Lihir shares), saying it significantly undervalued the gold producer.

The offer, however, represents a 27% premium to the company’s average share price of $3.03 over the past year.

Lihir chairman Ross Garnaut said while the board recognised the strategic merits of combining the two companies, it did not believe the offer represented good value.

“It undervalued Lihir both in terms of its existing business and in terms of the potential value the company expected to deliver to shareholders in the future,” he said.

“It also did not include a sufficient premium for control.

“Directors and management made certain that Newcrest was given the opportunity to make an offer that would deliver full value for our shareholders, but the board’s assessment was that the offer ultimately received was inadequate.”

In the course of discussions leading to the offer, Lihir provided Newcrest with access to limited due diligence items.

The due diligence was subject to a confidentiality deed and nine month standstill agreement, around the same time that rumours of a potential merger started in the marketplace.

“The board is strongly of the view that Lihir is undervalued in the marketplace, and that view has been expressed to us on a number of occasions by shareholders,” Garnaut said.

“We have recently made management changes and taken other steps that will assist us in the process of rebuilding market confidence and correcting that valuation shortfall.”

The prize for Newcrest, Australia’s largest listed gold producer churning out 1.63 million ounces of gold in 2009 and 89,877 tonnes of copper, is Lihir’s namesake operation in Papua New Guinea and its Bonikro mine in Cote d’Ivoire, but it also has the Mt Rawdon property in Queensland and growth projects in PNG and West Africa.

The company has achieved record production outcomes every year for the past four years, reaching output of 1.124Moz in 2009 at total cash costs of $US397/oz ($A432/oz) and has plans to build this to 1.45Moz from 2012-16.

Its cash position would also be an attraction for Newcrest, and in 2009 Lihir had $404.7 million in the bank which comprised cash of $US13.4 million and short-term deposits of $391.3 million.

Full-year production for 2010 is expected to be in the range of 960,000oz to 1.06Moz, and will include up to 840,000oz from Lihir, up to 130,000oz from Bonikro and up to 90,000oz from Mt Rawdon.

From 2012, the Lihir Island operation is set to achieve average annual production rates of 1Moz once the plant upgrade is complete.

In Cote d’Ivoire, the company is aiming to extend the life of its Bonikro project and increase annual production rates to more than 200,000ozpa from 2012.

In Australia, it struck a deal last month to sell its troubled Ballarat mine in Victoria to Castlemaine Goldfields for $A4.5 million in cash plus a 2.5% royalty interest based on net smelter returns from production, capped at $50 million.

As for Newcrest, the company is looking to gold production of up to 1.91Moz in 2010 and 90,000t of copper.

It also reported an underlying profit of $266.6 million for the six months to the end of December last year and declared a 5c dividend.

Growth projects for the group include Ridgeway Deeps in New South Wales, Gosowong in Indonesia and Hidden Valley in PNG.

In the latest quarter gross cash costs for Newcrest fell 31% to $310/oz and net cash costs by 29% to $310/oz.

Hunt’s total fixed remuneration in the first year of a five-year deal is $1.7 million.

Shares in Lihir were up 30.36% in morning trade to $A3.95, while Newcrest shares were down 2.29% to $A32.07.