Australian-based Newcrest Mining and rival Lihir Gold finally agreed on a partnership which values Lihir at $9.5 billion.

Newcrest chairman Don Mercer said the agreement was welcomed by the shareholders of both companies.

"The combined organization will be Asia-Pacific's leading gold producer, with standout portfolio of long-life, tier one gold assets," Mr. Mercer said in a statement.

In a joint statement, the agreement allows Lihir to continue its ongoing discussions with third parties until June 8, which signals the target was engaged in such talks.

The new offer by Newcrest is one Newcrest share for every 8.43 Lihir shares, with an additional 2.5 cents cash per Lihir share.

The original offer, which was one shares for every nine Lihir shares, plus a 22.5 cents cash per share was rejected by Lihir.

Ross Garnaut of Lihir said combining its two companies is a good strategy.

"We are therefore pleased to have secured an improved financial proposal that we can recommend to our shareholders," Mr. Garnaut said.

Our shareholders will receive a highly attractive premium and, by receiving Newcrest shares, will participate in the benefits created by the combination of the two companies."

The decision for an improved Newcrest's takeover bid followed after the federal government revealed its plans to introduce a 40 per cent tax on mining industry's super profits.

The tax, however, will only apply to Australian assets. Lihir's operations are in Papua New Guinea.

Grant Samuel has been tasked to organize an independent expert's report to forecast the possible effects of the proposed tax by the federal government.