Newcrest Mining disclosed on Tuesday it has completed its due diligence on Lihir Gold for its $9.5 billion takeover bid, and will finalize its contract with the target.

In a letter addressed to the Australian Securities Exchange, Newcrest said Lihir is now permitted to work exclusively with the company for the proposed merger and should deny any competing bids from third parties.

The Newcrest statement also said that both parties are setting a timetable for the merger implementation agreement, however, negotiation period is expected to prolong another two weeks for an independent expert report.

“As a result, the scheme meeting is likely to be held in August, with completion of the merger in September 2010, subject to Lihir shareholders approving the transaction," Newcrest said.

Newcrest shares peaked at 3.27 to $33.34 while Lihir shares went up to 2.5 per cent to $4.19 on Tuesday.

A source familiar with the situation said that Lihir must work exclusively with Newcrest starting on Tuesday, but third parties may also apply for a bid in the coming weeks.

The source added that Newcrest's bid is the only formal offer for Lihir so far.

It was expected that no rival bid will follow until an independent expert's report on Newcrest offer will be disclosed.

Under Newwcrest's bid, Lihir's shareholders will receive one share for every 8.43 shares they own, with a 22.5 cents cash a share less any interim dividend declared by Lihir.

Independent directors of Lihir unanimously agreed and recommended the deal to the shareholders.