Australia's Summit enters into strategic alliance with France's Areva

Australia's Summit enters into strategic alliance with France's Areva

	Published : Wed, 11 Apr 2007 06:06 By : Agencies Print this Story

SYDNEY (XFN-ASIA) - Uranium explorer Summit Resources Ltd said it has entered into a strategic alliance with French nuclear group Areva.

Areva will purchase 19.5 mln Summit shares at 6.20 aud per share, representing a nine pct shareholding and a cash injection of 121.1 mln aud into the Australian company.

The French group is entitled to increase its stake in Summit to 18 pct at a price of 7.20 aud per share following an intial placement at between 2-6 months. This would result in a further cash injection into Summit of around 171.5 mln aud.

Together, Areva's potential 18 pct shareholding in Summit will have been acquired at an average price of 6.75 aud per share - a 31 pct premium to the closing price of Summit shares on April 5 of 5.15 aud.

At 2:37 pm Sydney time (0437 GMT), Summit (SMM.ASX) shares were up 0.73 aud or 14.17 pct at 5.88 aud.

In conjunction with the second share subscription, Areva will be appointed to market two-thirds of Summit's share of potential uranium production from its Australian projects, with Summit retaining the right to market the remaining production.

Areva will also provide technical consulting services to Summit on the exploration and further development of the Mount Isa uranium project, and a representative of Areva will be invited to join the Summit board of directors.

Further uranium mining in Australia faces constraints, including state bans on uranium mining across Australia.

Only BHP Billiton's Olympic Dam project in South Australia and Rio Tinto's listed uranium miner, Energy Resources of Australia Ltd's (ERA) Ranger mine in Australia's Northern Territory are currently commercially operational.

Summit chief executive Alan Eggers said the agreement provides his company with the backing of the world's leading uranium industry player, significantly enhancing the ability to take their uranium assets from exploration success through mine development to production.

'Areva's vote of confidence in our project and our future not only vindicates our belief that we have a world class project, but also justifies our recommendation to reject Paladin Resources Ltd's inadequate offer,' he said.

Last month the board of Summit advised shareholders to reject a 1.011 bln aud scrip offer from African-focused uranium miner Paladin, saying it was opportunistic and inadequate.

Eggers said then the hostile offer from Paladin of one of its shares for every 2.04 Summit shares did not reflect the value of Summit's uranium, base metal and iron ore projects and extensive tenement holdings in Queensland.

He added Paladin's offer then was timed to beat a possible court loss over the Mount Isa Uranium Joint Venture (IUJV) of which Summit is manager and holder of a 50 pct interest. Paladin holds the other 50 pct interest which is under contention.

Paladin, which already mines uranium in the southern African nation of Namibia, is one of a handful of companies with the ability to bring uranium deposits held by Summit into development.

Areva Australia chief executive Philippe Portella said the company is delighted to enter into this strategic alliance with Summit which controls a unique land position in one of Australia's most prospective uranium provinces.

'We believe the combination of Areva's strong uranium marketing and technical expertise, together with Summit's highly regarded management team, provides the basis for a long and fruitful relationship,' he said.

Areva's investment in Summit is subject to Australia's Foreign Investment Review Board and Summit shareholder approval.

Summit shareholders are expected to meet in late May to consider the proposed share issue to Areva.

(1 usd = 1.21 aud)

paul.daniel@xfn.com