Australia's Paladin raises scrip offer for Summit Resources

Australia's Paladin raises scrip offer for Summit Resources - UPDATE

	Published : Thu, 12 Apr 2007 02:07 By : Agencies Print this Story

SYDNEY (XFN-ASIA) - Paladin Resources Ltd said it has increased its scrip takeover offer for uranium explorer Summit Resources Ltd to one Paladin share for every 1.67 Summit shares, up from the previous offer of one for 2.04 shares.

Paladin said based on the closing price of its shares yesterday at 10.38 aud, the increased offer values Summit at 6.22 aud per share or 1.228 bln aud, up from the initial offer of 1.011 bln aud.

The Africa-based uranium miner said the revised offer will be extended by 14 days to April 27 and is final, in the absence of a competing offer.

Paladin's announcement follows Wednesday's news that Summit Resources had entered into a strategic alliance with French nuclear group Areva.

Areva planned to 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 with an option of increasing its stake in Summit to 18 pct at a price of 7.20 aud per share and a further 171.5 mln aud.

In conjunction with the second share subscription, Areva was to 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.

Paladin chief executive John Borshoff said that in addition to these shares and a right to representation on the Summit board, Areva also benefits from a raft of valuable contractual rights including pre-emptive rights over Summit's assets, an anti-dilution option, uranium marketing rights over the majority of Summit's share of uranium production and protection against competing bids.

The chief executive said that it was important for Summit shareholders to realize that when the Areva deal is taken in its entirety, the price Areva is paying for the placement shares is substantially below Summit's headline figures.

Borshoff said the cost to Areva of the shares is actually 6.20 aud less the value of the options and rights granted to Areva.

His company's valuation of Summit's share option alone is 0.26 aud per share, implying a value per Summit share of around 5.94 aud which is supported by the Summit trading prices after announcement of the proposal.

'The values of the pre-emptive rights and uranium marketing rights are more difficult to quantify but clearly they are of material value,' Borshoff said.

Meanwhile, Paladin's chief executive said the involvement of Areva is a positive development for Paladin as a joint venture partner at 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 also under contention.

Borshoff noted the discipline, uranium marketing experience and technical skills Areva bring will go some way to bridging the capability gaps and nuclear industry inexperience that exist within Summit and Paladin plans to vote its shares in the IUJV in favour of the Areva transaction in late May.

But, he said, the Areva deal alone is not the best outcome for Summit shareholders as Paladin remains the only company which has brought a new conventional uranium mine into production in the southern African nation of Namibia and will have brought its second mine into production next year.

'Unlike Summit, Paladin offers direct exposure to uranium price upside today and during the critical shortage period to 2012,' Borshoff said.

'Summit shareholders who truly want to maximize the value of their exposure to Mt Isa should take the opportunity to swap into Paladin scrip. The increased offer gives them the opportunity to immediately do so, realising a substantial premium to market prices,' he added.

Borshoff also said Summit shareholders should understand the risk that a favorable federal Australian Labor Party decision for further uranium mining in the country will not lead automatically to a change in the state of Queensland policy which is also held by the ALP.

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.

'Paladin is looking forward to working with Areva to patiently prepare the Mt Isa assets for production if and when the policy in Queensland allows,' Borshoff said.

'In the meantime, acceptance of our offer provides Summit shareholders with the best way to maximise the value of their holding in both the short and longer term.'

(1 usd = 1.21 aud)

paul.daniel@xfn.com

Australia's Paladin raises scrip offer for Summit Resources - UPDATE