Australia's Summit Resources accepts Paladin's increased offer

Australia's Summit Resources accepts Paladin's increased offer

	Published : Mon, 16 Apr 2007 07:09 By : Agencies Print this Story

SYDNEY (XFN-ASIA) - The board of Summit Resources Ltd has unanimously recommend that all Summit shareholders accept a revised takeover offer from Africa-based uranium miner Paladin Resources Ltd.

The increased scrip offer equals to one Paladin share for every 1.67 Summit shares, valuing the company at 6.22 aud per share or 1.228 bln aud based on last Wednesday's closing price of Paladin's shares at 10.38 aud. This is up from the initial offer of one for 2.04 shares or 1.011 bln aud .

Paladin's revised offer was extended by 14 days to April 27 and is final, in the absence of a competing offer.

Summit chief executive Allan Eggers said the board undertook a detailed analysis of the potential future risks and rewards for Summit shareholders of staying independent compared to the benefits of being part of a much bigger company with existing production and growth prospects.

He said this also included Paladin's offer whereby Summit shareholders could retain exposure to the Mount Isa Uranium Project (IUJV) through ownership of Paladin shares.

Summit is the manager and holder of a 50 pct interest in the IUJV, with Paladin holding the other 50 pct interest which was under contention.

'I remain convinced that the Mount Isa project will prove to be world class and that it will produce not one, but several, world class metal deposits,' Eggers said.

Eggers noted they also considered the shorter term risk that there might not be a change to the Australian Labor Party's (ALP) policy on uranium mining at the upcoming national conference.

'That uncertainty, and the current stance of Queensland Premier Peter Beattie (who recently indicated that even if the ALP national policy changes, he will continue to oppose uranium mining in Queensland), imposed an additional layer of risk for Summit shareholders that increased the appeal of Paladin's offer,' he said.

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.

Eggers noted the board previously concluded that the benefits of the Areva transaction outweighed the benefits of accepting Paladin's first offer.

Last Wednesday. French nuclear group 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.

'In light of all these circumstances, the Board now believes that the benefits of accepting Paladin's higher offer when combined with the risks of rejecting it,' Eggers said.

(1 usd = 1.20 aud)

paul.daniel@xfn.com