miners struggle to reach valhalla turns ugly

From the SMH - http://www.smh.com.au/news/business/miners-struggle-to-reach-valhalla-turns-ugly/2007/03/07/1173166799064.html


PALADIN Resources' $1 billion push for full control of the Valhalla uranium deposit in Queensland has degenerated into a nasty brawl with its target, Summit Resources.

The uranium miner was prepared to drag Summit before the Takeovers Panel until the smaller company found fit to clarify some issues raised in a letter to shareholders, released last Friday, urging them to reject Paladin's offer.

Some of the issues dealt with claims and counter-claims Summit and Paladin have lodged against each other over issues relating to their joint venture agreement over the Valhalla and Skal uranium deposits.

Summit alleges Paladin has made its offer now to avoid the risk of losing the litigation, which could effectively strip it of its interest in the Valhalla project. Paladin denies the allegation.

Paladin gained a 50 per cent stake in the Summit-operated project through its $175 million scrip acquisition of Valhalla Uranium last year. Valhalla was spun off from Resolute Mining in an initial public offering in late 2005.

Summit is arguing Valhalla's prospectus materially breached the joint venture agreement by disclosing particular information - information which Paladin claims was not a breach in the first place.

Summit said yesterday it issued Resolute with a notice of the breach within a month of the prospectus being released to potential investors.

This was not disclosed to the market at the time.

But Paladin noted yesterday Summit did not take court action until after it announced its offer for Valhalla, nine months after the alleged breach.

If the court finds there was a breach of the joint venture agreement, Summit would be entitled to buy Paladin's 50 per cent stake in the Valhalla project at 85 per cent of its market value - a sum of hundreds of millions of dollars.

Resolute has agreed to provide Paladin with an indemnity, capped at between $50 million and $75 million, in the event Summit's legal action is successful.

Paladin managing director John Borshoff said yesterday he thought that was "unlikely".

But Paladin has also filed a counter-claim against Summit, alleging it disclosed confidential information without authorisation under the joint venture agreement.

If Paladin's counter-claim succeeds, it would be entitled to purchase Summit's stake in Valhalla, also at 85 per cent of the market price.