Paladin offers A$1bn for uranium explorer SummitPaladin launches...

Paladin offers A$1bn for uranium explorer Summit

Paladin launches a hostile bid for prospector Summit Resources.
James Regan
27 February 2007

SYDNEY -

(Reuters) - Uranium miner Paladin Resources Ltd. launched on Tuesday a hostile A$1 billion all-share takeover bid for prospector Summit Resources N.L., sending Summit shares up around 28 percent.

Summit advised shareholders to take no action for now and to ignore all communication from Australia-based Paladin, which is attempting to take full control of deposits of the nuclear fuel in Queensland.

"This offer is not unexpected and in my opinion is designed to capture value that will otherwise flow to Summit's shareholders," Summit's managing director, Alan Eggers, said in a statement.

The move comes as uranium demand is climbing as new nuclear power plants are built. Limited supply is leaving miners scouring the globe for new lodes.

Paladin, which mines uranium in Namibia, said it was one of a handful of companies with the ability to bring uranium deposits held by Summit in Australia into development.

"This says that Paladin sees its shares as fully valued and wants to move forward," said a mining analyst in Melbourne who spoke on condition he not be identified.

Paladin is offering one of its shares for every 2.04 Summit shares, implying a price of A$5.12 per Summit share and valuing Summit at A$1.01 billion.

Paladin's move pushed shares in Summit, which is looking for copper, gold and other minerals as well as uranium in eastern Australia, up 27.75 percent to A$5.11.

In afternoon trade, Paladin was down 2.6 percent to A$10.04. Its shares hit a record high of A$10.75 on February 21.

COMMERCIAL SHIPMENT

Paladin expects to make its first commercial shipment from its Langer Heinrich mine next month. Paladin began production at the mine, its first, in late December.

For six years until November 2003, spot uranium prices hovered between $8 and $12/lb, before rising sharply, as concerns about greenhouse gas emissions prompted renewed interest in atomic energy.

Major supplier Rio Tinto last month withdrew the sale of its Sweetwater uranium mill and other U.S. assets to Canadian miner Uranium One Inc., citing significant and unexpected changes in the global market for uranium.

Another major, BHP Billiton Ltd./Plc., has been supporting moves in Australia to allow for uranium sales to China after paying $7 billion in 2005 for WMC Resources, whose assets included the world's single-largest uranium deposit.

Last week uranium prices jumped 13 percent to $85/lb and could soon climb above $100/lb on concerns that consumption will outpace production for several years to come, sector analysts said.

Another Paladin mine in Malawi is scheduled to start up in September 2008.

Azure Capital is acting as financial adviser to Paladin.