the summit resources hangover

Paladin has around 82% of Summit Resources stock of which it paid with Paladin stock at the time a cash equivalent of just over $6. AREVA snapped up a defensive 10.46% of SMM stock to block the takeover. Leaving an approximate 8% of free SMM shares and a mighty headache for John Borshoff.

Because there is remaining shares and liquidity has dribbled to the realm of almost complete dormancy, anyone who would seek to wreak damage on the asset side of Paladin's economic value need do what it takes to devalue the SP of Summit Resources. Paladin has to mark to market its asset base and as such you can expect a significant writedown in the value of PDN's shareholding in SMM with the recent downtick in SMM's SP.

Borshoff needs to head this off by hoovering the remaining 8% of SMM stock to a price level that increases the value of PDN's current 82% shareholding. If Borshoff wanted it for $6 surely $1.50-$2 represents a bargain? A tilt at the remaining 8% of SMM using PDN script would make the most sense as it would encourage SMM shareholders to take the more liquid PDN stock, whilst not impacting on the all important cash flow PDN has going at the moment.

More importantly it will stop the inevitable downside pressure on the Summit asset that can come from any larger player that has an interest in seeing Paladin weaker from an asset valuation aspect. It is highly plausible that AREVA is behind the campaign to weaken the Summit valuation as not only can it short but it can also sell its own stock and buy it back driving the share price down with no fear of ever selling below the critical 10% level it needs to protect against outright PDN ownership. With the remaining 8% hoovered up AREVA would find it impossible to play with the SMM SP and PDN locks in a valuation on its Mt Isa assets.