re: price prediction and follow up
ASX, NZSX and Media release Wednesday, April 11, 2007 Summit announces Strategic Alliance with Areva
Summit Resources Limited announces that it has today entered into an agreement to create a strategic alliance with the French nuclear group Areva. Areva is the world leader in the nuclear industry with annual sales of over €10 billion. Areva has long established expertise in all aspects of the uranium industry and is a global leader in marketing uranium products. Under the agreement, Areva has agreed to subscribe for 19.5 million shares at a price of $6.20 per share, representing a 9% shareholding in Summit. This will result in an initial cash injection into Summit of approximately A$121.1m.
In addition, Areva is entitled to increase its stake in Summit to 18% through a subscription of further shares at a price of A$7.20 per share. This may take place anytime between 2 and 6 months following the initial placement and would result in a further cash injection into Summit of approximately A$171.5m and result in an total investment by Areva of A$292.6m.
Summit and Areva based their discussions around a common objective of creating a long term mutually beneficial relationship. Based on those discussions, the board of Summit is confident that Areva will take up its entitlement to 18% of the shares in Summit, at which point Areva will have acquired its shares at an average price of A$6.75 – a 31% premium to the closing price of Summit shares on 5 April 2007.
In conjunction with the second share subscription, Areva will be appointed to market two-thirds of Summit’s share of uranium production from its Australian projects, with Summit retaining the right to market the remaining production. Areva will also be engaged to provide technical consulting services to Summit on the exploration and further development of the Mount Isa Uranium Project, supplementing Summit’s existing management expertise and extensive experience. A representative of Areva will be invited to join the Summit Board.
Areva's share subscriptions are subject to Foreign Investment Review Board and Summit shareholder approval. A shareholders' meeting to consider the proposed share issue to Areva will be convened as soon as practicable and is expected to be held in late May.
Mr Alan Eggers, the Managing Director of Summit said today: “As a result of this strategic alliance, we will have the backing of the world’s leading uranium industry player, which will significantly enhance our ability to unlock value for our shareholders as we take our world class uranium assets from exploration success, through mine development to production. We will have the financial resources needed to bank the project. We will have access to additional technical support. Most importantly, we will have a platform on which to develop a lasting relationship with the leading global marketer of uranium with a demonstrated track record of achieving premium prices for its customers. We have also retained the ability to market a material proportion of our product in our own right should we choose to do so. Importantly, existing Summit shareholders will continue to have a significant exposure to our exciting uranium province.
Areva’s vote of confidence in our project and our future not only vindicates our belief that we have a world class project, but also justifies our recommendation to reject Paladin’s inadequate offer. We will continue to vigorously pursue our legal rights against Paladin and if, as we expect, we win our case, we will be in a strong position to consolidate the Mount Isa Uranium Project.
Summit directors intend to unanimously recommend this transaction to shareholders in the absence of a superior proposal.” Philippe Portella, Managing Director, Areva NC Australia said: “We are delighted to enter into this strategic alliance with Summit, which controls a unique land position in one of Australia’s most prospective uranium provinces. We believe the combination of Areva’s strong uranium marketing and technical expertise together with Summit’s highly regarded management team provides the basis for a long and fruitful relationship”.
Impact on Paladin takeover offer On 27 February 2007, Paladin Resources announced an unsolicited offer for all of the shares in Summit. That offer closes at 5.00 pm (Perth time) on Monday, 16 April 2007 (unless it is extended by Paladin). To date, Paladin has received acceptances of its offer of less than 1 per cent of Summit. Because Paladin’s offer is unconditional, the proposed transaction with Areva has no effect on the status of Paladin’s offer. The Summit board confirms its prior recommendation to all Summit shareholders that they REJECT the Paladin offer. Transaction documents The agreements between Summit and Areva which give effect to the transaction announced today comprise a: • Strategic Alliance Agreement • Subscription Deed • Deed of Undertaking.
A summary of these agreements will be included in a Supplementary Target's Statement to be released by Summit today. Summit is being advised by Gresham Partners and Areva is being advised by Rothschild. Contact Matthew Horan Cato Counsel 0403 934 958
Conference call details for analysts and media : Please dial in to the number below, Australia 1800 062 635 International +61 3 8660 4952 1:30pm EST 11:30am Western Australia Wednesday 11 April 2007
About Areva With manufacturing facilities in 41 countries and a sales network in more than 100, Areva offers customers reliable technological solutions for CO2-free power generation and electricity transmission and distribution. Areva is the world leader in nuclear power and the only company to cover all industrial activities in this field. Areva’s 61,000 employees are committed to continuous improvement on a daily basis, making sustainable development the focal point of the group’s industrial strategy. Areva’s businesses help meet the 21st century’s greatest challenges: making energy available to all, protecting the planet, and acting responsibly towards future generations.
Areva’s position as the leading uranium marketing company brings well established partnerships with long term contracts. The key end-users of uranium (nuclear power utilities) are increasingly seeking a “one stop shop” approach including uranium procurement. Areva is the only uranium market participant to span all nuclear activities. Areva has a diverse supply of uranium oxide, enhanced by the future inclusion of Summit’s production, uniquely placing it to meet the risk-management requirements of power utilities. The uranium supply diversification is a key differentiator. Along with an established trading arm, providing day-to-day market intelligence, it makes Areva the most reliable supplier for utilities and the right partner for Summit.
Through its unique marketing platform, Areva has been able to consistently secure prices at a premium to its competitors. In the past five years, Areva’s average realised price has materially exceeded main competitors’ at times by in excess of 10%.
SMM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
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