Uranium miner Paladin wants to take over Summit to cut costs; shares soar
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Paladin Energy has revealed its plans to fully acquire fellow ASX-listed uranium player Summit Resources in an all scrip deal valued at a 68.3 per cent premium.
Summit investors were thrilled – sending the shares up 67 per cent to an intra-day high of 20c, almost the same price as the offer.
Paladin (ASX:PDN) is already Summit’s (ASX:SMM) largest shareholder with a roughly 82.1 per cent stake.
The news comes less than a week after Canadian uranium heavyweight Cameco indefinitely suspended production at its McArthur River mine, which sent ASX small cap uranium players on a run.
Paladin is offering Summit shareholders one of its shares for each one Summit share held, which prices the deal at about 20.2c – well above the 12c Summit closed at on Tuesday.
This values Summit at around $44 million.
Summit has recommended shareholders take the deal because it offers them a “shareholding in a company that has exposure to a broader range of uranium projects and with a stock which has greater liquidity”.
It wasn’t that long ago that Paladin itself was struggling to stay afloat – with the company going into administration after it failed to sell its 75 per cent stake in the producing Langer Heinrich Mine in central Namibia to its Chinese joint venture partner.
The uranium price bombed heavily in 2011 from the roughly $US70 ($94) per pound it was trading at after the Fukushima Daiichi nuclear disaster that forced Japan to shut down its entire reactor fleet.
It is now trading around $US24 per pound – a long way off the trigger price needed for new mines to come into production and existing mines to make a profit.
Paladin emerged from administration in February after it managed to secure a deal with its creditors, but it has since halted production at the Langer Heinrich mine until uranium prices pick up.
Paladin told investors today the planned acquisition of Summit is part of its cost cutting drive.
“The company already owns 82.08 per cent of Summit and by purchasing the shares owned by third-party shareholders and delisting Summit, cost savings can be achieved in the areas of compliance and regulatory costs,” Paladin said.
The move could save Paladin potentially up to $500,000 each year by it not having to fund the majority of Summit’s capital raisings, Andrew Mirco, general manager corporate development and investor relations, told Stockhead.
“We reduce the listing costs, the director fees, the audit fees and this can be anywhere from $300,000 to half a million dollars a year depending on whether we need to do equity raises or not,” he said.
“So taking this off the market means that will be a direct saving back to Paladin having not to contribute to that funding.”
Summit’s main project is “Isa North”, which comprises 936 sq km of uranium prospects in the Mount Isa region in northwest Queensland.
Paladin acquired its majority stake in Summit back in 2006, but until now hadn’t been able to reach an agreement with the other major shareholder to acquire the rest of the company.