JAPAN-based Fortune 500 company Itochu Corporation will purchase up to 40 per cent of uranium focussed Alliance Resources under a strategic partnership arrangement. Alliance owns 25 per cent of the Four Mile uranium project in South Australia and will use Itochu’s funds to finance its share of development costs.
The agreement gives Itochu’s subsidiary Nura 3 the right to purchase an initial 14.9 per cent stake in Alliance or its wholly-owned subsidiary Alliance Craton Explorer under a deferred share rights deed.
Itochu will also have the option to subscribe for a further 25.1 per cent interest in Alliance; it can convert the deferred share rights and 25.1 per cent option to ordinary shares under certain circumstances, including the resolution of current litigation regarding the Four Mile project.
Four Mile is at the centre of a legal dispute between Alliance Craton and the remaining 75 per cent holder of the project, Quasar Resources subsidiary Heathgate Resources. Alliance Craton launched legal proceedings against Quasar and Heathgate in mid 2010, alleging that both companies deliberately withheld information from Alliance regarding the project area’s prospectivity.
The Federal Court of Australia officially refused Alliance’s application for disclosure of all documentation in early April this year. Alliance appealed the decision, but at the time of writing a hearing date was yet to
Approval must be gained from Alliance’s shareholders and the Foreign Investment Review Board, and other regulatory approvals and conditions met, before the transaction with Itochu can be officially executed.
Once Itochu has exercised its right to subscribe for shares in Alliance, it will nominate a director to Alliance’s board.
Itochu has annual net income of about $3.7 billion and a current market capitalisation of $16 billion.
The company has about 370 operating subsidiaries in varying industries worldwide.
Itochu already has extensive interests in the uranium sector and is one of the world’s largest traders of the commodity.
By Lorna Seatter