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ANNUAL REPORT 2010

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Skip Navigation LinksFinancial Report > Notes to the Consolidated Financial Statements > Note 25. Commitments And Contingencies

note 25. commitments and contingencies

There were no outstanding commitments or contingencies, which are not disclosed in the Financial Report of the Consolidated Entity and the Company as at 30 June 2010 other than:

(a) Tenements

CONSOLIDATED
2010
US$M
2009
US$M
Commitments for tenements contracted for at the reporting date but not recognised as liabilities, payable:
Within one year2.17.1
Later than one year but not later than 5 years20.48.0
More than 5 years0.1-
Total tenements commitment22.615.1

These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Namibian, Malawian, Western Australian, South Australian, Northern Territorian and Queensland Mines Departments attaching to the tenements and are subject to re-negotiation upon expiry of the exploration leases or when application for a mining licence is made.

These are necessary in order to maintain the tenements in which the Consolidated Entity and other parties are involved. All parties are committed to meet the conditions under which the tenements were granted in accordance with the relevant mining legislation in Namibia, Malawi and Australia.

(b) Mine construction commitments

CONSOLIDATED
2010
US$M
2009
US$M
Commitments for tenements contracted for at the reporting date but not recognised as liabilities, payable:
Within one year35.74.4
Later than one year but not later than 5 years--
More than 5 years--
Total mine construction35.74.4

These commitments in 2010 relate to construction of Stage 3 at LHM (2009: construction of the KM and Stage 2 at LHM).

(c) Operating lease commitments

The Group has entered into various property leases relating to rental of offices and residential accommodation.

These non-cancellable leases have remaining terms of between 1 month and 11 years. All leases include a clause to enable upward revision of rental charge on an annual basis according to prevailing market conditions.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

CONSOLIDATED
2010
US$M
2009
US$M
Within one year1.30.8
Later than one year but not later than 5 years4.52.7
More than 5 years0.91.6
Total operating lease commitment6.75.1

(d) Acquisition costs

The Consolidated Entity acquired a call option on 19 June 1998 in relation to the purchase of the Oobagooma Uranium Project and, in turn, granted a put option to the original holder of the project. Both the call and put options have an exercise price of A$0.75M (US$0.6M) (2009:A$0.75M (US$0.6M)) and are subject to the Department of Minerals & Energy granting tenements comprising two exploration licence applications. The A$0.75M is payable by the Consolidated Entity within 10 business days of the later of the grant of the tenements or the exercise of either the call or put option. The options will expire three months after the date the tenements are granted.

In relation to the Manyingee Uranium Project, the re-negotiated acquisition terms provide for a payment of A$0.75M (US$0.6M) (2009:A$0.75M (US$0.6M)) by the Consolidated Entity to the vendors when all project development approvals are obtained.

(e) Bank guarantees

As at 30 June 2010 the Group and Parent have outstanding US$731,144 (A$853,801) (2009: US$87,051 / A$108,201) as a current guarantee provided by a bank for the corporate office lease and a US$30,828 (A$36,000) (2009: Nil) guarantee for tenements.

(f) Legal actions

Mount Isa Uranium Joint Venture

On 3 August 2007 the Company’s wholly owned subsidiary, Mt Isa Uranium Pty Ltd (MIU) entered into a settlement agreement with respect to proceedings which had been commenced by SRA (which had, by the time of the settlement, become ultimately 82.0% owned by the Company) against MIU and the unrelated entity, Resolute Pty Ltd (Summit Proceedings). The Summit Proceedings related to alleged breaches of confidentiality provisions in the Mount Isa Uranium Project joint venture agreement. If successful in the Summit Proceedings, SRA would have been entitled to the transfer of MIU’s 50% interest in the Mount Isa Uranium Project joint venture for 85% of its market value.

Areva NC (Australia) Pty Ltd (Areva), being a 10.01% shareholder of the parent company of SRA subsequently applied to the Supreme Court of Western Australia for, relevantly, orders under Section 237 of the Corporations Act 2001, to be granted leave to intervene in and effectively re-open the Summit Proceedings, notwithstanding the settlement (Areva intervention proceedings). The trial of the Areva intervention proceedings was heard over the period from 18 May 2009 to 3 June 2009 and the Court reserved its decision.

In any event, even if the Summit Proceedings are re-opened as a consequence of the Areva intervention proceedings, the Company has always remained confident that the Summit Proceedings could be successfully defended. Further, the Company has the benefit of an indemnity from Resolute Mining Ltd (the parent of Resolute Pty Ltd) and an ultimate 82% interest in SRA. As a consequence, a change in the ownership of the 50% interest in the Mount Isa Uranium joint venture from MIU to SRA would not be of significance to the Company.

On 3 December 2009, Paladin announced that MIU had entered into a conditional agreement with (amongst others) Areva, Resolute Limited and Summit Resources Limited (Settlement Agreement).

The Settlement Agreement relates to the Areva intervention proceedings and is conditional upon the Honourable Chief Justice making orders in the form sought by the parties.

Paladin will make a further announcement to the market once it becomes known whether the Honourable Chief Justice will make the orders sought by the parties. There is no guarantee that such orders will be made, or made in the form sought by the parties.

The Company has recognised a provision for the expected litigation settlement amount.