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Note 21. Auditors’ Remuneration Note 23. Employee Benefits 1

NOTE 22. COMMITMENTS AND CONTINGENCIES

There were no outstanding commitments or contingencies, which are not disclosed in the Financial Report of the Group as at 30 June 2011 other than:

CONSOLIDATED
2011
US$M
2010
US$M

(a) Tenements

Commitments for tenements contracted for at the reporting date but not recognised as liabilities, payable:
Within one year19.02.1
Later than one year but not later than 5 years17.020.4
More than 5 years28.40.1
Total tenements commitment64.422.6

These include commitments relating to tenement lease rentals and the minimum expenditure requirements of the Namibian, Malawian, Nigerian, Canadian, 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 Group 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, Australia, Canada and Niger.

CONSOLIDATED
2011
US$M
2010
US$M

(b) Mine Construction Commitments

Commitments for tenements contracted for at the reporting date but not recognised as liabilities, payable:
Within one year18.835.7
Later than one year but not later than 5 years--
More than 5 years--
Total mine construction18.835.7

These commitments in 2011 relate to construction of Stage 3 at LHM (2010: construction of Stage 3 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 10 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
2011
US$M
2010
US$M
Within one year1.51.3
Later than one year but not later than 5 years5.34.5
More than 5 years0.10.9
Total operating lease commitment6.96.7

(d) Acquisition Costs

The Group 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$0.8M) (2010: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 Group 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$0.8M) (2010:A$0.75M (US$0.6M)) by the Group to the vendors when all project development approvals are obtained.

(e) Bank Guarantees

As at 30 June 2011 the Group has outstanding US$911,837 (A$860,619) (2010: US$731,144 / A$853,801) as a current guarantee provided by a bank for the corporate office lease and a US$289,700 (A$273,428) (2010: US$30,828 / A$36,000) guarantee for tenements.

(f) Legal Actions

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 Summit Resources (Aust) Pty Ltd (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 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 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.

Early in 2011 the Company finalised the settlement of the Areva intervention proceedings. Although the effect of the settlement is that the Summit Proceedings remain on foot, as previously announced, the Company is confident that, if pursued, those proceedings will be able to be successfully defended and, in any event, the Company has the benefit of an indemnity from Resolute. Further, the Company has an ultimate 82.1% interest in SRA. As a consequence, a change in the ownership of the 50% interest in the Isa Uranium joint venture from MIU to SRA would not be of significance to the Company.

SRA has now made application to the Supreme Court of Western Australia for orders which would allow it to settle the Summit Proceedings, essentially on the terms contemplated by the 2007 settlement agreement. That application is ongoing.

© 2011Paladin Energy Ltd
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