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Paladin embarks on sweeping recapitalisation exercise

24th November 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Uranium producer Paladin Energy has announced a throng of measures aimed at recapitalising the company and addressing its long-term funding requirements, including the convertible bonds due in November next year.

Following these and other initiatives, which were due to be implemented in early 2015, the group said in a statement that it expected to be fully funded until at least June 2016.

The group announced on Monday that it had signed a subscription agreement with China-based private equity firm HOPU Clean Energy, under which HOPU would unconditionally subscribe for 144.9-million fully paid ordinary shares in Paladin.

This represented 15% of Paladin's current capital base and about 13% of its issued capital following the placement and was expected to raise A$61-million, based on an issue price of A$0.42 apiece.

“The recapitalisation package will allow Paladin to significantly derisk its balance sheet and enhance its future funding flexibility.

“HOPU's investment demonstrates its confidence in the uranium industry and its understanding of Paladin's unique positioning in the uranium sector. It also increases Paladin's funding options going forward,” commented Paladin CEO and MD John Borshoff.

ENTITLEMENT OFFER
Eligible shareholders would, meanwhile, be entitled to participate in an entitlement offer and subscribe for one new Paladin share for every two existing shares held on November 27.

As the placement shares would be issued prior to the entitlement offer record date, HOPU was expected to be eligible for participation in the entitlement offer.

In addition to the placement, HOPU had committed to subscribe for its full entitlement under the institutional tranche of the entitlement offer and would participate in last-in-relief sub-underwriting of the retail tranche of the entitlement offer to bring its shareholding up to a maximum of 15% of Paladin’s issued capital following the placement and entitlement offer.

NUCLEAR INTEREST
Paladin added that it was currently engaged in ongoing discussions with major international nuclear utilities that had expressed a strategic interest in the producer with a view to “crystallising considerable value” early next year.

The company said the rationale for these entities to invest in Paladin was the opportunity it provided to access the Paladin platform, including technical capabilities and intellectual property, an asset pipeline, the opportunity to enter into additional arms-length offtake contracts and possible equity participation on developing projects.

This, in turn, would provide additional funds to both deleverage the balance sheet and support growth objectives.

“As an alternative to this strategic investment, Paladin will consider a potential long-dated convertible bond, the attractiveness of which will be considered against any proposals received from potential strategic partners,” the group outlined.

OPERATIONAL OUTLOOK
Paladin, meanwhile, confirmed that it remained on track to meet production guidance of between 5.4-million pounds and 5.8-million pounds of uranium for the 2015 financial year.

The Langer Heinrich mine, in Nambia, had now successfully introduced the new resin in the continuous ion-exchange circuits and scaling issues had been fully resolved.

The new resin would reduce operating costs through reduced reagent consumption and would increase the circuit uranium transfer capacity and overall process recovery.

Construction of the mine’s bicarbonate recovery plant was also well advanced and scheduled for commissioning in January.

“These initiatives put Paladin in a strong position to achieve its long-term cost target of $20/lb at Langer Heinrich,” said the group.

URANIUM OUTLOOK
The group further outlined that the funding initiatives were occurring “at an opportune time”, positioning the group to benefit from any upturn.

The recovery in the uranium spot price in recent months, from a low of $28/lb to a recent high of $44/lb, indicated both a tightness in supply and the effects of possible realignment of some supply sources owing to negative geopolitical developments, Paladin noted.

“With China as the nuclear growth leader, confirming its strong commitment in [the] build-up of its reactor fleet over the next 30 years, combined with supply shortfalls identified in the mid-term, Paladin believes uranium is set for a long period of price strength,” it stated.

The company reiterated that, given the status of these initiatives and the measures announced, it believed there would be no requirement for a further call on Paladin shareholders to meet its debt obligations in the medium term.

“With an improving uranium price environment, as well as continued strategic interest in the company and its operations, Paladin believes it is also well placed to address the expiry of its remaining convertible bonds due in April 2017,” it concluded.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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