Paladin Energy raises more money for expansion

Paladin Energy (PDN-T) “remains the only significant public uranium producer without a strategic investor/alliance,” making the company “a very attractive takeover target,” Canaccord Wealth Management remarked in a note to clients this morning.

The comment came about forty-eight hours after Cameco Corporation (CCO-T, CCJ-N) announced its hostile takeover bid for Hathor Exploration (HAT-V) on Friday–the same day Paladin Energy revealed that a syndicate of banks had agreed to a US$141 million project financing facility to expand its uranium mine in Namibia.

The money will go to the third-stage expansion of Paladin Energy’s Langer Heinrich mine, which will raise production from its current capacity of 3.7 million pounds of yellowcake per year to 5.2 million pounds. Initial funding had come from Paladin Energy’s existing cash reserves but now the expansion project is fully financed and “on track to reach nameplate capacity in the first quarter of 2012,” the company said in a statement on Aug. 26.

The facility consists of a six-year project finance facility of US$135 million with a cost overrun facility of US$6 million. Members of the syndicate include Societe Generale, Nedbank Capital, Standard Bank Plc, Barclays Capital, the investment banking division of Barclays Bank, and Rand Merchant Bank, a division of FirstRand Bank.

“The execution of the project financing facility in challenging financial markets is testimony to the Langer Heinrich mine’s status as a world-class operation and the strength of the long-term fundamentals in the uranium market,” the company outlined in a press release.

Earlier this month, Paladin Energy also announced that it had signed a series of term uranium sales agreements for output from the Stage 3 expansion project.

The agreements were signed with three new customers in the United States.  

Production commitments from the new agreements add up to more than 2.8 million pounds of U308 with deliveries starting next year and extending through to 2016.

Contractual pricing provisions incorporate both fixed and base (escalated) mechanisms ranging from the low- to mid-US$60 per pound U308, the company explained.

“We have consistently stated that nuclear fuel buyers continue to recognize the need to secure uranium supplies for the medium and longer term despite the price volatility and perceived uranium market uncertainties caused by events in Japan,” Paladin Energy’s managing director and chief executive, John Borshoff, said in a press release Aug. 22. “These contracts, signed at prices well in excess of the prevailing spot price, only serve to further support this message.”

The Langer Heinrich mine is in the Namib desert, 80 km east of the seaport of Walvis Bay and about 40 km southeast of the hard-rock Rössing uranium mine operated by the Rio Tinto group. The deposit was discovered in 1973 after a government-sponsored airborne radiometric survey.