Paladin crashes on discounted placement, mine non-sale
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Paladin Energy (PDN) has plunged the most in 13 years after selling shares in a heavily discounted placement and ending talks to sell its minority stake in a uranium mine.
Paladin slumped by 28% to 72 cents in morning trade, just above the 70 cents a share placement announced on Friday that raised $88 million at a 30% discount to the company's stock.
The share price fall was given added weight from downgrades by six brokers, including Citigroup, JP Morgan and Morgan Stanley today. They labelled the placement as a temporary fix to the company's worsening negative cash flow problems.
While JP Morgan dropped its recommendation to "neutral" and JP Morgan cut its to "underweight" from "equal weight", Citigroup reversed its rating to "sell, high risk" from "buy, high risk".
"With cash of $US78m, no cash being generated from operations and debt of $US750m... we see this equity raising [as] insufficient to patch a much bigger problem," Citi said.
The uranium production company also withdrew from negotiations to sell its minority interest in the Langer Heinrich mine in Africa, saying it wouldn't be able to get good value given the depressed uranium prices.
"An asset sale.. could potentially have been positive insofar as it would have alleviated some of the immediate balance sheet concerns," JP Morgan said.
JP Morgan still thinks Paladin provides the best leverage to uranium prices.
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