Paladin raising fails to impress

THE uranium miner Paladin Energy has secured more than $68 million in funding but appears to have lost some market support in the process.

By InvestSMART · 30 Sep 2011

By InvestSMART ·
30 Sep 2011

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THE uranium miner Paladin Energy has secured more than $68 million in funding but appears to have lost some market support in the process.

Despite choppy market conditions, the Africa-focused company all but achieved its hopes of raising $70 million, securing $68.2 million through an institutional placement of shares.

Paladin has endured an annus horribilus this year, as an easing uranium price, rising costs, reduced production targets and concerns about debts have savaged the company's share price to barely a quarter of its former value.

Paladin is looking to sell some non-producing assets to free up further cash. The managing director, John Borshoff, said the $68.2 million placement would "provide significant financial flexibility and provide a sound platform for the company to achieve its corporate objectives". The market responded negatively to the raising despite the placement diluting the share base by only 7.3 per cent. Paladin closed 14? lower at $1.17, the company's lowest share price since June 2005.

The Paterson Securities analyst Simon Tonkin attributed the larger than expected share price falls to frustration from existing shareholders. "The raising was a bit of a surprise," he said.

But Mr Tonkin said he expected Paladin's share price to recover, saying the company remained Australia's "number one investment vehicle for uranium" because it was producing more than other uranium stocks on the stock exchange.

Paladin is not the only uranium play seeking funds. Uranex wants to raise $4.7 million through a placement to institutional investors and a share offer to existing shareholders.

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Frequently Asked Questions about this Article…

What did Paladin Energy announce about its latest fundraising placement?

Paladin Energy completed an institutional placement that raised $68.2 million, just shy of its $70 million target, selling new shares to institutional investors to boost cash resources.

How did the market react to Paladin's $68.2 million placement and why did the share price fall?

The market reacted negatively: Paladin's shares fell about 14% to $1.17, their lowest level since June 2005. Analysts said existing shareholders were frustrated by the surprise raising despite the placement only diluting the share base by 7.3%.

What factors have weighed on Paladin Energy's share price this year?

The article cites an 'annus horribilis' for Paladin driven by an easing uranium price, rising costs, reduced production targets and concerns about company debt—factors that have severely pressured the share price.

How does the reported 7.3% dilution from the placement affect current shareholders?

According to the article, the placement diluted the share base by 7.3%, meaning existing shareholders’ percentage ownership is modestly reduced; despite this relatively small dilution, the market still responded negatively.

What did Paladin's managing director say the $68.2 million will be used for?

Managing director John Borshoff said the $68.2 million placement will provide 'significant financial flexibility' and a sound platform for the company to achieve its corporate objectives, implying it will shore up the balance sheet and support operations.

Is Paladin planning to sell any assets to raise more cash?

Yes, the company is looking to sell some non‑producing assets to free up further cash, according to the article.

What did analysts say about Paladin's future prospects after the raising?

Paterson Securities analyst Simon Tonkin acknowledged shareholder frustration over the surprise raising but said he expected Paladin's share price to recover, describing Paladin as Australia's 'number one investment vehicle for uranium' because it produces more than other listed uranium stocks.

Are other uranium companies also seeking to raise funds right now?

Yes — the article notes Uranex is looking to raise $4.7 million via a placement to institutional investors and a share offer to existing shareholders, showing Paladin is not the only uranium play seeking funds.