Uranium miner seeks $70m in fresh funds

IT IS not the best of times for a uranium producer to be tapping the market for fresh funding. But that is what ASX-listed African uranium producer Paladin Energy is doing, seeking up to $70 million from an institutional placement of shares.

By InvestSMART · 29 Sep 2011

By InvestSMART ·
29 Sep 2011

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The funds are needed to strengthen the group's balance sheet to "ensure the company is well placed to meet all future commitments and pursue identified growth options". It was not inspiring stuff from a company whose share price has been trashed since investor confidence in uranium stocks was undermined by the partial meltdown at Japan's Fukushima nuclear plant in March.

Paladin was a $5 stock before the earthquake and tsunami hit Japan. Ahead of a trading halt for the bookbuild for the placement, Paladin was trading at $1.31 a share.

Expansion at the group's Langer Heinrich mine in Namibia and the development of the Kayelekera mine in Malawi have also caused some headaches, contributing to the group's 74 per cent share price fall since Fukushima.

Last month, the Perth-based group talked up the prospect of big-spending joint-venture partners picking up the pace on the development of its other uranium projects. It said it had received eight "genuine inquiries" from potential joint-venture partners and it was a "reasonable aim" to have something finalised by the end of the calen-dar year.

Paladin's managing director, John Borshoff, said at the time introducing joint-venture partners to fund new developments would achieve growth in a much less costly manner. "This program of monetising some of our non-producing projects with third-party engagement for minority interests was always on our agenda," he said.

"We are positioned to make Paladin a partner of choice and this is reflected in the interest and the intensity of discussions we are having."

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Frequently Asked Questions about this Article…

What funding is Paladin Energy seeking and how much is it trying to raise?

Paladin Energy is seeking up to $70 million through an institutional placement of shares to raise fresh capital.

Why does Paladin say it needs the $70 million placement?

The company says the funds are needed to strengthen the group’s balance sheet so it can meet future commitments and pursue identified growth options.

How has Paladin Energy’s share price performed recently and what caused the fall?

Paladin’s share price has been heavily hit since the partial meltdown at Japan’s Fukushima nuclear plant. The stock was trading around $5 before the earthquake and tsunami, and was about $1.31 a share ahead of a trading halt for the placement bookbuild — a fall of roughly 74% since Fukushima.

Which Paladin projects have been causing operational or financial headaches?

Expansion at the Langer Heinrich mine in Namibia and the development of the Kayelekera mine in Malawi have contributed to the group’s problems and helped drive the recent share price decline.

Is Paladin looking for partners to help develop its other uranium projects?

Yes. Paladin has been seeking joint-venture partners to help fund development of other projects, saying this would be a less costly way to achieve growth.

What progress has Paladin reported in finding joint-venture partners?

The company said it had received eight “genuine inquiries” from potential joint-venture partners and described it as a reasonable aim to have something finalised by the end of the calendar year.

What has Paladin’s managing director said about the company’s strategy?

Managing director John Borshoff said monetising non-producing projects by bringing in third-party partners for minority interests was always on the agenda and would achieve growth in a much less costly manner. He added Paladin is positioned to be a partner of choice, reflected in the interest and intensity of discussions.

What should everyday investors take away from Paladin’s placement and recent announcements?

Everyday investors should note Paladin is raising capital through a share placement to shore up its balance sheet while also pursuing joint-venture partners for project funding. The company has faced major share-price pressure since Fukushima and ongoing project challenges at Langer Heinrich and Kayelekera, so these moves are aimed at stabilising finances and supporting future growth.