Paladin in dire straits

Paladin in dire straitsOff-take partner seeks more security Analysts believe Paladin could be a bankruptcy casualty of the uranium price downturn that has ravaged the industry for several years. The owner and operator of the Langer Heinrich uranium mine, Paladin Energy, this week reaffirmed that it is not to receive any further cash from off-take partner Électricité de France (EdF), saying that contrary to certain recent erroneous media reports, it was merely updating the market on the contractual process to determine the value of EDF's security and the consequences of that process.

Analysts believe Paladin could be a bankruptcy casualty of the uranium price downturn that has ravaged the industry for several years now. In 2016, spot prices fell 37% from US$34.70 per pound to US$18.50 per pound on November 14, according to independent market consultant UX Consulting, before turning somewhat positive again to trade at US$20.25 per pound as on January 2. This is still a far cry from the lofty all-time high of US$136 per pound hit in 2007.

The difficult market has forced Paladin to put its Kayelekera mine, in Malawi, on care and maintenance, while forcing it find options to fund its upcoming debt repayments, which includes a US$212-million payment due at the end of April, after delays in the divestment of a 24% interest in the Langer Heinrich mine in Namibia. The stake selling, along with the sale of a 75% interest in the Manyingee project, in Australia, is expected to net some US$205-million.

Paladin said Wednesday it might indeed be required to provide additional security and has been discussing the matter and the value of the additional security with EdF.

Late last month, EdF notified Paladin it is of the view that the value of the additional security proposed by Paladin is less than the value required by the off-take contract. Paladin disagrees with the position.

The matter will now proceed to independent expert valuation under the terms of the off-take contract. According to Paladin, while there are no prescribed periods for the independent expert valuation process, if the expert determines that the value of the additional security proposed by Paladin is less than the value required by the contract, the outstanding amount (being approximately US$260-million must be repaid within 30 days of that determination.

Concurrently, as part of discussions with key stakeholders regarding potential options to address the company's balance sheet position, the company has made a proposal for EdF to share security over Paladin's assets with Paladin's bondholders. If this proposal is accepted by EdF, the independent expert's valuation would not proceed.

MINING WEEKLY