Paladin on top of mid-tier uranium producers

Paladin Energy (PDN-T) is building itself into one of the most significant mid-tier uranium miners and its latest drawdown from a loan facility is a sign of the financial clout the company has behind it.

As rumours of a Cameco (CCO-T, CCJ-N) takeover persist, the company announced its first drawdown on the US$167 million loan facility set up to get its Kayelekera uranium mine in Malawi into production.

The company announced it will draw down US$84.5 million from the facility to reimburse the it for funds already spent on completing the project and for project and working capital expenditures.

Société Générale, Standard Bank and Nedbank Capital supplied the loan and are the same banks that financed the company’s first uranium mine, Langer Heinrich, in Namibia.

The US$167 million project finance package breaks down into US$145 million for project financing; US$12 million for cost overruns, andUS$10 million as a performance bond.

“The successful drawdown on this facility in the face of the current credit markets stands testament to the robust economics of the Kayelekera Uranium Mine and the ongoing support from the lenders,” Paladin’s chief executive John Borshoff said in a statement.

It also represents the first ever mining project finance facility in Malawi – which should come as little surprise considering that Kayelekera is the country’s first commercial mine.

The mine sits in northern part of the Malawi, 575km by road north of the capital city of  Lilongwe.

The deposit was first discovered by the Central Electricity Generating Board of Great Britain (CEGB) in the early 1980’s and by 1991 a feasibility study which considered an open pit mining operation was completed.

But low uranium prices and the privatization of CEGB conspired to cause the group to abandon the project 1992.

Paladin acquired its first stake in the project in 1998 and by 2005 had managed to acquire a 100% interest, although it will transfer a 15% interest to the government of Malawi as per an agreement signed in 2007.

The deposit has 12.62 million tonnes of ore grading 0.105% U3O8 for 29.3 million lbs of U3O8.

Production at the mine began in January of this year, with ramp-up towards full production starting in April. The company expects to be at full production by January of next year.

The mine cost Paladin roughly US$200 million to build and is slated to produce 3.3 million lbs of U3O8 per year once in full production.

On a bad day for global markets, Paladin shares were off 4.5% to $3.99 in Toronto on Aug. 17.

On Aug.10 the spot price for uranium was US$48 per lb. off from its July high of US$55 per lb.