Paladin sells 25% of Langer Heinrich

Paladin Energy (TSX: PDN) is following through on a vow to reduce its stake in its Langer Heinrich uranium mine in Namibia.

The company has agreed to sell a 25% stake in the mine to China-based and state-owned China National Nuclear.

The price tag for the interest is US$190 million, and when combined with a recent debt refinancing, it puts the company on more solid footing as the debt matures.

Paladin shareholders have been fretting over the US$300-million convertible note that’s due at the end of next year, but the new proceeds mean the company will likely require only a modest rebound in the uranium price to meet its commitments.

And while Paladin’s CEO John Borshoff told the Australian press that the final price for the stake in Langer Heinrich was at the lower end of expectations, he said the deal should be seen in the broader context of the impact on Paladin’s debt position, and the potential for a closer relationship with Chinese partners.

RBC Capital Markets analyst Chris Drew estimates that with the refinancing and the minority sale in place, Paladin only needs the uranium price to recover to US$45 per lb. as opposed to US$60 per lb., so that it can meet its debt obligations.

Uranium oxide prices have been moribund since the Fukushima meltdown some three years ago, and were sitting in the US$34 per lb. range at press time. 

The company has announced renegotiating its debt for both Langer Heinrich and its Kayelekera mine in Malawi. The new terms call for it to retire its debt connected to Kayelekera’s project financing, while it extends the repayment period at Langer Heinrich.

The agreement means that the US$148 million it owed as of the end of September is replaced with a new US$110-million, six-year Langer Heinrich term loan and a US$20-million credit facility.

And while Paladin didn’t release the terms of the new loan, it said they are the same as the previous loan.

The company says the refinancing will save it US$59 million in repayments over this year and next.

This year’s principal repayments have been cut to US$18.3 million from the US$53.8 million it owed with the new payment due in June. For next year, the principal repayments were cut by another US$23.7 million.

On Jan. 29 the company’s shares were trading for 52¢ apiece, within a 52-week price range of 38¢ to $1.30.