Paladin Energy Sells Stake in Malawi Uranium Mine

Uranium miner Paladin Energy (ASX:PDN,OTC Pink:PALAF) will sell its stake in the Kayelekera uranium project to Hylea Metals (ASX:HCO).

Paladin will be selling off its 85 percent stake in the Malawi-based mine to Hylea, which will retain 65 percent of the asset; its joint venture partner Chichewa will acquire the other 20 percent. The government of Malawi controls the remaining 15 percent.

“Kayelekera is a world class uranium asset that has produced over 10.9 million pounds of uranium and represents an opportunity to use the past production information to re-engineer certain mining and processing processes in order to reduce the overall Capex and Opex of the operations,” said Hylea Managing Director Simon Andrew.

Paladin will receive AU$5 million, broken down into AU$200,000 in cash and AU$4.8 million in Hylea shares. The AU$4.8 million will include AU$1.8 million upon completion, subject to a 12 month voluntary escrow period, as well as AU$3 million to be paid on the third anniversary of completion.

Hylea has also agreed to repay US$10 million to Paladin to provide security for an environmental performance bond issued to the government of Malawi.

Paladin operated an open-pit mine at Kayelekera between 2007 and 2014. The project was put on care and maintenance in early 2014 due to sustained low spot prices in the uranium market.

There is an estimated 31 million pound resource left at Kayelekera.

With the capital raised from the sale of the project and the repayment of the security for the environmental bond, Paladin will work to restart production at its Langer Heinrich project in Namibia.

The company is also expected to save roughly AU$5 million annually on care and maintenance for the Malawi mine.

“(The sale) is consistent with our stated strategy of focusing on the re-development of Langer Heinrich whilst preserving our capital and developing opportunities to monetize non-core assets,” stated Paladin CEO Scott Sullivan. “With this structure, we also keep some exposure to the upside of this transaction through the AU$4.8M in share placements early in the development cycle.”

Hylea plans on utilizing the existing plant infrastructure to advance its position at Kayelekera, and will take advantage of the exploration potential of the 157 square kilometer tenement package.

The company is excited about the potential Kayelekera poses and expects a shift in uranium prices in the near future.

“We are optimistic about the global uranium market and the outlook for firmer pricing,” said Andrew.

Shares of Paladin sat flat on Monday (June 24), trading at AU$0.12. Hylea shares were up 89.5 percent trading at AU$0.05.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.