Chinese state on the verge of full take-over of Langer Heinrich uranium mine
Australian uranium hopeful, Paladin Energy Limited announced this week a Restructure Proposal and a potential option in favour of Chinese state-owned giant, China National Nuclear Company (CNNC) which if exercised, could entitle CNNC to acquire Paladin´s full interest in the Langer Heinrich Mine.
In a statement on the Namibia Stock Exchange news service, Paladin advised investors that it has received notice from CNNC requesting that Paladin begin a process to determine the fair market value of Paladin´s share of the Langer Heinrich mine. Paladin holds 75% of the issued share capital of Langer Heinrich Mauritius Holdings Limited, the holding company of the owner of Langer Heinrich, the mine.
Furthermore the SENS statement said the fair value determination process would be the first step in a process that may lead to exercising the option. Paladin said that it would provide its stakeholders with material updates as soon as it is in a position to do so.
In a report from the Australian newspaper, it was said that the one-time uranium high-flyer Paladin Energy looks set to engage in a bitter fight to the death with CNNC which is responsible for China’s civilian and military nuclear programmes.
“Paladin has confirmed that it had received notice from CNNC on the matter. It is understood Paladin intends to fight the validity of the option through an arbitration process in Singapore, and that it has already received strong encouragement from many bondholders to take up the battle.”
“CNNC’s move could be a death knell for Paladin, as it could lead to the Chinese group acquiring the stake at a knock-down price well short of the US$650 million ($866m) that Paladin owes to bondholders and others” it is reported.
Paladin Energy Limited has been running into trouble with its Australian bond holdes and backers, following the slide in uranium spot prices from around US$85 per pound uranium oxide to an alltime low of US$27 per pound. The operational overheads at Langer Heinrich have been calculated on a uranium spot price of US$65 per pound. When uranium went below this level, Langer Heinrich operated at a loss, forcing the holding company into a first deal with China National Nuclear. In this deal, the Chinese government corporation acquired 25% shareholding in the mine.
The Australian newspaper continued “The CNNC option is a major spanner in Paladin’s debt restructuring, which was gaining increased traction among bondholders and stakeholders in recent weeks. The company is also believed to have attracted strong interest from some significant funds for the minimum US$75 million equity raising that formed part of the restructure.”
China National Nuclear bought their first 25% stake under Paladin’s previous management, leading to speculation that the current management may contest the validity of the option that arose under the sale of the first stake.
China National Nuclear and Paladin in 2016 wasted much time and energy, trying to iron out a doomed sales process for the acquisition of an additional 24% in Langer Heinrich uranium mine. Observers in Australia familiar with the deal was quoted as saying that it seems China National Nuclear’s intention has always been to get full control over Langer Heinrich.