24/11/2014 - 10:28

Chinese firm backs $205m Paladin plan

24/11/2014 - 10:28

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Chinese firm backs $205m Paladin plan
Paladin Energy's Langer Heinrich uranium operation in Namibia.

Paladin Energy has launched a $205 million recapitalisation plan, designed to fund it until midway through 2016, which has won the backing of China-focused private equity firm HOPU Clean Energy.

Paladin said the recapitalisation initiative would comprise a $61 million placement to HOPU at 42 cents per share, and a separate $144 million, one for two entitlement offer, priced at 26 cents per share.

HOPU will also take up its maximum entitlement in the share offer, lifting its total investment in Paladin to between $80 million and $88 million.

Following successful completion of the placement and share offer, HOPU’s stake in Paladin will be between 13 per cent and 15 per cent.

Paladin said it had received Foreign Investment Review Board approval for HOPU to take a stake of up to 19.99 per cent.

Both offers will be fully underwritten by global investment bank and stockbroking firm JP Morgan.

Also, as part of the agreement, Paladin will appoint HOPU managing director Wendong Zhang to its board of directors.

The uranium miner said proceeds from the capital raisings would be put towards repayment of around $US300 million in its existing convertible bonds, due to be repaid by November next year.

It said it was also in discussions with potential strategic investment partners, including one or more major international utilities, with an announcement expected early next year.

Paladin said it was considering a potential long-dated convertible bond to repay its existing debts.

“The recapitalisation package will allow Paladin to significantly de-risk its balance sheet and enhance its future funding flexibility,” managing director John Borshoff said.

At 10:15AM, WST, Paladin shares were steady at 38 cents.

Paladin maintained a rosy outlook for the uranium sector, despite having lodged total losses of around $1 billion over the past three financial years.

It also maintained its production guidance for FY2015, expecting to produce between 5.4 million pounds and 5.8 million pounds of uranium over the financial year.

The miner said a recent recovery in the uranium spot price, from $US28 per pound to $US44/lb indicated tightness in supply worldwide, with the amount of product available for the spot market down appreciably following production cutbacks last year.

HOPU Clean Energy is a private equity firm that focuses on China-related investment opportunities, with offices in Beijing, Hong Kong and Singapore. 

It recently raised $US1.85 billion to invest in opportunities driven by China's economic reforms.

Paladin said the backing of HOPU had the potential to attract other Chinese investment.

Paladin's private equity move is the latest in a string of Western Australia-based companies to tap the sector for their respective funding requirements rather than the Australian Securities Exchange.

Other resources-sector players striking private equity deals over the past month include Auctus Minerals, MZI Resources, Range Resources and Toro Energy.

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