Paladin gains approval for Kayelekera sale

Paladin Energy has received formal approval from the government of Malawi to proceed with the sale of its Kayelekera uranium project to Perth-based Lotus Resources and Lily Resources.

Paladin, which announced the sale in June 2019, said the transaction would reduce its ongoing care-and-maintenance costs for the project by around $US5 million ($A7.6 million).

The company said on Monday it had received the outstanding approval from the Malawi's minister of natural resources, energy and mining to complete the sale of an 85 per cent stake in its subsidiary Paladin Africa, which operates the Kayelekera mine.

The mine, which has a five-year mine life remaining, was placed into care and maintenance in 2014 following a continued drop in uranium prices.

More than $US200 million ($A305 million) has been spent on the plant and associated infrastructure, which has a processing throughput of 1.5 million tonnes per annum.

As part of the transaction, Lotus Resources will acquire a 65 per cent interest in Paladin Africa, and Lily Resources – of which Lotus owns 76.5 per cent of shares – will acquire 20 per cent.

Lotus will pay $200,000 cash up front and issue $4.8 million worth of shares (90 million shares) to Paladin Energy, priced at 2 cents per share, funded by a capital raising.

Lotus said it would now proceed with the tranche 2 capital raising associated with the Kayelekera purchase, under which the company will issue 225 million shares at 2 cents per share to raise $4.5 million, along with one free attaching option for every two shares with an exercise price of 4 cents.

The transaction is fully underwritten by BW Equities.

As part of the deal, Paladin will also receive a 3.5 per cent royalty on future production at Kayelekera, capped at $5 million.

Paladin said its annual cash burn was now expected to be less than $US10 million ($A15.3 million).

Paladin Energy managing director Ian Purdy said the sale would deliver significant financial benefits to the company.

“Upon completion of the sale, Paladin will be able to prioritise its efforts and capital expenditure on the restart of our Langer Heinrich uranium asset,” he said.

The Langer Heinrich mine, located in Namibia, was placed into care and maintenance in May 2018.

Paladin says it is currently undertaking optimisation and feasibility studies to prepare for a restart once there is significant improvement in uranium market conditions.

The company acquired the project from Aztec Resources in 2002 for $15,000 cash and a 12 cent per kilogram production royalty.

Paladin also owns three exploration projects, including the Mount Isa uranium deposit in Queensland.

Shares in the company closed up 2.5 per cent to trade at 8.2 cents.