Uranium miner Paladin Resources Ltd has agreed to proceed with construction of its second new mine after negotiating a development agreement with the government of Malawi, which has taken a 15 per cent stake in the project.
Uranium miner Paladin Resources Ltd has agreed to proceed with construction of its second new mine after negotiating a development agreement with the government of Malawi, which has taken a 15 per cent stake in the project.
The decision follows completion of a bankable feasibility study, which concluded the project would cost US$185 million (A$245 million).
The size of the Kayelekera mine has been increased from 2.3 million pounds per annum to 3.3 million pounds, which will enable Paladin to exploit current record uranium prices.
The bankable feasibility study was conducted by engineering firm GRD Minproc, which managed the design and construction of Paladin's Langer Heinrich mine, currently being commissioned in Namibia.
The agreement with the Malawi government involved a package of measures, with Paladin benefiting from lower tax and royalty rates.
A company announcement is pasted below:
Paladin Resources Ltd is pleased to announce that through its subsidiary, Paladin (Africa) Ltd it has reached agreement with the Government of Malawi to enter into a Development Agreement for the Kayelekera Uranium Project.
The formal and detailed Development Agreement was approved by the Malawian Cabinet earlier this month and executed on Friday 23rdFebruary 2007. The Development Agreement is a far reaching document providing a stable fiscal regime for at least 10 years from the commencement of production and will provide a high degree of certainty for the Project. Early discussions with Société Générale Australia Branch as the current lead arranger for Paladin's project finance at Langer Heinrich has been assisting Paladin in drafting the completed Development Agreement and discussions have already occurred around finance structures, terms and conditions. The terms of the fiscal regime detailed in the Development Agreement are as follows:
1. 15% carried equity in project company to be transferred to the Republic of Malawi (in return for 2 and 3 below).
2. Corporate tax rate reduced from 30% to an effective 27.5%.
3. The 10% resource rent tax in Malawi reduced to zero.
4. Reduced royalty rate from 5% to 1.5% (years 1 to 3) and 3% (years 3 plus).
5. No 17.5% import VAT or import duty during the stability period.
6. Immediate 100% capital write off for tax purposes.
7. Paladin to provide social infrastructure in the Kayelekera region, including modern primary and boarding secondary schools and health facilities for the local population most probably funded in the third year of the project life
8. Thin capitalisation (debt:equity) ratio of 80:20 for the Project.
9. Stability period of 10 years no increases to tax/royalty, regime and a commitment to provide the benefit of any tax/royalty decrease during the period.
The 15% Government shareholding will offer a long term stabilizing element for the Project as it will align the interests of the Company and the Government in the Project, creating a sustainable environment which the Company believes is for the long term benefit of both the Company and Malawi. Paladin's participation will be both via its 85% equity stake in the project company and via interest on the inter-company loans that will provide up to 80% of the funding for the project company.
The Paladin Board is very pleased to have this agreement with the Malawian Government in place which it believes is both fair and equitable and can now look forward to developing its second uranium mine to benefit both the people of Malawi and the Paladin shareholders.
With the Development Agreement in place this paves the way for Paladin to commence development and construction of this project late Q1/early Q2/07 with a planned mine commissioning still anticipated for September 2008.
