Paladin trading woes: Malawi gov’t in the dark

Malawi government officials were in the dark that uranium miner Paladin Energy is selling shares to raise about $78 million)to bolster funding which Paladin Africa  mining in Malawi at Kayelekera in Karonga has kept a tight lid on the issues.

Nyasa Times understands that government of Malawi is a shareholder in Paladin Africa and apparently it has not been informed that Paladin the parent company had suspended share trading and was selling 15% of its shares at 30% less than the stock price, to raise money.

According to Bloomberg, the Perth-based company after its failure to sell part of the Langer Heinrich mine in Namibia prompted the uranium producer to sell shares at a 30 percent discount to its previous closing price.

The company planned to use the proceeds to reduce debt and strengthen its balance sheet. Paladin had $650 million to $700 million in debt at the end of June.

Paladin Africa boss Greg Walker: Paladin hcannot stop mining in Malawi
Paladin Africa boss Greg Walker: Paladin hcannot stop mining in Malawi

The company’s cash position dropped to $78.1 million at June 30, down from $112.9 million at the end of the previous quarter.

In June when Paladin announced that it was negotiating selling a minority shareholding in its Namibian mine, the spot price for the uranium was US$ 40 +- per pound. Currently the spot is US$34.50, and the difference is far less than the minus 30% for the 15 % sold to raise the US$ 78 million.

Analysts wonder  what happens if the US$ 78 million raised by selling off 15% of its issued shares at a price 30% less than the stock value runs out.

Paladin said it was unlikely to get a price it wanted for the mine stake because of the slumping price of uranium, which dropped to $34.50 last month, the lowest since November 2005.

“While the raising alleviates immediate balance sheet concerns, the issue appears to have only been pushed out,” JPMorgan Chase & Co. said in an Aug. 2 report. “Unless Paladin can significantly turn around its cash flow, it appears unlikely the company will have enough cash to be able to repay its debt, particularly at current low spot uranium prices.”

This development comes when Paladin’s Malawi mine in the northern border district of Karonga has been temporarily shut down.

Paladin General Manager Greg Walker told Nyasa Times that “the mine was undergoing its regular annual maintenance shutdown, which is planned and conducted each August.”

He added: “Staff continue to be employed – in fact there are additional contractors on site for the maintenance period. Mining operations continue.  The plant is not operating because it is undergoing major maintenance work and upgrading.”

Asked to comment Ahmed Dassu, the democracy campaigner and the UK based businessman said : ”Paladin for now has managed to raise funds  to alleviate its immediate cash flow problems. The $ 78 millions according to Paladin’s statement to investors, meet its operational requirements into September 2014. But the question remains, what happens if the price for the metal remains low and Paladin runs out of cash in September 2014? Or if it cannot find new buyers for the minority shareholding that it wants to sell in its Namibian mine?

“In my opinion, optimistic statements targeted at retaining investors confidence, and measures such as the raising of capital at 30% less than the stock value do not the fully address the problems facing Paladin, what is required is for the share holders  and stakeholders to demand new management at both board and operational level. Its obvious that the CEO, the directors, the management of the mines, are all failing the company’s shareholders and it’s employees, whilst receiving huge salaries and benefits, and that the company needs a fresh approach.

“ An example of huge costs incurred is the corporate jet flying South African employees to Johannesburg and back every week, whereas many of these South African employess could be replaced by equally if not more qualified and experienced Malawians.”

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