The Paladin Energy Ltd (ASX: PDN) share price will be on watch when trading on the ASX opens this morning, following a further announcement on the sale of its majority interest in Paladin Africa.
Paladin Energy is a uranium production and exploration company with projects currently in Australia, Canada, and Africa. Its core project is the Langer Heinrich Mine in Namibia, Africa.
Details of sale of Paladin Africa sale
Paladin Energy announced that the Minister of Natural Resources, Energy and Mining and the Minister for Finance, Economic Planning and Development in Malawi have provided the necessary Ministry Consent for the completion of the sale of its 85% interest in Paladin Africa to Lotus Resources Limited and Lily Resources Pty Ltd.
60% of Paladin's interest will go to Lotus Resources and 20% will go to Lily Resources.
Paladin had originally announced the sale of its interest in the African operations in June last year. Since then, the company has been actively engaged with the ministers in Malawi in order to progress the statutory and contractual consents that are required in order to complete the sale.
Paladin added that the completion of the sale is now subject to the approval by the Reserve Bank of Malawi, which it anticipates will come after this Ministry consent. Paladin expects it will be able to achieve this approval on or before 13 March 2020.
Key benefits of sale for Paladin
Paladin sees a major reduction in the ongoing care and maintenance costs associated with the Kayelekera Mine as being one of the key benefits of this sale. These costs had amounted to around US$5 million per annum.
Paladin will also benefit from the financial consideration of the sale which will amount to $5 million. The company will also receive a 3.5% royalty based on any revenues derived from the production at Kayelekera in the future. However, this royalty will be capped at $5 million.
In addition, Paladin will benefit from the repayment of funds advanced to provide security for the US$10 million environmental performance bond. These repayments are set to occur in four separate tranches.
Paladin commented that following the sale, it expects its annual cash burn to be less than US$10 million per annum.
Commenting on today's announcement, Paladin Managing Director and CEO, Ian Purdy said:
"The progression of the sale of Paladin (Africa) Ltd is a positive step and one which will 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."
