Paladin Energy Ltd. agreed to sell a 25 percent stake in its Namibian uranium mine to China National Nuclear Corp. for $190 million, allowing the Australian company to cut debt.
Paladin climbed 0.9 percent to 56.5 Australian cents at the close in Sydney, after rising as much as 17 percent following the deal with the Chinese state-owned operator of atomic plants. Australia’s benchmark S&P/ASX 200 Index declined 0.2 percent.
The “cash injection from this minority interest sale will largely be applied to debt reduction, which the board considers an essential step during a time of unprecedented low uranium prices,” John Borshoff, chief executive officer of Perth-based Paladin, said today in a statement. “This will help stabilize the company.”
The sale gives Paladin more time to wait for a recovery in the uranium market, according to UBS AG, which forecasts that prices will rise to $50 a pound in early 2015. Uranium, which traded at $36.05 on Jan. 17, according to data compiled by Bloomberg, has slumped since the March 2011 earthquake and tsunami crippled Tokyo Electric Power Co.’s Fukushima Dai-Ichi power plant and prompted the shutdown of Japan’s nuclear reactors.
Investors had valued a 25 percent stake in the Langer Heinrich uranium mine at about $250 million, according to UBS and Pac Partners Pty.
The price the company is receiving “reflects the uranium market at the moment and Paladin’s bargaining position,” Andrew Shearer, a Melbourne-based resources analyst at Pac Partners, said today by phone.
Paladin’s initial failure to sell part of the Langer Heinrich uranium mine in Namibia prompted the company in August to sell shares at a 30 percent discount. The company said at the time that it was unlikely to get the value it wanted for the stake because of slumping prices. Paladin has total debt of A$351 million, according to data compiled by Bloomberg.
The deal shows that the Chinese have returned to the uranium market after a hiatus and should help sentiment, Simon Tonkin, a Perth-based analyst at Patersons Securities Ltd., said today in a note. China Guangdong Nuclear Power Group Co. acquired Australian uranium explorer and producer Extract Resources Ltd. in 2012.
China, the biggest energy user, has 20 nuclear power reactors in operation and 28 under construction, according to the World Nuclear Association.
China National Nuclear will purchase uranium from the project at market prices, Paladin said today in the statement. The deal requires Chinese regulatory approvals, which are expected by mid-2014.