PDN 1.56% 15.8¢ paladin energy ltd

Paladin Energy to raise $US100m as it posts loss

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    12 Feb 2015

    Paladin Energy is seeking to bolster its ability to pay a looming debt pile by issuing $US100 million of new convertible bonds.

    The company launched the senior unsecured convertible bonds offer as it announced its half-year results, which saw Paladin record a $US67.2 million net loss after tax following a hit on its revenue during the period.

    The Western Australian-based uranium miner said it will use the funds raised to repay existing convertible bonds of $US300 million due in November. The company said it has scope to issue a further $US50 million of bonds on the same terms within the next 30 days if it chooses.

    UBS analyst Glyn Lawcock said in a note on Thursday that while the move to address the November convertible bonds was positive, the new convertible bonds will be "quite dilutionary, but we suspect this was Paladin's only option".

    If the offer is successful, Paladin is broadly expected to meet the $US300 million November repayment, with the company holding a cash balance of $US334 million after completing a recapitalisation in December including a $US205 million capital raising.

    JPMorgan is the sole lead manager and bookrunner of the issue with Nedbank Capital and The Standard Bank of South Africa, the co-managers.

    Paladin's sales revenue for the six months to December fell 36 per cent year-on-year to $US108.6 million. The company said the result was due to the closure of its Kayelekera mine in Malawi during the period which resulted in a 29 per cent decrease in sales volumes. An 11 per cent drop in realised sales price didn't help either.

    Paladin has been selling its uranium for about $US34 a pound during the first half; a price on par with the average spot price over that period.

    But it is not enough for the company to be profitable, with UBS estimating the miner needs a price of $US42 a pound to be cash flow neutral.

    In the face of a volatile price, Paladin has been working hard to reduce its C1 operating costs at its remaining Langer Heinrich mine in Namibia, slashing them from $US35 a pound in the September quarter to $US30 a pound in December. The miner said it is targeting pushing these even lower, to below $US26 a pound by the end of the financial year, and $US22 a pound in the 2017 financial year.

    It aims to do this by focusing primarily on reagent recycling, increased recovery and plant utilisation.The group reaffirmed its previous guidance for full-year production of between 5.2 million and 5.5 million pounds ofuranium oxide.

    The uranium spot price has fluctuated greatly over the last few months, rising to $US44 a pound in November before decline to $US36 a pound at the end of December. It has recovered slightly and now sits at about $US38 a pound.
    Paladin remains in a trading halt, awaiting the outcome of the bond issue, expected to close Thursday. Shares last traded at 37c.
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