This will be followed by a fully underwritten retail entitlement offer to raise a further A$26.2 million. The Paladin share price opened 15% lower today at 39.5 cents to reflect the discount and is currently trading at 40 cents.
Transformational capital raise for Paladin Energy
According to its release, Paladin will use the capital raise proceeds to repay $208.2 million of senior notes, accrued interest and redemption fees. This includes removing its legacy corporate debt overhang as US$115 million in secured notes and accrued interest fall due on January 2023.
The company believes this move will stop the value transfer from its equity holders to debt holders through the high ‘payment in kind’ coupon interest rate of 10%.
With most of the debt behind the company, it hopes to restart funding for its Langer Heinrich mine in Namibia. The project began producing uranium back in 2007 with a peak production of 5.6 million lbs in 2014 before operations were suspended due to low uranium prices in 2018.
Uranium prices were as high as ~US$130/lb back in 2007 before plunging to around the mid US$20/lb mark between 2016 to 2019. Prices have rebounded in recent months to US$30 lb. The recent resurgence in the Paladin share price reflects the rebound in uranium prices and the company’s plans moving forward.
The improvement in the uranium market translated to a Mine Restart Plan from Paladin back in June 2020. This aims to bring Langer Heinrich back into production with targeted investment to maximise its reliability and runtime.
The company estimates that US$81 million will be needed to restart its operations. The company believes the mine will have a life of 17 years and a cost of production of ~US$27/lb.
Paladin believes that the uranium market will shift into a supply deficit in the short to medium term as demand will outpace current supply.