By William Kumwembe
Dual-listed miner, Paladin Energy Limited, Monday announced intentions to offload its 85 percent stakes in the country’s Kayelekera uranium mine, a move that has attracted mixed reactions.
The company intends to sell-off its shares to Hyle Metals, a subsidiary of Lotus Resources, a joint venture with Chichewa Resources.
The Malawi Government, which owns the remaining 15 percent stakes, said it was yet to respond to Paladin’s intent to let go of its shares in the mine.
The government granted Paladin a mining licence in April 2007 for a period of 15 years following the signing of a Development Agreement. Construction commenced in June 2007 and was completed in April 2009.
Paladin’s stake in Kayelekera will be sold for $5 million, comprising $200,000 in cash and $4.8 million in Hylea shares to be issued to Paladin, according to a statement issued yesterday and seen by The Daily Times.
This will include $1.8 million upon completion, which is subject to a 12-month voluntary escrow, as well as $3 million on the third anniversary of completion.
The issue price will be based on the lower of the 30- day volume-weighted average price at the time of issue or the price of Hylea capital raising in the 90 days preceding.
Paladin Chief Executive Officer, Scott Sullivan, says selling its interest in Kayerekera will provide the company with additional capital and other resources available for that purpose and also eliminate the significant ongoing care and maintenance costs associated with Kayerekera.
Paladin suspended production at its Kayelekera Uranium Mine in 2014 for a care and maintenance exercise.
However, low uranium prices on the global market forced the miner not to resume production.
“The sale is a positive result that will enable Paladin to focus all its resources on restarting our flagship asset Langer Heinrich by releasing restrained cash resources of approximately $10 million and realising significant care and maintenance cost savings of $5 million per annum,” Sullivan says in the statement.
Reacting, Deputy Director of Mines, Peter Chilumanga, said the government had seen the communication but was still working on modalities on how to respond.
“The government will be indicating its position soon as we are still looking at the modalities on how to respond. It is a process,” Chilumanga said.
In its response, the government would, among other things, have to consider the terms and conditions stipulated in its agreement Paladin, and other related laws and regulations.
In a separate statement Monday, Hyle Metals says the company has entered into agreement with Paladin to acquire 65 percent interest in Kayerekera.
The firm says it will have an option to acquire a further 20 percent from Chichewa.
“The acquisition of 65 percent of Kayerekera is an excellent opportunity for HCO. Kayerekera is a world class uranium asset that has produced over 10.9 Mlb of uranium and represents an opportunity to use the past production information to re-engineer certain mining and processing processes,” reads part of the statement.
For years, the Kayerekera mine has been perceived by some as a white elephant to the Malawi government and its people, as other commentators were saying the State ventured into a hasty and raw deal.
Media reports suggested that, by 2017, Malawi lost about K19.6 billion through tax exemptions and royalties in the Uranium mining deal, quoting a Berlin-based consultancy firm, OpenOil.
But the report was quashed by the then minister of Finance, Goodall Gondwe, who said the figure was way too high.