Paladin Energy Ltd. is running out of time to turn things around, with a potential offer from China National Nuclear Corp. for its 75% stake in the Langer Heinrich mine in Namibia being the Australian uranium player's last hope.
The ASX-listed company, which went into a trading halt June 13, is now required to repay US$277 million that Electricite de France SA, or EDF, paid in advance under a long-term supply contract after an independent expert, according to a June 12 statement from Paladin, found that the value of the additional security offered by Paladin against the contract was insufficient.
The contract was previously secured against one of Paladin's exploration projects, which lost value when the uranium price fell, and as further collateral, it is likely the company offered part of its stake in the Langer Heinrich mine.
Paladin now has 30 days to repay the outstanding amount.
With the EDF repayment and a further US$382 million owed to bondholders and a working capital facility, Paladin's debt bill is over US$650 million.
Matthew Keane, director of metals and mining and energy for Perth, Australia-based stockbroker Argonaut Ltd., values Paladin's Langer Heinrich stake at US$450 million to US$500 million.
"I suppose the time crunch is really the issue here for Paladin," he told S&P Global Market Intelligence.
"It's set by A, they've got 30 days in which EDF can call on this debt, and B, the fact that they only had circa US$22 million in the bank at the last quarter. It's a loss-making business at current uranium prices, so the cash balance is increasingly under pressure.
"Either way they've got to sort this out really quickly and get an agreement, and hopefully China Nuclear comes to the table and buys the asset for more than that US$500 million, which is the amount required under that alternate restructure or plan B."
Paladin, which did not respond to a request for comment, is now trying to negotiate the terms of a standstill agreement with EDF.
Another source, who did not want to be named, said that while the Chinese could be the "saving grace" for Paladin, it is likely the company will not be able to continue trading on the ASX.
There is a ray of hope, however, with the independent valuation of the Langer Heinrich mine being conducted by an international bank supportive of the uranium sector.
An independent expert has been appointed to value the Langer Heinrich stake and has agreed to provide Paladin a valuation within 30 days.
Meanwhile, if the company is successful in its restructuring, the expectation is that it will hold on to its Manyingee project, despite joint venture partner Avira Energy Ltd.'s withdrawal from the project in April and the Western Australian government's refusal to grant any new uranium mine approvals.
"They've got to keep some meat on the bones, so that and Michelin [in Canada] will be the go-forward projects," Keane said. "They'll keep it in the portfolio. I don't think they will put it up for sale."
The uranium price is again on the decline, falling to US$19.25 per pound, from over US$26 at the start of the year.
However, production cuts from Cameco Corp. and Kazatomprom, as well as Japanese reactor restarts could support prices.
"There's probably going to be about seven Japanese reactors operating by the end of this year or soon thereafter," Keane said. "So that might be a trigger for the spot market to move upward."