Paladin Energy Limited plans to start arbitration proceedings against CNNC Overseas Uranium Holdings Ltd (CNNC Overseas) amid indications it will seek to acquire Paladin's interest in the Langer Heinrich uranium mine in Namibia. CNNC Overseas bought a 25% joint venture equity stake in Langer Heinrich for $190 million in January 2014.
Western Australia-based Paladin on 9 March notified the Australian Stock Exchange that China National Nuclear Corporation subsidiary CNNC Overseas had requested it begin the process of determining "fair market value" of Paladin's 75% share of Langer Heinrich. This would be the first step in a process that could lead to CNNC Overseas exercising an option entitling it to acquire Paladin's share in the Namibian mine.
The fair value determination process depends on CNNC Overseas establishing that an "event of default" has occurred under the Langer Heinrich Mine shareholders agreement. Paladin disputes that such an event has occurred and is therefore disputing the validity of CNNC Overseas' notice. The shareholders agreement is subject to the laws of Western Australia, under which such disputes must be referred to arbitration before the Singapore International Arbitration Centre, Paladin said. The company is seeking to extend existing standstill arrangements with creditors to allow it time to pursue the arbitration proceedings.
Paladin last year announced plans to sell 24% of Langer Heinrich to CNNC Overseas, but in December announced the sale was no longer likely to close before the end of the final quarter of 2016. In the absence of progress on the sale, Paladin in January announced a balance sheet restructuring to enable it to meet a $212 million debt obligation due in April 2017.
Paladin said today that, in the event the potential CNNC Overseas option is found to be valid, it is unlikely it will be able to implement the restructure proposal.
CNNC Overseas' actions are "disappointing", Paladin said given the support the Restructure Proposal has received to date; its failure to proceed with the acquisition of an additional 24% stake in the mine when it was offered to them last year; and its "repeated refusal" to fund the working capital requirements of mine. As a result, CNNC Overseas has "put at risk" the interests of Paladin's shareholders, it said.
Paladin "intends to dispute" CNNC Overseas' actions, "unless an acceptable compromise" can be reached.
Researched and written
by World Nuclear News