Langer Heinrich was originally discovered in 1973 and acquired by Paladin in 2002 for AUS$15,000 and AUS$0.12 per pound of yellowcake (Photo: Paladin Energy Ltd.)

Langer Heinrich was originally discovered in 1973 and acquired by Paladin in 2002 for AUS$15,000 and AUS$0.12 per pound of yellowcake (Photo: Paladin Energy Ltd.)

The African-focused uranium producer, Paladin Energy (PDN:TSX) has come under pressure in the past few years due to a decreasing spot price for uranium as well as $600 million in debt on their balance sheet.  The market has been worried about the company’s ability to meet near-term obligations and the stock has been on a steady decline since Fukishima.  Paladin has found a buyer (China National Nuclear Corp. (CNNC)) for 25% of their Langer Heinrich mine in Namibia.  CNNC has agreed to pay $190 million for the stake in the mine as well as a right to purchase a pro-rata share of the uranium production at market prices.  This not only gives Paladin a much need balance sheet boost, but also secures a production off take agreement.

If this successfully closes, Paladin will have add the $190 million to the existing $125 million it currently has in cash.  This should be sufficient for the company to repay $300 million in debt that is maturing in November 2015.  This sale essentially lifts the debt concerns overhanging the stock and should allow for some relief in its share price.

Langer Heinrich deposit hosts ore reserves of approximately 125 million pounds of U308 at an average grade of 0.052%.  This grade seems low relative to the Athabasca Basin, and it is, but >0.05% U308 is above the global average for uranium deposits.  The company gradually increased production quarter-over-quarter in 2013 from 1.23 million pounds in Q1 to 1.43 million pounds in Q4.  They have plans for an expansion to the mine, but have held off for stronger uranium prices.

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Read: Paladin Energy Ltd: Sale of Minority Interest in Langer Heinrich Mine, Namibia