Hi Radx,
A friend also noted this and contacted the Company to discuss, kindly giving me a heads up.
This relates to CNNC's 25% share of LHM in that this is 25% of the Debt Outstanding to the JV vehicle which holds the LHM asset - PDN holding the remaining 75%.
The loan to this JV vehicle cannot be called in without the approval of both PDN and CNNC, thus is not a solvency issue.
The debt - of which CNNC holds 25% and PDN holds 75% - will eventually be repaid to these two parties from the JV vehicle, assuming that U prices move up to, and past, the level required for LHM to resume operations and for it to generate meaningful FCF again.
From another thread, IMO there is ZERO chance of CNNC selling it's 25% LHM share to fund a Rossing transaction. You only need to read Chinese analysis to see that they are concerned about fuel security into the future for their growing reactor fleet.
A University paper was even written recently suggesting that Chinese Entities should procure uranium mines globally to secure this supply.
In another release via a Canadian Trade Delegation to China last week, it was relayed that China anticipates having a FURTHER 30 reactors under construction by 2020 over-and-above what is currently under construction.
Whilst China is primarily focused on domestic reactor construction, they are also starting to export their technology - e.g. Chinese entities are building a reactor in Pakistan.
I think that they will want to copy the Russian 'turn-key' model applied by Rosatom whereby they build the reactor, supply all of the fuel over the life of the reactor and decommission it all for a contracted price. A key part to that model is having LT access to uranium fuel (and the conversion and enrichment thereof).
It does seem, however, that RIO want rid of Rossing which makes sense given that Roughrider is already closed and Ranger is winding down - RIO will then be out of the U sector.
Rossing is an old and higher cost mine. I understand that the Chinese mega-mine, Husab, is having significant operating issues in its ramp up and securing Rossing, nearby, for a knockdown price, may provide some synergies and alleviate some of the issues (processing?) that are occuring at Husab.
PDN, via LHM and Kayelekera, have two very valuable assets if you think that there are likely to be structural U supply shortage in the future, most likely between 2-5 years due to:
(1) Primary mine shut-ins and their reluctance to restart these without decent contract price protection
(2) Reduction in secondary supply to market (DoE sales, Japanese inventory, Underfeeding from Enrichers)
(3) Timeline required for new mines to get into production, irrespective of price incentives;
- NXE: anticipated still a decade away from production
- DNN: newly released PFS anticipates using acid ISR and this will be very hard to get permitting
- BKY: I have my doubts whether they will ever get through the Spanish/ EU permitting process
- FCU: like NXE, this could be a decade from production --> zero infrastructure in Western Athabasca
- USA ISR: the likes of UUUU, PEN, UEC, et al are smaller producers and whilst they can restart/ ramp up production, for them to reach some of their targeted production numbers will take a lot of time/ capex.
Give it time ... PDN is going to make early post-insolvency investors a lot of money in the years ahead (just got to remember that every buy becomes a sell at some point).
Cheers
John
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