Paladin ready for uranium consolidation.Matt Chambers |...

Paladin ready for uranium consolidation.

Matt Chambers | September 10, 2009
Article from: The Australian.

URANIUM miner Paladin Energy was last night putting the finishing touches to an institutional placement of up to $430 million to position itself for more consolidation in the global uranium sector.

Paladin managing director John Borshoff said growing demand from growing nuclear power producers China and India was expected to drive mergers and acquisitions in the sector and he wanted to be able to participate.

"The whole uranium space is going through consolidation and revision, of which Paladin will hopefully be one of the architects," Mr Borshoff said. "We want a war chest. We're going out to play with a pocketful of money, not sitting there waiting for someone to shout us," he said when asked why he was proceeding with the capital raising.

Mr Borshoff, who has long talked of growing Paladin through acquisition, would not talk about individual targets.

Shares in Paladin's Australian joint venture partner Energy Metals surged 12 per cent to $1.08 yesterday after the capital raising was announced amid speculation it could be a target.

On Tuesday Energy Metals agreed to a $96m proportional takeover and rights issue from state-owned China Guangdong Nuclear Power.

Energy Metals owns 54 per cent of the Bigryli uranium project northeast of Alice Springs, in which Paladin has a 42 per cent stake. One analyst who covers the stock said he did not believe Energy Metals would be a likely target.

Paladin was more likely to try to diversify out of Africa, where it currently mined 6per cent of the world's uranium production, and Australia, where it already had ground, he said. UBS and RBC were appointed joint lead managers of the institutional bookbuild.

Yesterday, UBS was offering the stock at between $4.45 and $4.70, which compared with a last-traded price of $4.90.

Mr Borshoff said initial interest in the placement had been strong. As well as mergers and acquisitions, Paladin said the funds would be used to process the recently approved third-phase expansion of the Langer Heinrich uranium mine in Namibia and expand exploration and pre-development programs in Australia. Macquarie analyst Len Buckridge said Paladin's current balance sheet already looked comfortable for the company's existing Namibian and Australian plans, indicating the funds would mostly be used for other aggressive growth.

Paladin produces uranium at Langer Heinrich and is scheduled to start commercial production from the Kayelekera mine in Malawi this month.

In Australia, Paladin is concentrating on exploration ground near Mt Isa in Queensland.

Mr Borshoff said consolidation was being driven by unprecedented growth in uranium demand, which he expected to continue. Goldman Sachs JBWere analysts said they were not as bullish on demand as Mr Borshoff and did not think a perceived shortage of uranium and a price premium on stocks because of this, was justified.