May 10, 2010 / 11:41 AM / 9 years ago

UPDATE 3-Uranium One ups Paladin stake, sparks buyout talk

* Raises Paladin stake to 3 pct

* Paladin shares up 12.5 pct on takeover speculation

* Uranium One adj loss $0.03/shr vs est $0.01/shr profit (Recasts with details on Paladin stake, speculation. In U.S. dollars unless noted)

By Cameron French

TORONTO, May 10 (Reuters) - Uranium One UUU.TO said on Monday it had raised its stake in Africa-focused uranium miner Paladin Energy <PDN.(AX) PDN.TO to 3 percent, which helped send Paladin’s shares up 12.5 percent on speculation of a full-blown takeover.

Australian-based Paladin has long been the subject of takeover rumors, but with Canadian uranium giant Cameco Corp (CCO.TO) usually seen as the likely buyer.

Paladin disclosed on April 30 that Uranium One had bought a 1.4 percent stake, and Uranium One Chief Executive Jean Nortier said on Monday the stake had since been raised to 3 percent.

While Uranium One’s smaller size — its market capitalization of C$1.4 billion ($1.37 billion) trails Paladin’s C$2.4 billion — would seem to preclude it as a buyer, the Canadian miner may have access to deeper pockets after taking on partnerships with the Russian and Japanese governments in the past year.

“The only way I see it happening maybe is if Uranium One gets in bed with the Russians the Japanese,” said Patrick Donnelly, an analyst at Salman Partners.

Uranium One acquired a 50 percent stake in the Karatau mine in Kazakhstan last year from Russia’s state-owned uranium miner in exchange for cash and a 17 percent stake in itself.

Earlier this year, the company closed a C$270 million convertible debt financing with a government-controlled consortium of Japanese companies.

Analysts have also said Uranium One’s stake in Paladin could spur Cameco to make a bid.

Donnelly said takeover speculation was likely contributing to Paladin’s share rise, although he noted shares of most mining companies were higher on Monday on optimism that a $1 trillion European rescue package would forestall a euro zone sovereign debt crisis.

Paladin runs mines in Namibia and Malawi, and has projects in Australia.

Uranium One operates primarily in Kazakhstan, but Nortier has said the company is on the hunt for acquisitions and would like to push into Africa.

Paladin — whose stock trades in both Australia in Toronto, rose 41 Canadian cents at C$3.70 in Toronto, while Uranium One eased 2 Canadian cents at C$2.42.


Uranium One also posted a first-quarter loss on Monday, citing falling revenues and higher operating costs.

The company lost $21.5 million, or 4 cents a share, compared with a year-earlier profit of $61.1 million, or 13 cents a share.

Excluding one-time items, the loss was 3 cents a share. Analysts, on average, had forecast a profit of 1 cent a share, according to Thomson Reuters I/B/E/S.

Revenue fell 17.4 percent to $35.5 million on lower sales volumes and a lower realized uranium price.

The average realized sales price during the first-quarter was $46 per pound, down from $49 a year ago. The average total cash cost per pound of uranium sold was $19 during the quarter, up from $17.

Uranium One said it still expected to produce about 6.8 million pounds of uranium in 2010 and about 8 million pounds in 2011.

$1=$1.02 Canadian Additional reporting by Euan Rocha; editing by Rob Wilson

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