ICBC provides $140 million loan to CNNC to facilitate its acquisition of 25% ownership stake in Langer Heinrich uranium mining operation in Namibia

On January 18, 2014, Australia's Paladin Energy Ltd. signed an agreement to sell a 25% joint-venture equity stake in Langer Heinrich Mauritius Holdings Ltd. (its flagship Langer Heinrich uranium mining operation in Namibia) to CNNC Overseas Uranium Holding Limited — a wholly owned subsidiary of China Uranium Corporation Limited— for $190 million. The offtake component of the agreement allowed CNNC to purchase its pro-rata share of product at the prevailing market spot price. There was also an opportunity for Paladin to benefit by securing additional long term offtake arrangements with CNNC, at arm's length market rates, from Paladin's share of Langer Heinrich production. Then, on July 15, 2014, China National Nuclear Corporation and the Industrial and Commercial Bank of China (ICBC) signed a $140 million acquisition loan to complete the payment of the equity consideration for the merger and acquisition. The merger and acquisition was successfully completed on July 23, 2014. On March 23, 2017, Paladin Energy Ltd. said that it decided to take its Chinese joint venture partner (CNNC) in the Langer Heinrich uranium project in Namibia to arbitration. CNNC had previous notified Paladin Energy Ltd. that it was seeking to determine the fair value of the Paladin Energy Ltd.’s 75% ownership stake in Langer Heinrich Mauritius Holdings Ltd., which would be the first step in a process that could lead to the exercise of the potential CNNC option. If exercised, Paladin Energy Ltd. stood to lose its stake in the mine to CNNC. However, Paladin disputed this option, saying it was only applicable in the event of default, which had not occurred. Meanwhile, Paladin Energy Ltd. sought to extend existing standstill agreements with creditors, to buy time to pursue the arbitration proceedings. At the time, the company had in place standstill agreements with bondholders representing 75% of its 2017 and 87% of its 2020 convertible bonds. Then, on May 25, 2018, Paladin Energy Ltd announced that the Langer Heinrich Mine was to be placed on care and maintenance and stopped presenting ore to the plant because of persistently low uranium prices. In its annual report for the year ended June 30, 2019, Paladin Energy Ltd announced that in February 2019 it had completed a concept study that identified multiple options to reduce operating costs, improve process plant performance and potentially recover a saleable vanadium product. Such annual report also disclosed that in March 2019 it commenced a two-stage pre-feasibility study respecting a potential re-start of mining operations at the Langer Heinrich Mine upon a sustained recovery in uranium prices, with the first stage expected to be completed in September 2019 and examining a rapid, low-risk restart of the mine and the second stage expected to be completed in March 2020 and involving a more detailed study, including process optimization aimed at lowering costs, recovering vanadium and potentially increasing production in the later stages of the mine life. In the report, Paladin also disclosed that a re-start would be considered only if forecast cash flows from uranium sales provide an appropriate return on investment. On October 14, 2019, Paladin Energy Ltd announced the completion of the first stage of its pre-feasibility study, which included a JORC compliant mineral resource estimate for the Langer Heinrich Mine with measured resources of 71.87 mmlb of U3O8 (66.2 million tonnes at an average grade of 0.049% U3O8) and indicated resources of 17.96 mmlb of U3O8 (18.8 million tonnes at an average grade of 0.044% U3O8). Such resource estimate was reported on a depleted basis to June 30, 2018 and did not include stockpiles. Paladin's disclosure regarding the prefeasibility study included: (a) an estimate of $80 million required for the rapid restart of the mine, including $38 million for plant repair and improvement and $42 million for working capital; (b) an initial production capacity of 5.2 mmlb, while processing high and medium grade ores for approximately an 8-year period (after a 12-month ramp-up), followed by production capacity of 2.7 mmlb while processing low grade ores for approximately 12 years; and (c) a resulting average life of mine all-in sustaining cost of approximately $33 per pound, consisting of life-of-asset mining costs of $8.40 per pound, processing costs of $18.20 per pound, other operating costs of $2.60 per pound and capital costs of $3.80 per pound. Paladin further disclosed that it had identified opportunities, requiring estimated discretionary capital expenditures of $30 million, to significantly debottleneck existing mining and mineral processing operations to 6.5 mmlb per year and reduce all-in sustaining costs by approximately $4.50 per pound. On June 30, 2020 Paladin Energy Ltd announced the result of the Langer Heinrich Restart Plan, which refined the results of the previous Prefeasibility Report. The Restart Plan is based on a re-sequencing of mining and processing activities outlined in the 2019 PFS and takes elements from both the PFS 5.2Mlb Option and the PFS 6.5Mlb Option. The release states that the mine could be brought back into production for $81 million of pre-production cash expenditure.

Additional details

1. Paladin is a publicly-listed company with listings on the Australian, Canadian and the Namibian stock exchanges and has its headquarters in Perth, Western Australia. The Company specializes in uranium exploration, project development and uranium mining operations. It is the only company in the world to have developed two modern conventional uranium mines in the past 20 years and is recognized for successfully applying innovative mining technologies to both its Langer Heinrich Mine in Namibia and its Kayelekera Mine in Malawi. 2. China Uranium Corporation Limited is a wholly owned subsidiary of China National Nuclear Corporation (CNNC), a major state-owned enterprise. 3. The Langer Heinrich mining operation in Namibia commenced uranium production in 2007 and subsequently underwent two stages of expansion. It was the first successful conventional uranium mining operation to have been built in the world since 1992 when Areva established its McLean Operation in Canada. Langer Heinrich utilizes a unique alkaline leaching process developed by Paladin. Langer Heinrich has a design capacity of 5.2Mlb of uranium concentrate per annum and, following successful optimization and de-bottlenecking, Paladin was targeting 5.7Mlb of production by FY14. At the time that the acquisition took place, the de-risked operation had a 20-year mine life and, given sufficient uranium price incentive, it was capable of being expanded further to produce approximately 8.5Mlb per annum.

Number of official sources

5

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11