Trouble in Africa for Paladin Resources
(ASX:PDN) and API’s decision to stand pat on their price for Silk Laser
(ASX:SLA) were just two of the myriad stories in a busy Tuesday ASX session.
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Trading in shares of uranium miner Paladin Energy
(ASX:PDN) was halted on the ASX yesterday after they slumped 20% on news that of a threat by Namibia to nationalise some its natural resources.
Trading was suspended with Paladin shares at 54.5 cents, down 19.5% on the day. Paladin asked for the halt to last until tomorrow, June 1, to allow it time to sort out the reports, which first appeared on Bloomberg News.
Namibia is the 4th biggest uranium producer globally through mines such as Rössing, Husab and Langer Heinrich, but mines and energy minister Tom Alweendo shocked the sector on Monday when he called for greater government control.
“We are making a case that local ownership must start with the state, which holds ownership of our natural resources,” Mr Tom Alweendo told lawmakers on Monday, according to the Bloomberg report.
“The proposed state ownership should take the form where the state owns a minimum equity percentage in all mining companies and petroleum production, for which it does not have to pay,” he said.
Paladin’s75% owned Langer Heinrich Mine is in Namibia and is situated in the country’s Namib Desert, 80km east of the port of Walvis Bay.
The Langer Heinrich mine has produced over 40 million pounds of U3O8 until 2018 when low world prices saw it placed on care and maintenance.
But now world uranium prices have rebounded in the renewables rush and Paladin is looking to bring the mine back into production.
While Paladin could be caught up in the move, much bigger victims of any move would be two major Chinese nuclear companies.
The world’s longest running open pit uranium mine at Rössing (previously operated by Rio Tinto) is now operated by China National Nuclear Corporation (CNNC) – a partner with Paladin.
The Husab uranium operation is also close to the Paladin mine and is run by China General Nuclear Power Company.
Namibia is a major producer of diamonds and Africa’s largest producer of uranium.
But there are also hydrocarbons. In February, Impact Oil & Gas Ltd. said it will start a multi well drilling program in the country with TotalEnergies, which discovered oil offshore last year.
The African nation joins others such as Zimbabwe, Brazil, Chile, Indonesia, Philippines and Peru in pushing for more value from their minerals or considering increased state intervention, partly due to higher commodity prices. Chile for example already dominates the global copper sector, but has done so far years.
Shares in Deep Yellow, another ASX listed uranium explorer with interests in Namibia, saw its shares lose more than 5% yesterday, closing at 58 cents.
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Wesfarmers-owned Australian Pharmaceutical Industries (API) will not match the higher offer for SILK Laser Australia
(ASX:SLA) from a Hong Kong company, meaning that in the absence of a rival offer, SILK will fall to the latecomer to the dance.
SILK announced Tuesday that it had been advised API would not be matching the offer from EC Healthcare of Hong Kong.
API had offered $3.15 cash, plus a 10 cents final fully franked dividend, while EC Healthcare offered $3.35 cash which would have been reduced if a final dividend is paid.
Seeing EC Healthcare doesn’t operate in Australia, it wants to get control of SILK’s franking credits which is probably why its offer is 20 cents a share higher.
Wesfarmers’ decision disappointed punters who quit SILK shares on Tuesday, leaving them down nearly 9% on the day at $3.12, 23 cents under the EC Healthcare price.
After getting the EC Healthcare offer on May 23, the SILK board determined that it was a superior offer to the one from API which had the right to match the offer or top it.
With API now having chosen not to, SILK has executed a confidentiality agreement with EC Healthcare and granted due diligence access to Hong Kong company and is now conducting negotiations for a formal offer.
Notwithstanding this, API has indicated to SILK that its due diligence investigations are ongoing.
Wesfarmers boss Rob Scott told an investor day in Sydney on Tuesday that ““We will finalise our due diligence and will continue to monitor the situation … but as always, we’ll maintain our disciplined approach to M&A,” he said in commenting on the decision not to pursue a higher priced offer for SILK.
SILK said its shareholders do not need to take any action at the current time. “The Board notes that there is no certainty that SILK’s engagement with either EC Healthcare or API will result in a change of control transaction or an offer capable of acceptance by SILK shareholders.”
