Paladin suspends production at Kayelekera, Malawi’s largest mine

Paladin Energy
Paladin Africa Limited, a subsidiary of Australia-based Paladin Energy, announced earlier today that production has been suspended at Kayelekera uranium mine in Karonga District, northern Malawi. This involves placing the operation on care and maintenance until the price of uranium recovers.

According to the announcement, there are two factors beyond the control of Paladin Energy subsidiary for the suspension of production:

1. The continuing depressed price for uranium oxide, which has been severely negatively impacted since March 2011 following the nuclear reactor damage caused by the Fukushima earthquake and tsunami; and

2. The unsustainable cash demand to maintain the loss:making Operation at KM.

Managing Director of Paladin Energy, John Borshoff, explained

By placing Kayelekera on care and maintenance now, we are preserving the remaining value of the ore body until it can be mined profitably to make a positive contribution to the Paladin Group. This is in the best interest of all PAL stakeholders, including the Government of Malawi. […]

Electing to take Kayelekera “offline” at this time is a prudent and sensible step to preserve
shareholder value and position Paladin to take best advantage of the opportunities that will present to the Company when the uranium sector enters its next exciting phase of growth and profitability.

The decision will result in a significant level of redundancy, while the company assures that “retrenched national employees will receive generous redundancy packages that exceed Malawi’s minimum legal requirements”.

194 Malawi national employees and 27 expatriate staff will remain at the site during the period of care and maintenance. Paladin Africa has been the object of much criticism over the years related to the mining development agreement signed between the company and the Government of Malawi, which has a 15% stake in Paladin Africa.

The announcement mentioned in this post can be accessed on Paladin Energy’s website here.

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