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Sunday, March 11, 2007

Paladin to proceed with $185m Malawi uranium development

URANIUM PROSPECT Paladin to proceed with $185m Malawi uranium development The Malawi government has entered into an agreement with Australian resources group Paladin for the development of the $185-million-plus Kayelekera uranium mining project, in northern Malawi.

The new mine's commissioning is scheduled for September 2008.

Paladin MD John Borshoff says the agreement gives the Malawi government a 15% shareholding in the project.

In return, Paladin's corporate tax rate will be slashed from 30% to 27 5% and the company will be exempted from the 10% resource rent tax.

"The development agreement is a far-reaching document providing a stable fiscal regime for at least ten years from the commencement of production and will provide a high degree of certainty for the project," says Borshoff.

The agreement will see the company's royalty rate reduced from 5% to 1,5% during the first one to two years of mining. In addition, Paladin will not pay the 17,5% import value-added tax and there will be an immediate 100% capital write-off for tax purposes.

Under the agreement, Paladin will be requirerd to provide social infrastructure in the Kayelekera area, including primary and secondary schools and health facilities, most probably funded in the third year of the project.

"The 15% government shareholding will offer a long-term stabilising element for the project, as it will align the interests of the company and the government in the project, creating a sustainable environment which the company believes is for the long-term benefit of both the company and Malawi," says Borshoff.

Paladin is currently readying itself for the predevelopment works, involving local access preparation, preliminary site establishment, a secure equipment storage area and a communications facility.

This work is scheduled for the fourth quarter of this year.

Paladin has also started buying equipment for the project and has so far acquired a second-hand 5,03-m-diameter, 8,54-m-long Dominion SAG mill.

A bankable feasibility study undertaken by international consultancy firm GRD Minproc indicated that the project is financially and technically viable, with an 11-year life-of-mine. The survey results peg the total yearly production for the project at 3,3-million pounds of U3O8 over the first seven years, up from the 2,3-million pounds that was initially envisaged.

Paladin will use a portion of the $250-million it raised from capital markets in December to kick-start the project. It is also seeking a $90-million debt facility from its banker, Societe Generale Australia.

The company requires working capital of$45-million for the development stage of the project, whose capital cost is pegged at over $185-million.

Paladin recently applied for a 25-year mining licence and submitted the bankable feasibility study report, the management plan and the environmental-assessment study for the project to the Malawi government for review and approval.

"Initial responses have been favourable and approvals are expected towards the end of March 2007," says Borshoff.

Paladin is also exploring work in the vicinity of the Kayelekera deposit in order to boost the size of the resource.

"With its strong focus on exploration drilling planned to test existing uranium targets in its surrounding tenements over the next three to four years, Paladin is confident that satellite deposits will be discovered, offering the potential to extend the project life beyond the 11 years identified in the bankable feasibility study," concludes Borshoff.

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