PERTH (miningweekly.com) – Uranium miner Paladin Energy has struck a deal with ASX-listed Hylea Metals to divest of its shareholding in the Kayelekera mine, in Malawi, for A$5-million.

Paladin owns 65% of the Kayelekera project, joint venture partner Chichewa holds a 20% interest and the Malawi government a 15% stake.

Under the deal with Paladin, Hylea will pay A$5-million, consisting of A$200 000 in cash and A$4.8-million in Hylea shares. The shares will be issued in two tranches, the first of which will be subjected to a 12-month voluntary escrow, while the second tranche will be completed on the third anniversary of the transaction.

The issue price of the shares will be based on the lower of the 30-day volume-weighted average share price at the time of issue, or the price of a Hylea capital raising in the 90 days preceding the share issue.

Paladin will also receive a 3.5% royalty on revenues derived from future production at Kayelekera, capped at A$5-million.

Paladin will also be repaid the funds advanced to provide security for the $10-million environmental bond issued to the government of Malawi, with the payments to be made in four tranches.

“The acquisition of 65% of Kayelekera is an excellent opportunity for Hylea. Kayelekera is a world-class uranium asset that has produced over 10.9-million pounds of uranium and represents an opportunity to use the past production information to re-engineer certain mining processes in order to reduce the overall capital cost and operating cost of the operation,” said Hylea MD Simon Andrew.

“We are optimistic about the global uranium market and the outlook for firmer pricing.”

Hylea noted on Monday that the company also had an option to acquire a further 20% interest in Kayelekera through a deal with Chichewa.

Paladin on Monday told shareholders that selling its interest in the project would provide the company with additional capital and other resources, while also eliminating the significant ongoing care-and-maintenance costs associated with Kayelekera.

“The sale is a positive result that will enable Paladin to focus all of its resources on restarting our flagship asset Langer Heinrich by releasing restricted cash resources of around $10-million and realising significant care-and-maintenance cost savings of around $5-million a year,” said Paladin CEO Scott Sullivan.

“It is consistent with our stated strategy of focusing on the re-development of Langer Heinrich while preserving our capital and developing opportunities to monetise noncore assets. With this structure, we also keep some exposure to the upside of this transaction through the A$4.8-million in share placements early in the development cycle.”

Kayelekera was idled in 2014 on the back of low uranium prices. The project includes a 1.5-million-tonne-a-year processing facility and is estimated to host some 28.7-million pounds of uranium oxide.