Uranium giant eyeing Langer Heinrich

SPECULATION that Cameco Corp, the world’s second-largest uranium producer, may buy Paladin Energy, owners of the Langer Heinrich uranium mine in Namibia, the Australian Financial Review said yesterday.

According to Bloomberg, Cameco CEO Jerry Grandey singled out Paladin as one of the companies the Canadian-based producer considers attractive in an interview last November already.Cameco may be more interested in acquiring Paladin after the Australian company fell 15 per cent in three months, RBS Equities Australia told Bloomberg.’I think Cameco would certainly be looking at Paladin,’ RBS analyst Lyndon Fagan said yesterday. ‘Paladin’s share price has been underperforming recently because of failing to deliver on production targets, and the recent weakness could provide an opportunity for the likes of Cameco.’The Australian uranium producer on October 29 cut its production forecast after delays to an upgrade at the Langer Heinrich mine in Namibia and the replacement of equipment at the Kayelekera venture in Malawi. Perth-based Paladin estimated production of 5,6 million pounds to 6,1 million pounds for the year ending June 30, down from a previous projection of 6,6 million pounds.Cameco declined to comment on a potential bid for Paladin. ‘As one of the world’s leading uranium producers, we are often associated with speculation about various business deals,’ Lyle Krahn, a Cameco spokesman, said in e-mailed comments yesterday.Paladin Managing Director John Borshoff didn’t immediately return a phone call seeking comment.The Australian uranium producer’s shares have fallen 15 per cent from A$4,80 on October 19 to close at A$4,07 yesterday, compared with a gain of 2,5 per cent for the benchmark S&P/ASX 200 Index. Paladin traded at A$4,05 in Sydney, down 0,5 per cent, at 1:35 pm local time, valuing the company at about US$2,7 billion.Discussion of a potential Cameco-Paladin transaction isn’t new, Bloomberg said.JPMorgan Chase & Co. said in March 2009 that Paladin may be an attractive target for producers such as Cameco. Paladin completed a share sale to institutional investors, raising A$429 million, the company said in September. Borshoff said last year the company may grow beyond Africa and Australia, while expanding its project in Namibia. Paladin will consider acquisitions of its own, he said in October.Cameco, which plans to double annual uranium output from its existing operations by 2018, will consider acquisitions of mining assets and creating joint ventures with customers, Chief Executive Officer Jerry Grandey said in November, mentioning Paladin Energy as an option.Even so, Grandey said: ‘We’ve always been challenged by the valuation.’ Paladin shares rose 69 per cent in 2009 to finish the year at A$4.18.Cameco agreed to sell its stake in Centerra Gold Inc. for about C$872 million ($850 million), the company said last month.The Canadian producer currently has ‘substantial financial capacity for acquisitions’, RBC Capital Markets analyst Fraser Phillips in Toronto wrote in a report yesterday. A takeover would cost Cameco about US$3,7 billion, the Australian Financial Review said in its Street Talk column. A bid at that level would boost Cameco’s earnings per share by as much as 30 per cent by 2014, it said, citing research by BMO Capital Markets. – Bloomberg