an open letter to board of paladin

Have just fired this letter off the the company. I hope it persuades them to re-consider this matter. A lot is at stake. I am currently overseas and can't be there, but urge shareholders living in and around Perth to attend the AGM on Thursday and make your voice heard.

Dear PDN Board and Managing Director

I'm a new shareholder in Paladin and am writing an open letter to the company. I feel the current situation is right at the bottom of a cycle that has seen uranium prices plunge some 75% over the past 6 years. You are aware that many mines are now unsustainable whereas PDN has made big gains in reducing costs of production whilst ramping up output to nameplate capacity at both mines. Operational cashflow for FY14 is positive and indications (from the figures in last week's update) are that C1 costs will continue falling. Plus we are paying less interest to lenders than recently. Your own charts illustrate how uranium supply is in a tight squeeze and we are on cusp of a significant price rise. I am very optimistic re Paladin, in both short and longer term.

In August you stated: negotiations to sell a stake in LH mine had been terminated because "the current depressed uranium price has meant that it is unlikely that a sale-price that appropriately reflects the STRATEGIC value of the asset will be achieved, and accordingly proceeding at this time will be detrimental to LONG TERM shareholder value" (my emphasis). Then last week PDN state: "negotiations have restarted re selling a minority stake and board remain focused on achieving a "suitable outcome" at the earliest opportunity".

How can you reconcile these two statements? It's not in the medium-longer term interests of shareholder's or the company to attempt a sale of even 15% of our crown jewel, and especially when the market is so depressed. Clearly the $US300 million in unsecured convertible bonds maturing in November 2015 has to be dealt with... but we have a full 24 months in which to find a solution. Plus we hold $125 million in cash and cash equivalents. The situation is far from desperate.

I feel you have under-estimated the willingness of shareholders to participate in raising more capital. If institutions were willing to pay 70 cents/share just 3 months ago, why wouldn't shareholders be willing to pay 50 cents/share especially now it's clear we have made substantial progress? Did you cut a deal that prohibits or excludes possibility of another capital raising so soon after the previous CR? I find it hard to believe you would have painted us into such a corner.

The Langer Heinrich mine has at least 25 years of future production. To sell a stake now... at the very bottom of the price cycle... will leave shareholders feeling cheated and betrayed. As you know, even a modest rise in price of U308 will provide massive leverage to profits.

This sale has not been discussed with shareholders. Our opinions deserve to be heard. Please STOP and rethink this important issue. Once sale is done, it's gone for ever.

Michael Mennell