takeover article from todays australian

Paladin a tempting target
August 01, 2007

PALADIN Resources managing director John Borshoff admits the recent plunge in the value of Paladin scrip might tempt a potential suitor.

Paladin has shed about 16.3 per cent of its market capitalisation since July 20, as word filtered out about a production downgrade and the uranium spot price slipped lower.

From a record share price of $10.80 in October, Paladin has lost about $2.2 billion in market capitalisation.

"Te price weakness might tempt somebody," Mr Borshoff said. "I had no worries up until six months ago and I still believe I don't have anything major to worry about.

"We have had defence advisers on the matter for the past 18 months. But you can't deny there seems to be a rationalisation of the whole uranium market at the moment."

Paladin's biggest threat could come from French uranium giant Areva, which recently paid about $US2.5 billion ($2.9 billion) for South African-based UraMin, which has its flagship project in Namibia with an inferred resource of 139 million pounds.

Paladin's Langer Heinrich operation has an inferred resource of nearly four times that amount, at much higher grades.

Areva has made no secret of its intentions to double uranium production capacity to 10,000 tonnes a year by 2010.

Despite a shock announcement on Monday that Paladin would fall well short of production targets for the six months to the end of June, Mr Borshoff said the company was well on track to be at full production in 2008, producing 1180 tonnes of uranium.

"You do have to work on your credibility after a production downgrade," he said.

"Full quota shouldn't be a problem next year. We produced in July what we produced over the previous six months."

Deutsche Bank analysts Brendan James and Brendan Fitzpatrick said in a note to clients that commissioning problems as Paladin moved from explorer to producer were to be expected.

"What we are more concerned about, however, is that the company has not yet attained production capacity, despite previous guidance to that effect," the analysts said.

Paladin's shares closed 25c lower yesterday at $7.18.