The seven-year $167 million ECA and bank debt package for Paladin Energy's Kayelekera uranium mine in Malawi set a number of precedents when it closed in March 2009 – the deal is both the first large scale mining project financing and biggest commercial international financing in Malawi to date.

The project is also only the second uranium project financing to be undertaken globally (the first being the Langer Heinrich project financing, also for Paladin). Consequently the sponsor and lead arrangers – Nedbank Capital, Standard Bank and Societe Generale (Australia) – were in the bank market with a project located in an untested country, a relatively untested asset-type and, like most of the deals last year, looking to close financing at the height of the liquidity crunch.

Despite the hurdles the deal reached financial close and first drawdown on 15 June 2009, albeit nearly two years after lenders received credit committee approval.

The Kayelekera project is owned 85% by Paladin (Africa) Limited (PAL) and 15% by the Government of Malawi under the terms of the development agreement signed between Paladin and the government in February 2007.

The project is located in northern Malawi, 52km west of the provincial town of Karonga at the northern end of Lake Malawi, and 575km north of the capital city, Lilongwe. The mine was officially opened in April 2009 and has been successfully commissioned, with the plant showing full capability to operate throughout its flowsheet with yellowcake produced during this phase. South Africa's Engineering & Projects Company is EPC and the 3.3Mlb pa project remains on schedule for its ramp-up.
Over a 12- to 13-year life Kayelekera will mine 2.87Mt/9.75Mt of proven/probable reserves. Measured and indicated resources at a 300ppm U3O8 cut-off are 22.2Mt and at 600ppm U3O8 are 10.39Mt.

Despite the 18 months to financial close after credit committee approval the debt package did not change – long negotiations over holding accounts in the host country were the cause of delay of financial close.

Standard Bank and Nedbank are co-underwriters of a $110 million tranche supported by Export Credit Insurance Corporation of South Africa (ECICSA), with Societe Generale arranging a $35 million commercial tranche and the three banks splitting equally $12 million cost overrun facility. The $167 million total also includes a $10 million performance bond.

Kayelekera Uranium Mine
Status: Financial close March 2009
Description: First large scale mining project financing in Malawi
Sponsor: Paladin Energy
Mandated lead arrangers:
Societe Generale; Standard Bank; Nedbank Capital
ECA: ECICSA
Financial adviser: Azure Capital
Legal counsel to sponsor: Blakiston & Crabb
Legal counsel to lenders: Blake Dawson; Mayer Brown
EPC contractor: E + PC Engineering
Technical consultancy: Behre Dolbear Australia Pty Ltd
Insurance Due Diligence: Marsh
PRI Broker: Newedge Brokerage
Model Auditor: PwC