Maravi

Denison Mine to sell 19.9 per cent shares

Denison Mine to sell 19.9 per cent shares
Written by Nchima Nchito Jr
Friday, April 17, 2009 2:21:53 PM

DENISON Mine has revealed intentions to sell 19.9 per cent
shareholding in the company to Korea Electric Power Corporation (KEPCO) in a bid to strengthen its balance sheet.

Denison Mine owns the Mutanga mine project in the South of Zambia formerly called the Kariba Uranium Project.

Capital expenditures for the project are estimated to be over $100 million with a yearly operating cost reaching $40 million.

According to mining weekly, Denison was hoping to raise C$94.9 million (US $77 million) through the offer should it prove successful.

Denison, which said last month it was investigating a number of options to avoid being in breach of a debt covenant by year-end, expects that an agreement with the Korean utility would mean the company stays within the terms of the earnings covenant with its banker.

The company further stated that it planned to use the proceeds for debt repayment and project development, but the “majority” of the funds raised would be used to pay down the company's revolving credit facility.

Recently, there had been speculation that the company may need to sell assets to reduce its debt load.

But company president Ron Hochstein said the proposed agreement with Kepco would likely mean Denison avoids breaching the debt covenant.

“We haven't run all the numbers yet, but we expect that it should resolve the situation,” said Hochstein.

A memorandum of understanding has been signed between the parties, which includes proposals for an off-take agreement for Kepco to buy 20 per cent of Denison's yellowcake production from 2010, and a private placement of about 58-million Denison shares to Kepco, which would give it a 19.9 per cent stake in the Canadian company once the transaction is completed.

If the transaction is completed, Kepco will have the right to appoint two directors to Denison's board, and a right of first offer to buy up to 20 per cent of any assets Denison acquires with a partner or sells.

Entities nominated by Denison chairperson Lukas Lundin would also buy another 15-million shares, for C$19.5 million (about U.S $15 million).

Labels: DENISON MINE, KEPCO, KOREA, MUTANGA MINE

posted by MrK @ 1:22 PM