Paladin faces another hurdle in developing its Malawi uranium project

Australian headquartered uranium miner Paladin Resources Inc. (TSX, ASX:PDN) might not be able to roll out its Kayelekera uranium project in Malawi's northern region district of Karonga in 2008 as planned because the mining site is far from being connected to the country's electric power system.

The local media reported over the weekend that Malawi's sole power supplier - Electricity Supply Corporation of Malawi (Escom) - has written Paladin informing it that the corporation cannot solely source funds to connect the required power to the mine site. According to press reports, Escom wants the miner to foot the bill for extending electricity to Kayelekera.

The state-owned company says in order to provide electricity to the mining site, it will require a capital cost based on duty free materials of US$8.810m. However if there will be duty paid on the materials, the same would cost US$10.783m. The utility company would need to upgrade switchgear at Telegraph Hill and construct 80km of 66 KV steel tower supported power line from the country's northern region city of Mzuzu.

In addition, the company will also need to construct 34km of 66 KV wooden pole power line from Karonga town to the proposed mining site, install 12.5 MVA 66/11 KV substation and associated switchgear to Kayelekera. All these have not yet been started raising doubts whether the Kayelekera mining project will be commissioned in 2008 as planned.

Escom Chief Executive Officer Kandi Padambo told The Nation newspaper on Sunday that his company, which has been struggling financially over the years, cannot single-handedly finance the whole project.

"We cannot mobilize that kind of money at one go," Padambo told the paper. "Discussions on the best way forward are underway. We are discussing with Paladin to see how they can help us source money in the form of a loan. It will be a commercial agreement and we cannot have problems to repay the loan because what we will be getting every month will be enough to take
care of that"

The paper says Paladin is yet to respond to the letter Escom wrote on the cost-sharing venture. However Minister of Energy Chimunthu Banda told the paper that Escom is duty bound to connect the mining site although it was understandable that it was not in their plans.