Paladin (Africa) Limited, owner and operator of the Kayelekera Uranium Mine in Karonga District, northern Malawi, wishes to inform the people of Malawi of its position in relation to comments made during the past week by the Governor of the Reserve Bank of Malawi, Dr. Perks Ligoya.

In remarks on radio on 25 November and published in the local media on 26 November and 30 ovember, Dr. Ligoya criticised the Paladin Group of Companies. Dr. Ligoya:

• Alleged that there was no accountability in how much money Paladin earned as proceeds from sales of uranium oxide.
• Claimed that Paladin did not remit proceeds of uranium sales to Malawi. Dr. Ligoya said: “They were allowed to open an offshore account somewhere and they just get enough money from that account to run their show.”
• Stated that “It was not correct for Reserve Bank at that time to agree to the arrangement that proceeds from export of uranium be deposited in an offshore account without the Reserve Bank having any records of movements in that account.”
• Maintained that: “It is common knowledge in any country that proceeds of main exports are recorded as part of the foreign reserves of that country. To correct this anomaly, we have now agreed with Paladin (Africa) Ltd that Reserve Bank of Malawi will be a co-signatory to the offshore account. This will improve level of accountability.”

Paladin (Africa) Limited rejects Dr. Ligoya’s claims. They are unfair, untrue and misleading. The facts are:

1. There is nothing about the operation of Paladin’s offshore account which is not completely transparent and already well known to the Reserve Bank of Malawi
2. There is also nothing new in the announcement by Dr. Ligoya of the proposal for the ReserveBank to become a co-signatory to Paladin’s offshore account
3. agreed to this request 12 months ago – it has not happened because the Reserve Bank did not return documentation required by the relevant commercial bank to enable this change
4. The Government of Malawi approves all contracts for sale of uranium oxide before export
5. The Reserve Bank is fully informed on use of proceeds of uranium sales from Kayelekera Mine
6. Paladin provides the Reserve Bank full disclosure – on a monthly basis – of transactions of the Company’s offshore and onshore accounts, including full reconciliation of all exports proceeds from export sales, deposits into the offshore account, loan repayments and deposits to the onshore account, together with provision of supporting bank statements

Uranium Sales Proceeds and Lending Requirements

• The Reserve Bank is aware that the initial deposit of all sales proceeds into the Company’s offshore commercial bank account is a requirement of the Kayelekera financing arrangements, which were approved by the Reserve Bank.
• The international banks that financed development of the Kayelekera Mine require sufficient funds to meet principal and interest payments to be held in that offshore US $ account. This is to avoid potential default of debt servicing, including those due to foreign exchange shortages such as Malawi now suffers – or through intervention by the Reserve Bank of Malawi.
• Without this guarantee, international lenders would not have provided the necessary project finance and Kayelekera Mine would not have been developed.
• All other export proceeds are transferred from the offshore account to our Malawi account and 40 per cent of proceeds are immediately converted to Kwacha, as required by Reserve Bank regulation .

Benefits to Malawi

Kayelekera Mine is the first large, modern mining project developed in Malawi on an internationalscale. Paladin’s investment in Malawi now exceeds MWK 825 billion (US$ 500 million) – more than any other investment made in the country.

As a result of that investment, Malawi has gained the following benefits:

• Additional foreign currency earnings to-date – MWK 34.9 billion (US$ 207.6 million).
• Purchases of Kwacha with foreign currency – MWK 14 billion.
• Taxes paid to the Government of Malawi – MWK 2.8 billion.
• Royalties paid to the Government of Malawi – MWK 379.9 million.
• Purchases of goods and services from Malawian businesses – MWK 31.4 billion.
• Kayelekera Mine injects MWK 200 million into the Malawian economy every week.
• Expenditure on social and community projects (water supply, schools, health, etc) – MWK 2.55 billion.
• Expenditure on exploration to extend the life of the mine – MWK 576.7 million.
• Direct employment of 994 Malawians; indirect employment of thousands more.

Concessions and Conditions

Dr Ligoya said: “We gave out a lot of concessions and funny conditions that Kayelekera people – they are in Namibia – they don’t have those conditions like they sort of coined with us here in Malawi.”

The facts are:

• Concessions granted by the Government of Malawi to Paladin reflected the Company’s role as the pathfinder in developing Malawi’s resource sector and were in line with similar concessions granted to developers in other countries.
• In exchange for those concessions, Paladin invested US$ 500 million in Malawi and gave the Government of Malawi a 15 per cent free-carried equity stake in PAL, leading to the benefits outlined above, which are on-going .

Transparency and Accountability

Dr. Ligoya stated: “There was no accountability whatsoever in how much money they are getting as profits. It’s pathetic.”

The facts are:

• Reserve Bank knows that Paladin , as a publicly-listed Company, is required by law to abide scrupulously to its reporting obligations. The Company conducts its business to the highest standards of integrity and technical diligence that would withstand the most rigorous third party scrutiny and auditing.
• As a shareholder in Paladin (Africa) Ltd, the Government of Malawi has a Director on the Company’s Board and is able to scrutinise the Company’s actions and accounts at any time.

Profitability of Kayelekera Mine

Despite the assertions by Dr. Ligoya, the people of Malawi should know and understand that Paladin’s Malawi operations are currently loss making (not profitable) and its running costs, including wages and salaries, continue to be part funded by the parent company in Australia, thus enabling the Kayelekera Mine to continue operating.

• Rather than making substantial profits from its Malawi operations, in view of the current world economic crisis and the significantly- reduced price of uranium oxide, Paladin has not received a single Kwacha in return on its investment in Malawi of US$ 500M over the past five years.
• Paladin has not received any interest on inter-company loans provided to the Malawi operations as the Kayelekera Mine is currently unable to afford such payments.
• This situation is largely a consequence of tsunami-related damage to the Fukushima nuclear power plant in Japan last March, which led to a 30 per cent reduction in the price of uranium oxide.
• Far from making profits, the audited financial statements for Paladin (Africa) Ltd, which have been provided to the Reserve Bank, show losses of MWK 9.2 billion (US$ 56M) to 30 June 2011.
• On 14 November 2011, Paladin (Africa) Ltd’s Australian parent company announced a loss of US$123.4 million, substantially as a consequence of its operations in Malawi.

Paladin is proud of its faith and investment in Malawi. The Company looks forward to a brighter future when the uranium price fully recovers, as we confidently expect it to do. In the meantime, Paladin expects that its commitment will be matched by a level of cooperation and consideration on the part of the Reserve Bank and the Government of Malawi. A lack of mutual commitment will be detrimental for all stakeholders.