• Paladin Energy Ltd. logo is displayed at the company's reception in Perth, Australia.

Paladin Energy Ltd. logo is displayed at the company's reception in Perth, Australia. (Photo : Getty Images)

Paladin Energy, a one-time uranium high-flyer, looks set in engaging in a bitter fight to the death with the China National Nuclear Company, a Chinese state-owned giant.

Paladin Energy is a uranium production company with a strategy to become a major uranium mining house through its projects in Australia and Africa. It currently has two operating mines in Africa, the Kayelekera mine in Malawi and the Langer Heinrich mine in Namibia.

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Paladin confirmed that it has received notice from the CNNC, the company that it responsible for China's military and civilian nuclear programs, that the group has started a process in exercising an option over Paladin's remaining 7 percent stake in the Langer Heinrich uranium mine.

The move of the Chinese state-owned giant CNNC to acquire Paladin's stake owed to bondholders and others worth $650 million could be a death knell for the uranium production company.

As Paladin already received strong encouragement from many bondholders, it is intending to fight the validity of the option through an arbitration process in Singapore.

The CNNC option is a major tool in Paladin's debt restructuring, which gained increased traction among stakeholders and bondholders in the recent weeks. CNNC is also believing that it has attracted strong interest from some significant funds for a minimum of $75 million.

The option is a legacy of a 25 percent stake of Langer Heinrich that was sold earlier to the group under Paladin's former management. Paladin is likely to dispute whether the option had ever been triggered validly.

Both Paladin and CNNC went through a torturous and ultimately fruitless sale process last year over the sale of an additional 24 percent stake.

CNNC's latest effort in exercising its option on the stake will only add to the feeling that the Chinese giant was only ever stringing Paladin along.