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Paladin Energy Ltd reinforces position as a global uranium leader

Published: 09:35 25 Aug 2016 AEST

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Paladin Energy Ltd (ASX:PDN) has finished the FY16 year with record low uranium C1 cash costs and has achieved its objective of being cash flow positive excluding one-off items.

Paladin owns 75% of Langer Heinrich, the world’s fourth largest open pit uranium mine located in Namibia.

The company achieved a C1 cash cost of US$25.88 per pound of uranium and an all-in cash cost (AISC) of US$38.75 per pound of uranium.

The lowering of operating costs allowed EBITDA to increase to US$24.8 million in FY16 compared to a loss of US$20.9 million in FY15.

Consequently, Paladin finished the year with cash of US$59.2 million.

Paladin is guiding to sales of 650,000-750,000 pounds of uranium at C1 cash costs of US$20-22 per pound for the current September quarter.


Background

Paladin is a uranium production company with two mines in Africa and projects in Australia and Canada with a strategy to become a major uranium mining house.

The Langer Heinrich mine in Namibia is Paladin’s flagship project having commenced production in 2007.

The company’s second mine, Kayelekera, is located in the African country of Malawi and was placed in care and maintenance in May 2014 after opening in 2009.

Paladin owns a number of pipeline uranium deposits and projects located in Australia and Canada.

Paladin also holds an 82.08% interest in Summit Resources Ltd (ASX:SMM).


Langer Heinrich uranium mine

Paladin owns 75% of Langer Heinrich located in the Namib Desert, on the western side of central Namibia, 80 kilometres east of the major seaport of Walvis Bay.

Langer Heinrich is a calcrete uranium deposit being mined through a conventional open pit with a project life of 20 years.

The Stage 3 expansion is complete with production at 5.2 million pounds per annum. Studies are underway for a further expansion.

Langer Heinrich contains JORC Reserves of 96 million pounds of uranium and Resources of 133 million pounds of uranium.


FY16 results

Highlights from FY16 include:

- Production of 4.763 million pounds of uranium;
- AISC decreased by 24% to US$38.75 per pound uranium;
- Gross profit up 661% to US$13.7 million vs FY15;
- EBITDA of US$24.8 million improving from negative US$20.9 million in FY15.
- Debt reduced by US$122.9 million;
- C1 cash cost within guidance and a record low of US$25.88 per pound uranium; and
- Cash balance of US$59.2 million.


Namibia


Namibia is a politically stable country with good infrastructure and an established mining industry involving uranium, diamonds, gold and base metals.

The Namibian Government actively encourages growth of its mining industry, which is a solid contributor to the country’s economy.

Operating mines include the Rössing Uranium mine, located 40 kilometres north of Langer Heinrich, which has been in production since 1976.


Analysis

This FY16 result sees a point of inflexion for Paladin as it turns cash flow positive by continuing to deliver on its strategy of maximising operating cash flows.

By minimising operating, corporate and administrative costs and preserving the long-term life of mine plan, Paladin is positioning itself for a sustainable future.

As costs continue to decrease, Paladin is increasing its leverage to an increase in the uranium price.

The uranium market liquidity is improving and the outlook remains robust with the supply-demand dynamic becoming more favourable.

Japan continues its restart of reactors and producers are cutting back on production and deferring projects.

Paladin has guided to further lower C1 cash costs in the September quarter to US$20-22 per pound of uranium production.

 

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