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Despite tough market, Paladin sales beat expectations

Despite tough market, Paladin sales beat expectations

Photo by Bloomberg

28th July 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – ASX- and TSX-listed uranium producer Paladin Energy on Monday reported strong full-year 2014 and fourth-quarter output, meeting its guidance.

Paladin, which produces yellowcake from operations in Africa, reported combined output of 7.94-million pounds of uranium oxide, which was down 3.8% year-on-year, but met the upper-end of the company’s guidance of between 7.8-million pounds and 8-million pounds.

The Langer Heinrich mine, in Namibia, produced a record 5.592-million pounds of uranium oxide, up 5.7% year-on-year, and for the three months ended June, the mine produced 1.3-million pounds of the radioactive element.

Paladin said its Kayelekera operation, in Malawi, which was placed on care and maintenance and ceased production on May 6, produced 2.35-million pounds of uranium oxide for the full year and 262 060 lb of uranium oxide for the June quarter.

The miner pointed out that it would restart the operation once the uranium oxide price provided a sufficient incentive at about $75/lb and when grid power supply became available on site to replace the existing diesel generators with low-cost hydroelectricity.

Paladin sold 1.81-million pounds during the quarter, generating revenue of $69.28-million, which reflected an average sale price of $38.24/lb of uranium oxide – higher than the average weekly uranium oxide spot price for the quarter of $29.65/lb. Revenue for the quarter beat analyst expectations of $53.44-million.

Sales for the full year were up 5% year-on-year at 8.67-million pounds of uranium oxide, which accounted for revenue declining 19% year-on-year to $328.84-million, reflecting an average sales price of $37.95/lb.

During the quarter, Paladin had also increased the measured and indicated resource of its Michelin uranium deposit, in Canada, by 25% to 84.1-million pounds of uranium oxide.

TOUGH MARKET

Uranium miners have been struggling since Japan's Fukushima Daiichi nuclear disaster hit in March 2011.

Paladin reported that the June quarter saw a decline in the uranium oxide spot price to $29/lb in early May, before seeing it trade in a narrow range of between $28/lb and $28.25/lb.

The period was also characterised by significantly less yellowcake being sold on the spot market than over the past several years at nine-million pounds of uranium.

However, contracting activity in the longer-term market increased somewhat with mid-year volumes reported slightly above 50-million pounds. The uranium long-term price that started the quarter at $47/lb weakened further to $45/lb at the end of April and had remained flat since that time.

During May, China announced the commercial operation of two reactors, Ningde-2 and Hongyanhe-2, bringing its operating nuclear fleet to 20 reactors. A further 29 reactors were under active construction with 57 units in the 'planned' category. The country expected to add 8.6 GW of nuclear capacity during 2014 compared with 3.2 GW in 2013.

Further, on July 16, the Japanese Nuclear Regulatory Authority released its safety evaluation report on the Sendai 1 and 2 reactors, stating that these units complied with the newly promulgated nuclear safety criteria. The two reactors would now proceed into a 30-day public comment period before local authorities would be requested to grant their assent to restart operations.

Paladin’s TSX-listed stock closed on Monday up 6.41% at C$0.415 apiece.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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