Paladin Energy Ltd: Quarterly Activities Report for Period Ending-31 December 2010
PERTH, WESTERN AUSTRALIA -- (Marketwire) -- 01/21/11 -- Paladin Energy Ltd ('Paladin' or 'the Company') (TSX: PDN)(ASX: PDN) is pleased to provide its Quarterly Activities Report for the three month period ended December 31, 2011.
HIGHLIGHTS
-- Achieved record quarterly production results on both operating sites.
-- LHM 932,731lb up 4% on previous quarter
-- KM 534,201lb up 15% on previous quarter
-- LHM achieves 1 year zero LTI's and KM 5 month LTI free end Dec 2010.
-- Slower KM ramp-up will result in overall guidance downgrade from 7Mlb to
between 6.0Mlb - 6.3Mlb for FY11.
-- Expansions:
-- Stage 3 LHM delayed. Commissioning to start late March quarter
-- Stage 4 LHM Feasibility Study underway with completion expected late
September quarter
-- Sale of 1,273,922lb U3O8 at an average realised price of US$52/lb
(previous quarter US$46.50/lb).
-- Acquisition of the Aurora uranium assets in Canada adds significant
project to Paladin pipeline.
-- Odin adds an Inferred Mineral Resource of 10.3Mlb U3O8 at 0.06% to the
Mount Isa Projects inventory.
-- Corporate:
-- US$300M successfully raised via 5 year Convertible Bond expiring Nov
2015
-- Existing US$250M Convertible Bond expiring Dec 2011 successfully
bought back
-- Completion of takeover of NGM Resources
-- Spot uranium price continues to strongly increase with Ux quoting
US$68/lb mid January.
SAFETY
Safety throughout the Group continues to improve with no Lost Time Injuries (LTIs) recorded for the quarter at its Langer Heinrich Mine (LHM) or Kayelekera Mine (KM). During the period at LHM, an external safety, health and environment audit by NOSA was conducted with the preliminary result being that the site continues the 4 Star Platinum rating with an improved overall performance. Implementation of the NOSA safety system at Kayelekera in preparation for a similar external safety, health and environmental audit in the June quarter is underway.
QUARTERLY URANIUM SALES
Sales for the quarter were 1,273,922lb U3O8 generating revenue of US$66.3M, representing an average sales price of US$52.00/lb U3O8 (average Ux spot price for the quarter was US$56.71/lb U3O8).
The Ux spot price increased from US$46.50/lb U3O8 at the end of September to US$62.50/lb U3O8 at the end of December. The Ux long term price indicator rose from US$60/lb U3O8 to US$65/lb U3O8 during the quarter.
GLOBAL PRODUCTION FOR 2010
The overall production for calendar year 2010 of 5,429,863lb has increased 74% from the previous year's production as shown in the table below.
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LHM KM Total Paladin
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Production lb 2010 3,688,203 1,741,660 5,429,863
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Production lb 2009 2,875,496 253,616 3,129,112
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Progressive quarter by quarter production of the combined operations is as follows:-
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LHM KM Mar qtr June qtr Sept qtr Dec qtr
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Production lb U3O8 1,157,375 1,442,842 1,362,713 1,466,932
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LANGER HEINRICH MINE (LHM), Namibia
Production
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LHM Mar qtr June qtr Sept qtr Dec qtr
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Production lb U3O8 928,370 927,373 899,735 932,731
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Langer Heinrich continues to operate at nameplate capacity and in the December quarter delivered record production.
Mining
Mining activities have been advanced prior to Stage 3 initiation, with three working areas expected to supply ore feed in 2011. Mining and plant ore feed month by month over the half year to December 2010 were as follows:-
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July Aug Sept Oct Nov Dec
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Ore mined (t) 116,706 363,344 746,818 408,185 154,824 34,594
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Grade (ppm) 744 930 864 790 690 593
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Additional low
grade ore
mined (t) 52,291 38,648 132,256 116,270 59,424 41,602
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Grade (ppm) 286 327 344 337 351 307
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Waste/Ore ratio 5.9 2.4 0.59 1.77 6.62 33.01
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July Aug Sept Oct Nov Dec
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Ore crushed, dt 182,072 179,714 186,080 173,100 187,900 214,800
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Ore grade, ppm
U3O8 994 881 1048 1036 915 844
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Mining operations were carried out as planned, with large month to month variations in ore vs waste, as additional areas were prepared for mining in 2011. A high percentage of the waste material is being utilised for the new in-pit tailings facility which is expected to be operational in the June quarter. This waste was intentionally mined in December resulting in a high strip ratio for that month and will normalize back to historic levels going forward.
Process Plant
Tonnage through the process plant was the highest ever at over 575,000dt crushed beating the previous quarterly record of 550,000dt.
Performance of the front end circuits is satisfactory. The Stage 3 expansion features a much larger and robust scrubber as well as various circuit up-grades that will improve performance.
The leaching circuit extraction rate increased to 92% for the December quarter with an average of 94.2% in December. Leaching circuit vessels are now completely insulated and cost reductions as a result of this programme are currently being evaluated. The Stage 3 expansion includes a new system of slurry heating which has been designed around the results of a year long site based pilot plant trial. This new system will reduce operational dependence on the current spiral heat exchangers.
Counter-Current Decantation (CCD) and Ion Exchange (IX) combined operationally to a wash efficiency of 73.3%. Performance in this area is under review as an increase in efficiencies will provide an excellent opportunity to improve production and reduce costs.
The precipitation and drying areas are working above capacity and have the capability to perform well above nameplate. This was particularly evident in December when the product thickener was cleaned out for maintenance resulting in much higher than normal packaging levels.
Stage 3
Construction continued through the December quarter and is expected to be completed in the March quarter, allowing production commissioning and ramp-up to proceed.
The Stage 3 expansion project at LHM, which is increasing the existing plant's throughput to 5.2Mlb pa, is now 85% complete and is progressing well.
The project is now scheduled for mechanical completion late in the March quarter. This is delayed from the original schedule that anticipated completion by January 2011. Critical path equipment, including boilers and IX columns, were delayed arriving at site and as such have pushed back expected mechanical completion by approximately 2 months.
The budget is expected to be contained within 25% of the approved budget forecast; this includes recent foreign exchange movements.
Stage 4
A Bankable Feasibility Study has been initiated following the updated Resource and Reserve statements provided in the last quarterly report for the expansion of LHM to 10Mlb U3O8 pa. The study is investigating a new plant to be located adjacent to the existing plant with total production capacity of around 8.7Mlb U3O8 pa. In addition, the potential for heap leaching or upgrading the below cut-off grade material/mineralised waste rock to recover a further 1.3Mlb U3O8 pa is also being investigated. This feasibility study is scheduled for completion by the last quarter of CY2011.
KAYELEKERA MINE (KM), Malawi
Production
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KM Dec 09 qtr March qtr June qtr Sept qtr Dec 10 qtr
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Production lb U3O8 145,315 228,996 515,478 462,977 534,201
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Although a record level of production occurred at Kayelekera, performance during the quarter was hampered by intermittent electrical power generation outages resulting from earlier than scheduled mechanical overhauls of the on-site diesel power plants. The impact of these outages was reduced as 3 redundant diesel generators with an overall capacity of approx 2.8MW were relocated from Langer Heinrich and were installed mid-December. The reliability of the main Hyundai power plant had been impacted by the logistics chain to Malawi, however is now functioning well.
During times of consistent power operation the plant did operate at or near design levels. This is expected to improve with increased operational efficiencies and plant utilisation. Overall recovery levels have improved significantly contributing to higher production levels.
Mining
The mining and plant ore feed month by month for the half year ending December 2010 were as follows:
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July Aug Sept Oct Nov Dec
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Ore mined (t) 105,108 132,720 82,054 140,572 43,000 44,786
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Grade (ppm) 1906 1555 2111 1865 1003 1504
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Additional low
grade ore
mined (t) 39,680 33,473 49,073 13,448 56,905 17,144
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Grade (ppm) 513 509 515 546 513 491
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Waste/Ore ratio 1.2 1.75 2.3 1.2 3.0 2.8
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Operating data - Process
Clearly evident from the data below, the plant when operating, is running at design levels. For instance, on a strictly ratio basis, the plant running at 2000 hrs per quarter (of 2200 hrs available) would produce at 95% of nameplate. Solutions to improving the running times have been identified and implemented mainly involving process/maintenance operations with emphasis on the logistics chain Further work is underway to achieve a consistent 2000 hours quarterly run time.
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Dec qtr
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Operating time hrs 1380
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Mill feed, dry tonnes 228,764
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Grade (ppm) 1439
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Leach extraction % 90.1
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RIP efficiency % 88.4
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Overall efficiency % 78.0
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Process Plant
The crushing and grinding circuits have shown that they are capable of routine operation for both wet and dry conditions.
Leaching extraction is operating at over 90% versus 91% design. A modification to the launder system, when complete, is expected to improve extraction to at least design. Acid production on-site continues to run as per demand.
Resin-in-Pulp operational issues are being systematically mitigated, with efficiencies currently at 88.4% and regularly well over 90% for extended periods. Further increases in RIP efficiency continue as improved resin management and preventative maintenance processes are established.
The back end of the plant (uranium precipitation and packaging) is operating at nameplate.
Lender's Test
The 90 day continuous testing of 10 specific operational parameters, including tonnage throughput, grade reconciliation to resource model, overall recovery, production targets and unit costs, began on 1 November. Power disruption has extended the test period, however the operation continues with the testing and Paladin is confident it will be successfully completed within the required timeframe.
Expansion Study
Paladin's operational development team has formally embarked on design of the plant expansion to 3.8Mlb pa. As has been the case with expansions at Langer Heinrich, data derived from current Kayelekera operations will be valuable to reliably provide design and construction methods which, when initiated, will raise production capacity to stated levels and provide enhanced operation ability. This study is expected to be completed within the next 6 months.
GUIDANCE STATUS
Despite increased efficiencies and record production at Kayelekera, ramp-up delays in the first half of the year at the operation due to abnormal down-time resulting from power and maintenance disruptions have impacted FY11 production expectations. As a result production guidance for FY11 is reduced to a range of 6.0Mlb to 6.3Mlb versus the 7Mlb currently forecast. Management is confident that this conservative revision will be met and installed capacity will be maintained going forward as operational efficiencies and plant availability are improving.
MOUNT ISA REGION PROJECTS, Queensland
Work in the quarter included a maiden Mineral Resource estimate for the Odin orebody. The resource drilling programme at the Bikini deposit was completed in late December and the Skal programme is expected to be completed following the resumption of drilling in late March 2011.
MOUNT ISA URANIUM JOINT VENTURE (Paladin Energy Ltd 50%, Summit Resources (Aust) Pty Ltd 50% Operator)
Odin Uranium Deposit
The Odin deposit is part of the Valhalla Project and is located 40km north of Mount Isa on EPL 17514.
The maiden Mineral Resource estimate is based on 99 holes totalling 16,044m. The Odin deposit now has a strike length of 600m and contains two mineralised lenses. The main lens trends north-north-east and dips 50 degrees - 60 degrees to the east. The smaller southern lens strikes north-south and dips steeply to the east. Following compilation and consolidation of all data into a resource dataset, an initial Mineral Resource estimate has been completed. The Mineral Resource is currently classified as Inferred, primarily due to drill spacing and the number of bulk density determinations within the dataset. Additional drilling is expected to be undertaken in 2011, after the wet season, following on from the drilling at Skal with an updated Mineral Resource estimate expected June quarter.
The initial Inferred Mineral Resource estimate for the Odin uranium deposit is quoted using a cut-off grade of 250ppm U3O8.
Grade ppm
Mt U3O8 t U3O8 Mlb U3O8
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Inferred Resources 8.2 573 4,685 10.3
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(Mineral Resource quoted on 100% basis)
The Mineral Resource estimation was completed using the same methodology (Multi Indicator Kriging) as that undertaken at Valhalla, with the dataset derived predominantly from downhole radiometric logging using company owned, calibrated equipment. The radiometric grades have also been extensively validated against laboratory assays.
Skal Uranium Deposit
At Skal a resource development drilling programme of 28 holes totalling 4,566m was halted in early December due to the wet season. Encouraging results so far include:
SD0129 from 50m to 91m down hole, totalling 41m at 838ppm U3O8
SR0138 from 165m to 215m downhole totalling 50m at 1,394ppm U3O8
A resource upgrade for Skal is expected late in the March quarter following completion of the drilling programme.
Bikini Uranium Deposit
A 40m x 40m infill resource drilling programme was completed at Bikini in late October 2010. Drilling included 66 holes totalling 10,527m. An updated resource is expected to be completed in the first quarter of 2011 following compilation and validation of all the data.
CORPORATE
Acquisition of Aurora Uranium Assets
Paladin announced in December 2010 that it had initiated its uranium business in Canada and entered into a Definitive Agreement for the purchase of the uranium assets of Aurora Energy Resources Inc. ('Aurora') a wholly owned subsidiary of Fronteer Gold (TSX: FRG)(NYSE Amex: FRG) ('Fronteer'). Aurora Energy holds title to significant uranium assets within the highly prospective Central Mineral Belt ('CMB') of Newfoundland and Labrador in Eastern Canada, including the Michelin deposit (67.12Mlb Measured and Indicated and 36.08Mlb Inferred Resources of U3O8) as well as the Jacques Lake, Rainbow, Nash, Inda and Gear deposits and has secured the most prospective ground within the CMB.
NI 43-101 compliant U3O8 resources have been defined across all the deposits as follows:-
-- 83.8Mlb U3O8 Measured and Indicated Mineral Resources (40.2Mt ore at
0.09%)
-- 53.0Mlb U3O8 Inferred Mineral Resources (29.0Mt ore at 0.08%)
The consideration for 100% ownership amounted to C$260.87M via the issuance of 52,097,937 shares in Paladin. This valued the current resources at US$1.90/lb.
Paladin considers the CMB to be one of the few remaining, underexplored uranium districts globally and this acquisition not only provides Paladin with a noteworthy mid-term development asset but also offers an excellent opportunity for both significant new discoveries and expansions of the existing deposits. This highly strategic transaction fulfils Paladin's long held ambition to expand its footprint into Canada, a leading country in uranium mining, both in terms of resources and its stable political and business environment, providing the Company with an important new platform from which to plan its continued growth.
With this acquisition, Paladin's global uranium portfolio increases appreciably and, with strong potential for additional uranium resource discovery to complement the existing resource base, provides a genuine development opportunity within the forthcoming decade.
Convertible Bond Issue
During this reporting period Paladin announced the successful issue of senior, unsecured convertible bonds due October 2015 (Convertible Bonds).
The Convertible Bonds carry a coupon of 3.62% pa and are convertible into Paladin shares at an initial conversion price of US$5.665 per share and represented a conversion premium of approximately 32.5% above the reference price of Paladin shares at the time of pricing.
The proceeds of the issue were used to fund Paladin's tender offer to acquire from eligible bondholders its US$250M issue of convertible bonds due in December 2011, with any amount not applied to the tender offer being utilised to fund in part the proposed expansion of the Langer Heinrich Mine and to pursue future growth opportunities. The tender offer was fully accepted.
NGM Resources Ltd Takeover
On 10 December 2010 Paladin completed its takeover following compulsory acquisition of the remaining shares. The total number of shares allotted in relation to the acquisition of NGM was 7,116,001 fully paid shares.
Corporate Development Manager
Justin Reid, General Manager Corporate Development for Paladin has tendered his resignation effective 1st February 2011. Justin will be returning to Canada with his family and rejoining the capital markets. Justin is thanked for his contributions to the Company during what has been an exciting period of growth.
Paladin is pleased to announce the appointment of Dr. Nicole Adshead-Bell, in the role of Manager Corporate Development effective 1st February 2011. Nicole has a Ph.D. in Geology from James Cook University, Queensland and worked as a buy and sell side analyst specialising in both uranium and precious metals. Most recently Nicole was a Managing Director, Investment Banking for Haywood Securities Inc., in Vancouver focused on M&A in the mining and exploration sector. Nicole will be based in Vancouver, Canada and supported in Perth by both an analytical and IR team.
Uranium Market Comments
At the beginning of 2010 the uranium market was considered by some - but not Paladin - to be possibly over-supplied and lacking in direction despite the strong growth in new reactor commitments in China, India, Korea and the UAE and re-affirmation of successful nuclear power programmes in Europe and the United States.
The Ux spot price was US$43.50/lb U3O8 in January and the Ux long term price was declining from US$62/lb U3O8 towards US$58/lb U3O8 in March. By the end of 2010 a different picture has emerged. Reported spot volumes of over 50Mlb U3O8 (equivalent) almost matched the record set in 2009, and reported long term contracting volumes of over 240Mlb U3O8 (equivalent) approached the record of 250Mlb U3O8 (equivalent) set in 2005 (when the average annual long term price was US$30.73/lb U3O8). Reflecting these trends the Ux spot price recovered to US$62.50/lb U3O8 in December 2010 (and subsequently rose to US$68/lb U3O8 in mid-January 2011) and the Ux long term price also began moving upwards. On the production side it seems that the recent year-on-year increase in uranium production has slowed. Preliminary figures indicate global production rose by 8% in 2010, less than half the increase between 2008 and 2009, and that Kazakhstan accounted for more than 75% of the increased output.
Like other commodities, uranium is now showing signs of price recalibration as industry participants re-focus on medium and long term supply and demand issues. Paladin is exquisitely placed to provide new supply into this exciting and growing market.
Yours faithfully
Paladin Energy Ltd
JOHN BORSHOFF, Managing Director/CEO
Declaration
The information in this announcement that relates to mineral resources is based on information compiled by David Princep BSc MAusIMM for Mineral Resources. Mr Princep has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as Competent Persons as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves', and as a Qualified Person as defined in Canadian National Instrument 43-101. Mr Princep is full-time employees of Paladin Energy Ltd and consents to the inclusion of the information in this announcement in the form and context in which it appears.
ACN 061 681 098
Contacts:
In Australia:
Paladin Energy Ltd
John Borshoff
Managing Director/CEO
61 8 9381 4366 / Mobile: 61 419 912 571
john.borshoff@paladinenergy.com.au
In Canada:
Paladin Energy Ltd
Greg Taylor, Investor Relations Contact
905 337-7673 / Mobile: 416 605-5120 (Toronto)
greg.taylor@paladinenergy.com.au
www.paladinenergy.com.au