Paladin Energy Ltd: Financial Report for Three Months Ended 30 September 2011
PERTH, WESTERN AUSTRALIA -- (Marketwire) -- 11/14/11 -- Paladin Energy Ltd ('Paladin' or 'the Company') (TSX: PDN)( ASX: PDN) announces the release of its Financial Report for the three months ended 30 September 2011. The Financial Report is appended to this News Release.
Highlights
-- Key Company step-change objectives achieved in September quarter
allowing Langer Heinrich Mine Stage 3 expansion ramp-up to start in
October and Kayelekera Mine bankers' test to start in November after
significant operational improvement/rectification and initiation of
important cost optimisation measures.
-- Cash position strengthened with US$127M Stage 3 project finance drawdown
and a A$68M share placement.
-- Langer Heinrich Mine production increases as ramp-up reaches 90% of
Stage 3 design post quarter.
-- New contracts for delivery of 2.8Mlb signed with three new customers.
-- Mid to long term uranium market fundamentals intact.
-- Programme for minority JV partner farm-outs on Australian projects
initiated.
Results
(References to 2011 and 2010 refer to the equivalent three months ended 30 September 2011 and 2010 respectively).
-- Safety and Sustainability:
-- One Lost Time Injury for the quarter. Rolling 12 month Loss Time
Injury Frequency Rate down to 0.9 for LHM and to 0.7 for KM.
-- Production:
-- Production of 1.24Mlb U3O8 - a decrease of 15% from last quarter.
-- Operations affected by combination of planned shutdowns and
unscheduled remediation work.
-- Langer Heinrich Mine:
-- Production of 849,067lb U3O8, impacted by Stage 3 tie-in shutdowns
(6 days), however increasing production benefits evident as new
equipment comes on-line.
-- Post quarter Stage 3 ramp-up tracking well with production at 90% of
design capacity in October.
-- Construction of Stage 3 expansion almost complete, with the
remaining NIMCIX modules nearing completion. Various Stage 3 modules
are in operation and either in ramp-up or advanced stages of
commissioning. Stage 3 will increase annual production capacity from
3.7Mlb U3O8 to 5.2Mlb U3O8pa.
-- Feasibility Study for Stage 4 expansion targeting annual production
of 8.7Mlb pa conventional and 1.3Mlb pa processing of low grade
material remains on schedule for completion in the December quarter.
-- Kayelekera Mine:
-- Production of 395,478lb U3O8 impacted by planned plant upgrade shut
down (3 weeks) and unscheduled remediation work (3 weeks).
-- Plant upgrades successful with bottlenecks addressed and plant
operating at nameplate operating hours and throughput.
-- Bankers' completion test commenced on 1 November 2011. Production in
line with target of achieving 90% of design capacity.
-- Localised ground movement problems are currently stabilised with
acid plant online 7 October. Uranium production re-commenced on 14
October with interim drying at LHM.
-- Relocated drying and packaging plant back on line 12 November.
-- Cost Optimisation:
-- Implementation plan approved to reduce annual corporate and
marketing costs of US$26.5M (FY12) by at least 10 to 15%.
-- Discretionary exploration expenditure reduced by US$5M for FY12 by
extending programme timeframes.
-- Kayelekera Mine cost optimisation programme progressing. The mining
contract has been restructured and the finished goods transport
contract is under review.
-- Impairment:
-- The continued deterioration of the uranium price post-Fukushima has
resulted in a reduction of the carrying value of the Kayelekera Mine
from US$470M to US$337M, with an impairment charge of US$133M (post
tax).
-- Sales:
-- Record sales for the quarter: 2,001,673lb U3O8 sold for US$102.7M at
an average realised price of US$51/lb.
-- New contracts for 2.8Mlb signed for deliveries 2012 to 2016 at
pricing from mid to low US$60's per lb.
-- Cost of Sales (C1):
-- Langer Heinrich Mine cost of sales (C1) for the quarter increased to
US$32/lb from US$28/lb for the year ended 30 June 2011, due to a
stronger Namibian Dollar and lower production caused by plant
stoppages to accommodate Stage 3 expansion equipment tie-ins. FY12
target of US$28/lb remains unchanged.
-- Kayelekera Mine cost of sales (C1) for 2011 decreased from US$50/lb
in the year ended 30 June 2011 to US$40/lb in quarter ended 30
September 2011 as a result of the lower net realisable value of
inventory held at 30 June 2011. The product sold in the September
2011 quarter was predominantly from inventory held at 30 June 2011
which had previously been written down to a recoverable value of
US$52.75/lb, with a C1 cash cost component of approximately
US$40/lb.
-- Profit and Loss
3 months to 3 months to
30 September 30 September
2011 2010
US$M US$M
Revenue 103.0 49.1
Cost of sales (69.3) (28.9)
Royalties and distribution (6.4) (3.2)
----------------- -----------------
Gross profit (before amortisation) 27.3 17.0
Exploration (0.8) (0.5)
Site non-production costs (5.4) (2.2)
Corporate and marketing (6.0) (4.4)
----------------- -----------------
Contribution from continuing operations
(before non cash) 15.1 9.9
Amortisation and depreciation (17.3) (7.0)
Non-cash costs (2.5) (4.0)
----------------- -----------------
Non-recurring income & expenses (185.8) (6.0)
----------------- -----------------
Loss before interest and tax (190.5) (7.1)
Finance costs (13.8) (13.1)
----------------- -----------------
Loss before income tax (204.3) (20.2)
Income tax benefit 61.3 15.1
----------------- -----------------
Loss after income tax (143.0) (5.1)
Non-controlling interests 19.6 1.6
----------------- -----------------
Net loss after tax - members of parent (123.4) (3.5)
----------------- -----------------
-- Gross profit before amortisation increased to US$27.3M for 2011 from
US$17.0M in 2010 because of higher sales.
-- Contribution from continuing operations before amortisation and non-
recurring items increased to US$15.1M in 2011 from US$9.9M for the 2010
quarter.
-- Site non-production costs for the quarter were higher at US$5.4M due to
higher royalties on increased sales, the acquisition of the Canadian
operations and the Stage 4 expansion study.
-- Corporate and marketing costs of US$6.0M higher due to increase in
number of projects being progressed. Reduction targeted through cost
optimisation programme currently underway.
-- Non cash costs, mainly share based payments, reduced from US$4.0M to
US$2.5M as a result of the cost reduction programme.
-- Non-recurring expenses mainly reflects the impairment of the Kayelekera
Mine asset expense of US$178.9M pre-tax (US$133M post tax) caused by the
continued deterioration of uranium prices since events in Japan in March
2011.
-- Finance costs for 2011 remained fairly constant at US$13.8M compared
with US$13.1M in 2010.
-- Cash Flow:
-- Positive cash flow of US$18.4M generated by the Langer Heinrich and
Kayelekera operations for the quarter before US$16.0M investment in
working capital, mainly due to a reduction in creditors with the
wind down of Stage 3 construction and an increase in debtors due to
higher sales levels, offset by a reduction in inventories.
-- Positive cash flow from financing activities with US$100.8M net
proceeds from the drawdown of LHM Stage 3 project finance facilities
after repaying the remaining Stage 1 project loan in full.
-- Cash Position:
-- Cash of US$158.4M at 30 September 2011.
-- Funding:
-- US$127.2M drawndown under US$141M LHM Stage 3 project finance
facility.
-- Remaining US$24.8M of LHM Stage 1 project finance facility repaid.
-- Post Quarter Capital Raising:
-- In early October 2011, successfully completed A$68.2M raising via an
institutional private placement of 56.9M ordinary shares at a price
of A$1.20 per share.
-- Uranium Market Outlook
Future uranium demand growth, post Fukushima, remains assured with no nuclear plants apart from those in Germany (and the Fukushima plants) having been permanently shut down. No other country with an existing nuclear energy programme has abandoned nuclear power as a result of the Fukushima nuclear accident.
Uranium supply however remains a critical challenge facing the nuclear power sector. Sufficient future uranium supply growth is not as assured given the significant obstacles facing the industry to achieve the expected demand growth, which Paladin estimates to be 220Mlb U3O8 pa by 2020. This potential supply deficit has emerged not only because of increasing technical and political risks faced by the uranium supply industry, but paradoxically also because of Fukushima. Uranium price, its volatility, and the disparity in returns on investment between uranium and the other mineral commodities will all contribute to a negative impact on the ability to build and grow uranium supply capacity to the substantial levels needed.
The global resource boom, the peculiar nature of the uranium market and how it is transacted, the exacerbating factors resulting from Fukushima, increasing risks associated with geopolitical issues and currency uncertainties, along with regulatory and societal complexities, all make uranium mining a challenging endeavour requiring a return at least on par with the rates of return achieved for other mineral commodities in the general mining industry. The uranium industry, like its peer industries, requires suitable returns to justify the necessary commitment to grow and maintain production.
In its recently completed study of the global uranium supply industry, Paladin also evaluated the economics of 10 significant uranium projects which were considered likely to be part of future production growth. This study used operating costs and capital cost figures from feasibility studies where available (which are inherently optimistic) and concluded that to bring an additional 80Mlb pa U3O8 on line by 2020 (excluding the additional 50Mlb pa U3O8 replacement production also required by this time) and reach 220Mlb pa, the realised uranium price for the majority of the cases studied would have to be significantly above current price levels, in order to achieve desired rates of return. Key contributing factors leading to this conclusion were the associated lower grades and higher technical costs involved as well as the considerable impact of global cost inflation on large capital projects.
We continue to believe, based upon our comprehensive assessment of project economics and our experience in building and operating new uranium mines, that there will be a likely uranium supply deficit in the near to mid-term as current prices will not incentivise the development of sufficient new supply. The disparity of the uranium price from the general metals index is unsustainable under current mining industry cost pressures and under the shadow of the greatest global mineral resource boom ever experienced. On this basis Paladin remains confident the future uranium price outlook is positive even in the shorter term.
The documents comprising the Financial Report for the three months ended 30 September 2011, including the Report to Shareholders, Management Discussion and Analysis and Financial Statements and Certifications are attached and will be filed with the Company's other documents on Sedar (sedar.com) and on the Company's website (paladinenergy.com.au).
Generally Accepted Accounting Practice
The news release includes non-GAAP performance measures: Cost of sales (C1), gross profit (before amortisation), contribution from continuing operations as (before non cash) well as non-recurring income and expenses. The Company believes that, in addition to the conventional measures prepared in accordance with GAAP, the Company and certain investors use this information to evaluate the Company's performance and ability to generate cash flow. The additional information provided herein should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Conference Call
Conference Call and Investor Update scheduled for 06:00 Perth & Hong Kong, Tuesday 15 November 2011, 17:00 Toronto, Monday 14 November 2011 and 22:00 London, Monday 14 November 2011.
Details were included in a separate news release made on 10 November 2011.
To view the Financial Statements, visit the following link: http://media3.marketwire.com/docs/744564.pdf
A.C.N. 061 681 098
Contacts:
Paladin Energy Ltd
John Borshoff
Managing Director/CEO
61-8-9381-4366 or Mobile: 61-419-912-571
john.borshoff@paladinenergy.com.au
Paladin Energy Ltd
Garry Korte
Chief Financial Officer
61-8-9381-4366 or Mobile: 61-409-875-910
garry.korte@paladinenergy.com.au
Paladin Energy Ltd
Greg Taylor
Investor Relations Contact
905 337-7673 or Mobile: 416-605-5120 (Toronto)
greg.taylor@paladinenergy.com.au
Paladin Energy Ltd
Matthew Keane
Investor Relations Contact
61-8-9381-4366 or Mobile: 61-407-682-974
matthew.keane@paladinenergy.com.au
www.paladinenergy.com.au