Paladin Energy: Financial Report for Year Ended 30 June 2012
PERTH, WESTERN AUSTRALIA -- (Marketwire) -- 08/30/12 -- Paladin Energy Ltd ("Paladin" or "the Company") (TSX: PDN)(ASX: PDN) announces the release of its Financial Report for the year ended 30 June 2012. The Financial Report is appended to this News Release.
FY12 has been a milestone year for the Company. Achieving nameplate production levels at both mines positions Paladin well at a time of a changing landscape in the uranium supply industry.
FY13 will be the first year Paladin will operate without distracting construction and commissioning activities running in parallel. In this new environment the Company is well placed to optimise efficiencies and costs on its operations and benefit from returns. Debt gearing is also reducing with the initiatives announced FY12 and early FY13.
Highlights
-- Record production for the year of 6.895Mlb U3O8, an increase of 21% over
the previous year.
-- Langer Heinrich Mine produced 4.417Mlb U3O8 for the year, an increase of
25% over the previous year.
-- Kayelekera Mine delivered record production of 2.478Mlb U3O8 for the
year, an increase of 14% over the previous year. The project operated
consistently at 90% of nameplate for the last 8 months of the year.
-- Average cash cost of sales (C1 cost) of US$39/lb sold for year compared
with US$35/lb in the previous year.
-- Average realised sales price of US$55/lb U3O8 achieved for the year
compared to average UxC price of US$52/lb.
-- Both mines now, for the first time, operating without concurrent
construction expansion programmes, allowing a strong focus on
operational and cost optimisation.
-- 50% Kwacha (Malawian currency) devaluation in the last quarter of the
year, positive for the Malawian economy and for Kayelekera Mine cost
optimisation progress.
-- Cash position strengthened with US$141M Stage 3 project finance drawdown
and US$65M proceeds from share placement.
-- Successful raising of US$274M through Convertible Bonds. Portion of
proceeds used to fund concurrent partial buyback of US$191M of the
existing convertible bonds maturing in 2013.
-- Post year end, a long-term off-take contract agreement was entered into
with major utility to deliver a total of 13.73Mlb U3O8 in the period
2019 to 2024. The agreement includes a US$200M prepayment, which will be
partly allocated to repay the balance of the convertible bond payment of
US$134M due March 2013.
-- Post year end, new mid-term sales contracts were secured for a total of
6.3Mlb U3O8, to be delivered from late 2012 to end 2015 at market
prices, with a fixed price component well above the current spot price.
-- Labrador, Canada, three-year moratorium on uranium development and
mining ended, providing access for the resource development of the
potentially world class Michelin deposit. Drilling commenced in August
2012.
Results
(References to 2012 and 2011 refer to the equivalent year ended 30 June 2012 and 2011 respectively).
-- Safety and Sustainability:
-- Maintained high safety performance with a 12-month moving average
Lost Time Injury Frequency Rate (LTIFR) of 0.9.
-- Production:
-- Record production for the year of 6.895Mlb U3O8 - an increase of 21%
from the previous year, despite operations being affected by a
combination of planned shutdowns, unscheduled remediation work and
disruptions from Langer Heinrich Stage 3 tie-ins.
-- In the June 2012 quarter both mining projects operated exceptionally
well. Production from Langer Heinrich exceeded design levels, with
1.323Mlb U3O8. Kayelekera achieved 0.726Mlb U3O8 production in the
June 2012 quarter, 88% of nameplate capacity, despite a seven-day
disruption due to industrial action in May.
-- Langer Heinrich Mine:
-- Record production for the year of 4.417Mlb U3O8 - a 25% increase
from 2011. Demonstrated production and performance benefits achieved
from Stage 3 production ramp-up.
-- June 2012 quarterly U3O8 production of 1.323Mlb U3O8, achieving 102%
of Stage 3 nameplate capacity, representing a 26% increase from the
March quarter.
-- Construction of the Stage 3 expansion completed with staged ramp-up
achieved, crushed tonnes increasing and ore feed grades reducing to
design levels.
-- The Stage 4 expansion study is well advanced, with Environmental
Impact Assessment (EIA) approvals granted by the Namibian
Government. Completion of the feasibility study will be deferred
until all aspects of the Stage 3 equipment have been fully optimised
and understood.
-- Kayelekera Mine:
-- Record production for the year of 2.478Mlb U3O8 - a 14% increase
from 2011. During the year, production was impacted by a planned
plant upgrade shutdown in August 2011, unscheduled remediation work
in September/October 2011 totalling 2 months and industrial action
in May 2012 (7 days).
-- Record quarterly U3O8 production achieved in June 2012 quarter of
0.726Mlb U3O8, 88% of design capacity - consistent with March 2012
quarterly production, despite industrial action in May.
-- Record production in June 2012 at 96% of nameplate.
-- The key production measures for the Kayelekera bankers' technical
completion test, covering 90 days from 1 November 2011 to 31 January
2012, have been passed. Work is continuing on final completion test
certification.
-- Localised ground movement abated, with conditions continuing to be
stable.
-- Cost Optimisation:
-- Implementation plan approved in 2011 to target reducing corporate
and marketing costs by at least 15%. Tighter controls have led to a
reduction of corporate overheads, including travel costs and
outsourced work. Labour costs have reduced as the high capital
investment phase has largely been completed.
-- Discretionary exploration expenditure reduced by US$5M for FY12 by
extending non-essential programme timeframes.
-- Kayelekera Mine cost optimisation programme is a key focus with
production having achieved design performance. Fourteen areas have
been identified with specific targeted cost saving opportunities,
including the key areas of reagents (primarily acid), diesel and
transport. Progress during the year included reaching a new
agreement with the finished goods transporter to reduce costs,
securing cheaper imported acid, cost effective direct diesel imports
and cheaper mill balls now being sourced from China.
-- Recent 50% devaluation of the Malawi Kwacha corrects the
artificially high fixed rate that has negatively impacted Kayelekera
costs over the past three years.
-- Sales:
-- Sales revenue increased 37% from US$266.8M in 2011 to US$365.8M for
the year ended June 2012, mainly as a result of higher sales volumes
of 6.698Mlb U3O8 compared to 2011 sales volume of 4.812Mlb U3O8 - an
increase of 39% in volume. The average realised uranium price for
the year was US$55/lb U3O8 (2011: US$56/lb). The average UxC spot
price for the year was US$52/lb.
-- Total sales volume for the June 2012 quarter of 2.241Mlb U3O8 - a
97% increase on the March 2012 quarter sales of 1.137Mlb U3O8.
Uranium sales volumes are expected to fluctuate quarter-on-quarter
due to the uneven timing of contractual commitments and resultant
scheduling by customers. Now that production has reached design
levels, sales and production volumes are expected to be comparable
on an annualised basis.
-- New contracts signed during the year for the delivery of 2.8Mlb from
2012 to 2016 at pricing from mid to low US$60's/lb. as well as
extension of existing contract for the delivery of more than 1.0Mlb
over the same period at market-related pricing.
-- Mid-term contract signed in August 2012 to deliver 6.3Mlb from late
2012 to the end of 2015 at approximately 2Mlb pa. Pricing will be
determined predominately by the market price at the time of
delivery.
-- Term market interest by nuclear utilities in all regions has
increased recently for deliveries commencing in 2013-2014, which
will provide additional multi-year contracting opportunities in an
improving long-term market.
-- Cash Cost of Sales (C1 cost):
-- Average C1 cash cost component of cost of sales for the year
increased to US$39/lb (2011: US$35/lb).
-- Langer Heinrich Mine C1 cash cost component of cost of sales for the
year increased to US$31/lb U3O8 from US$28/lb U3O8 in 2011, mainly
due to disruption problems with Stage 3 tie-ins.
-- Kayelekera Mine C1 cash cost component of cost of sales for the year
(before adjustments for impairments) increased to US$54/lb from
US$50/lb in 2011 mainly due to disruption problems with the plant
shutdown, unscheduled remediation work and the industrial dispute.
The benefits of increased production levels and cost benefits from
the cost optimisation programme will be realised in the 2013
financial year. Cost optimisation continues to be a key focus, with
specific target areas including acid, reagents, diesel,
transportation and providing increased opportunities for local
workers. Major benefits from these cost reductions are expected over
the next 18 months.
-- Profit and Loss
Year Ended
30 June
2012 2011
US$M US$M
Revenue 367.4 268.9
C1 cost(1) (256.7) (170.9)
Impairment loss in prior year relating to inventory
sold during the year 23.4 -
Impairment - inventory and stores (39.0) (26.4)
Royalties and distribution (19.1) (15.2)
Depreciation and amortisation (49.3) (36.1)
----------------------
Gross profit 26.7 20.3
Exploration expenses (2.5) (3.0)
Site non-production costs (19.8) (14.9)
Corporate, marketing and administration (21.0) (26.5)
----------------------
(16.6) (24.1)
Non-cash costs (9.0) (12.6)
Other income & expenses (197.2) (6.9)
----------------------
Loss before interest and tax (222.8) (43.6)
Finance costs (56.7) (61.5)
----------------------
Loss before income tax (279.5) (105.1)
Income tax benefit 78.7 16.6
----------------------
Loss after tax (200.8) (88.5)
Non-controlling interests 28.0 6.2
----------------------
Net loss after tax attributable to members of the
parent (172.8) (82.3)
----------------------
(1) Cash cost of sales (C1 cost) = cost of sales excluding impairment, product distribution costs, sales royalties and depreciation and amortisation.
-- Gross profit for the year increased to US$26.7M from US$20.3M in 2011
due to higher sales volumes which has been partially offset by lower
average prices and a US$39.0M impairment of inventories and stores at
the Kayelekera Mine (2011: US$26.4M). Adding back amortisation and
depreciation of US$49.3M for 2012 (2011: US$36.1M), gross profit before
amortisation and depreciation increased to US$76M in 2012, up from
US$56.4M in 2011.
-- Site non-production costs for the year were higher at US$19.8M due to
higher royalties on increased sales, increased activity at the Canadian
operations following the lifting of the moratorium and the Stage 4
expansion evaluation study.
-- Corporate and marketing costs were US$5M lower for the year due to cost
savings achieved through the cost rationalisation programme, announced
to the market in the latter half of 2011. Tighter control has led to a
reduction in corporate overheads.
-- Non-cash costs, mainly share-based payments, for the year were reduced
from US$12.6M to US$9.0M as a result of a reduction in share rights
issued in this period.
-- Other income and expenses mainly reflect the September 2011 impairment
of the Kayelekera Mine asset expense of US$178.0M pre-tax (US$133M post-
tax) caused by the deterioration of uranium prices since events in Japan
in March 2011, the write-off of fixed costs during the plant shutdown of
US$9.7M and an impairment of available-for-sale assets of US$8.0M.
-- Finance costs have decreased by US$4.8M due to a portion of the Langer
Heinrich Mine Stage 3 project finance loan being capitalised as part of
the Stage 3 construction costs and in 2011 finance costs included a
US$4.6M non-cash loss on convertible bond buy-back.
-- Net loss after tax of US$172.8M was recorded for the year, mainly as a
result of the US$133M (post-tax) impairment associated with the write
down of the Kayelekera assets in the quarter ended September 2011.
-- Cash Flow:
-- Positive cash flow of US$113.3M generated by the Langer Heinrich and
Kayelekera mine operations for the year before investment of
US$85.0M into inventory working capital required to support higher
production levels, payments for administration, marketing and non-
production costs of US$50.2M, exploration of US$2.5M and net
interest paid of US$36.6M.
-- Sales revenue of US$52M relating to deliveries in June 2012 was
shown as a trade receivable as at 30 June 2012. The proceeds were
received in July 2012.
-- Cash outflow from investing activities was US$82.2M relating mainly
to the completion of the Stage 3 expansion and capitalisation of
exploration costs.
-- Positive cash flow from financing activities of US$201.5M is mainly
attributable to the US$139M net proceeds from the Langer Heinrich
project financing, US$62.6M net proceeds from the share placement,
net US$77.1M from the placement of US$274M convertible bond offset
by partial buyback of US$191M of the US$325M convertible bond,
offset by project financing payments of US$77.2M.
-- Cash Position:
-- Cash of US$112.1M at 30 June 2012.
-- Long-term Off-take Contract with a US$200M prepayment
-- On 15 August 2012, a six-year off-take agreement was entered into
with a major utility to deliver a total of 13.73Mlb U3O8 in the
period from 2019 to 2024.
-- A prepayment of $200M will be made to the Company for part of the
future product deliveries.
-- To secure the Company's obligations under the off-take agreement,
the utility will hold security over 60.1% of the Company's Michelin
project in Canada. The percentage of Michelin secured will be
reduced by joint agreement as the value of that project is enhanced
by Paladin's ongoing work. The Michelin security can also be
replaced by other appropriate security if required.
-- The remaining US$134M of March 2013 convertible bonds are expected
to be repaid from proceeds of this.
-- Exploration and Development
-- In Labrador, Canada, the three-year moratorium on the mining,
development and production of uranium ended providing access to the
Michelin deposit and validating Paladin's decision to acquire the
Aurora uranium assets at a discounted price of US$1.90/lb U3O8. This
has cleared the way to re-commence work on the project and
substantial long-term resource increases are expected.
The documents comprising the Financial Report for the year ended 30 June 2012, 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 (www.sedar.com) and on the Company's website (paladinenergy.com.au).
Generally Accepted Accounting Practice
The news release includes non-GAAP performance measures: Cash cost of sales (C1 cost), gross profit before amortisation and depreciation, non-cash costs as well as other 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.
Declaration
The information in this Announcement relating to exploration and mineral resources is, except where stated, based on information compiled by David Princep B.Sc who is a Fellow of the AusIMM. 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 a Competent Person 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 NI 43-101. Mr Princep is a full-time employee of Paladin Energy Ltd and consents to the inclusion of this information in the form and context in which it appears.
Conference Call
Conference Call and Investor Update scheduled for 06:30 Perth & Hong Kong, Friday 31 August 2012, 18:30 Toronto and 23:30 London, Thursday 30 August 2012.
Details were included in a separate news release made on 27 August 2012.
To view the Year End, Financials, and MD&A associated with this release, please click the following link:
http://media3.marketwire.com/docs/PDNYearEnd.pdf
ACN 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
Alan Rule
Chief Financial Officer
+61-8-9381-4366 or Mobile: +61-438-942-144
alan.rule@paladinenergy.com.au
Paladin Energy Ltd
Greg Taylor
Investor Relations Contact
+1 905-337-7673 or Mobile: +1 416-605-5120 (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