Paladin Energy Ltd Quarterly Activities Report for Period Ending: March 31, 2014
22 Aprile 2014 - 12:00PM
Marketwired Canada
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 March
31, 2014.
HIGHLIGHTS
-- Key strategic initiatives successfully implemented.
-- sale of 25% minority joint venture equity to China National Nuclear
Corporation (CNNC) for US$190M.
-- Paladin satisfies conditions for US$20M deposit from CNNC to become
non-refundable.
-- refinancing of Langer Heinrich and Kayelekera facilities, allowing
significant reduction in debt repayments over CY2014 and CY2015.
-- decision to place Kayelekera on care and maintenance, saving
appreciable cash outflows at current uranium prices.
-- Continued steady production at both Langer Heinrich and Kayelekera mines
in March quarter.
-- combined production of 2.089Mlb (948t) U3O8.
-- production was down slightly by 5% from December quarter mainly due
to fewer days in the quarter and rundown in production at Kayelekera
in preparation for care and maintenance.
-- Langer Heinrich produced 1,392,694lb (632t) U3O8 for the March quarter,
4% above budget.
-- overall recovery for the quarter was 85.8%.
-- feed grade for the quarter down to 750ppm U3O8.
-- Kayelekera produced 696,710lb (316t) U3O8 for the quarter, in line with
the revised care and maintenance budget.
-- recovery of 86.7% for the quarter.
-- announcement on February 7 to place the project on care and
maintenance due to low uranium price with production expected to
continue until early May when reagent stocks will be depleted.
-- Revised production guidance of 7.8Mlb to 8.0Mlb for FY14 remains on
track.
SAFETY
The Company incurred nine lost time injuries (LTIs) across the organisation for
the quarter - six at Langer Heinrich Mine (LHM), two at Kayelekera Mine (KM) and
one in exploration. At LHM, two were lower back injuries, two ankle injuries,
one wrist dislocation and one fingertip injury. At KM, both involved minor
fractures (leg and thumb). The exploration injury involved hypothermia. Full
investigations have been conducted and recommendations made and are being
implemented. The Company's 12-month moving average Lost Time Injury Frequency
Rate (LTIFR) increased to 2.8 from 1.0.
A major health and safety review was undertaken at LHM. This identified several
areas for improvement including additional safety training, which is a major
initiative for the next 12-24 months. The annual NOSA CMB 253 (HSE) audit was
conducted at LHM and resulted in a 3-star Platinum accreditation dropping from
its 4 star rating the previous year.
QUARTERLY URANIUM SALES
Sales
Sales for the quarter were 2,405,159lb U3O8, generating revenue of US$88.56M,
representing an average sales price of US$36.82/lb U3O8 (average weekly Ux spot
price for the quarter was US$35.15/lb U3O8).
LANGER HEINRICH MINE, Namibia (100%)
Production by quarter
----------------------------------------------------------------------------
Jun 2013 Sep 2013 Dec 2013 Mar 2014
LHM Qtr Qtr Qtr Qtr
--------------------------------------------
U3O8 Production (lb) 1,353,348 1,429,378 1,431,307 1,392,694
----------------------------------------------------------------------------
The March 2014 quarterly production of 1,392,694lb U3O8 was above budget by 4%.
Mining
------------------------------
Dec 2013 Qtr Mar 2014 Qtr
----------------------------------------------------------------------------
Ore mined (t) 1,254,668 909,533
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Grade (ppm U3O8) 664 1,021
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Additional low grade ore mined (t) 1,150,223 357,922
----------------------------------------------------------------------------
Grade (ppm U3O8) 331 325
----------------------------------------------------------------------------
Waste (t) 3,235,604 3,729,823
----------------------------------------------------------------------------
Waste/ore ratio 1.35 2.94
----------------------------------------------------------------------------
Ore mining activities concentrated on the eastern side of the deposit in Pit G1.
Fewer ore tonnes were mined during the period, but the ore grade was
significantly higher than in the previous quarters. The majority of waste
material mined came from Pit H on the western side of the open cut. Mining also
commenced in Pit G3 during the quarter.
ROM ore stocks have been maintained at approximately four weeks' supply and are
being supplemented by medium grade ore from long term stockpiles in line with
the plant's blend requirements.
Process Plant
The plant continued to perform well during the quarter, with record throughput
and reduced feed grade as reflected below:
------------------------------
Dec 2013 Qtr Mar 2014 Qtr
----------------------------------------------------------------------------
Ore milled (t) 962,930 982,209
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Grade (ppm U3O8) 771 750
----------------------------------------------------------------------------
Overall recovery (%) 87.8 85.8
----------------------------------------------------------------------------
U3O8 Production (lb) 1,431,320 1,392,694
----------------------------------------------------------------------------
The processing optimisation strategy during the quarter focussed on continuous
improvement utilising existing equipment and continued positive gains in both
production and unit cost:
-- Quarterly ore processed increased by 2% from the previous quarter to a
new record high.
-- Overall recovery impacted by reduced loading capacity on the IX resin.
This issue will be addressed in the coming quarter.
All operating mines in the area, including LHM, are now obtaining the majority
of their water supplies under a water supply agreement executed with NamWater in
November 2013 using marine desalinated water from existing infrastructure. Since
being signed, LHM has been receiving a reliable and secure water supply.
KAYELEKERA MINE, Malawi (85%)
Production by quarter
----------------------------------------------------------------------------
Jun 2013 Sep 2013 Dec 2013 Mar 2014
KM Qtr Qtr Qtr Qtr
--------------------------------------------
U3O8 Production (lb) 789,430 614,603 777,015 696, 710
----------------------------------------------------------------------------
Uranium production for the March quarter was affected by the consequences of
transitioning KM towards a care and maintenance status. This announcement was
made on February 7 and the plant was shut down for the 3 days after the
announcement was made to facilitate the transition. Production is consistent
with the revised guidance provided in that announcement.
Mining
There was no mining production during the March quarter as a result of both the
mining cessation over the Christmas break and the decision to proceed to care
and maintenance. There are sufficient existing ROM stockpiles to feed the plant
while the mine transitions toward care and maintenance.
Mining data
------------------------------
Dec Qtr 2013 Mar Qtr 2014
----------------------------------------------------------------------------
Ore mined (t) 207,192 No mining
during Qtr
-------------------------------------------------------------
Grade (ppm) U3O8 1,403
-------------------------------------------------------------
Additional low grade ore mined (t) 96,026
-------------------------------------------------------------
Grade (ppm) 383
-------------------------------------------------------------
Waste (t) 642,830
-------------------------------------------------------------
Waste/ore ratio 2.12
----------------------------------------------------------------------------
Process plant
Operating data
------------------------------
Dec Qtr 2013 Mar Qtr 2014
----------------------------------------------------------------------------
Mill feed (t) 319,385 325,416
----------------------------------------------------------------------------
Grade (ppm) U3O8 1,291 1,141
----------------------------------------------------------------------------
Overall recovery (%) 85.9 86.7
----------------------------------------------------------------------------
U3O8 Production (lb) 777,015 696,710
----------------------------------------------------------------------------
-- Overall recovery increased to 86.7% for the March quarter compared with
85.9% for the December quarter.
-- Resin-In-Pulp (RIP) recovery remained at record levels and well above
budget (96%) at 98.4%. RIP recovery in excess of 98% is now established
as a benchmark and resin consumption in RIP remains well below budget.
Total acid consumption for the March quarter was 48.42kg/t compared with
a budget of 62.81kg/t (down 22.9%). This is a direct result of optimal
ore blending and the very successful Acid Recovery Project that was
commissioned last quarter.
Product Shipment Incident, Feb 10, 2014
As previously reported, there was an incident with a routine product shipment on
February 10 where a small quantity (30kg) of Class 7 uranium product concentrate
was spilled a short distance from the mine in Malawi. A truck travelling in
convoy failed to make a turn while headed from the mine to the Port of Walvis
Bay in Namibia. The truck tipped to its side damaging the cargo container. The
driver suffered only minor injuries and there were no consequent health or
environmental impacts. The small area involved with the spillage was cleaned up
and radiologically tested and Malawi's Atomic Energy Regulatory Authority
declared that it was satisfied with Company's response and clean-up procedure.
Care and Maintenance
On February 7, the Company announced that KM would be placed on care and
maintenance due to the low uranium price and non-profitability of the operation.
With this decision being taken, the plant will now operate until all necessary
reagents in the supply chain are run down and consumed to the maximum extent
possible. Currently, it is anticipated that the plant will continue to produce
into early May. During care and maintenance staffing levels will be reduced as
appropriate.
During the period of care and maintenance, subject to being granted the
necessary exploration licences, exploration work will be carried out on the
existing Mining Lease and adjoining tenements. This work will be focused on
expanding the current mineral resource base in order to extend the project life
once operations resume. A number of social community programmes will be
continued.
It is expected that production will restart once the uranium price provides a
sufficient incentive (circa US$75/lb) and the ESCOM grid power is available on
site to replace the diesel generators with much lower cost hydro electricity.
PRODUCTION GUIDANCE FORECAST FOR FY14
Production for FY14 is expected to be within the 7.8Mlb - 8Mlb U3O8 range
specified in the revised guidance announced on February 7, 2014 as a result of
placing the Kayelekera operation on care and maintenance.
AURORA - MICHELIN URANIUM PROJECT, Canada (100%)
The winter drilling programme was completed in March for a total of 15 holes for
4,432m. The results are currently being collated. Also, another 608 line
kilometres of ground magnetic surveys were completed. The exploration camp was
closed late March until the commencement of the forthcoming summer field season
in August.
CORPORATE
Sale of Minority Interest in Langer Heinrich Mine, Namibia
On January 20, 2014 Paladin announced that it had signed an agreement to sell a
25% joint-venture equity stake in its flagship Langer Heinrich uranium mining
operation in Namibia to China Uranium Corporation Limited, a wholly owned
subsidiary of CNNC, the leading Chinese nuclear utility, for consideration of
US$190M.
The offtake component of the agreement will allow CNNC to purchase its pro-rata
share of product at the prevailing market spot price. There is also an
opportunity for Paladin to benefit by securing additional long term offtake
arrangements with CNNC, at arm's length market rates, from Paladin's share of
Langer Heinrich production.
Completion is now subject only to certain Chinese regulatory approvals
(including the National Development and Reform Commission), which are expected
to be obtained by June 2014. Consents for the transaction from Paladin's project
financiers and the Bank of Namibia have been received and as a consequence on 16
April 2014 the US$20M deposit paid by CNNC has been released from escrow to
Paladin and is non-refundable.
Securing CNNC as a joint-venture partner is considered a significant achievement
by Paladin given CNNC's stature and high regard in China and internationally due
to its ability to develop, build and operate nuclear power plants. Having this
highly respected member of the Chinese nuclear power industry participating in
Langer Heinrich is a very important and positive development for both the
Company and for Namibia.
Successful Refinancing of Langer Heinrich and Kayelekera Facilities
On January 17, 2014, Paladin announced it had entered into agreements with its
lenders to refinance the LHM and the KM project finance facilities. This new
facility provides significant cash flow benefits to both projects and leaves
Paladin in a much stronger financial position. The annual principal repayments
across both projects have been reduced from US$53.8M to US$18.3M in CY2014, a
substantial reduction of US$35.5M, with the first repayment not being due until
June 2014. In CY2015, annual principal repayments under the existing facilities
compared to the new facility will be reduced by a further US$23.7M.
The KM finance facility (currently US$48.1M) was repaid in full immediately,
however, the facility and existing security arrangements will remain in place to
support the US$10M Performance Bond.
Overall, this rationalisation in the project financing reduces the Company's
debt position and, by substantially reducing repayments over the next three
years, conserves operational cash flow.
Sale of Shareholding by Newmont Mining Corporation
The Company announced on March 12, 2014 that Newmont Mining Corporation sold its
5.4% shareholding in Paladin through a book-build process. The sale was
underwritten by investment bank UBS at a fixed price of $0.525 per share and
Paladin has been informed the shares were sold to a broad range of institutional
investors.
Newmont acquired the shareholding through its acquisition of Fronteer Gold in
2011, which had previously sold the Aurora uranium assets in Canada to Paladin.
Paladin understands the sale is consistent with Newmont's strategy of divesting
non-core assets to align its investment interests with its global gold
production business.
URANIUM MARKET OUTLOOK
The spot uranium price was reported at US$34.50/lb at the beginning of the
quarter before rising to US$35.75/lb in mid-February. The price retreated to
US$34.00/lb by the end of March. In February, as a potential sign the market is
bottoming out, Uranium Participation Corporation, secured financing totalling
C$57.6M and to date has reportedly purchased a total of 850,000lb for near-term
delivery.
The term contracting market has begun to show activity, as a large US nuclear
utility requested offers for deliveries spanning 2016-2022. Paladin believes
that increasing term contracting will strengthen the term price as the year
progresses and additional term demand enters the market.
On April 11, 2014 the Japanese government approved a new energy policy, which
incorporates nuclear as "an important base-load energy source". This new Energy
Basic Plan defines nuclear energy as an important part of the energy fuel mix
Japan intends adopting and calls for the restart of their idled reactors. The
independent Nuclear Regulatory Authority agreed to place two reactors, Kyushu
Electric's Sendai 1 & 2, on an expedited review process, which could lead to
restarts by mid-year. Recent forecasts of reactor restarts envision 5-8 reactors
operating by end of CY2014 and circa 32 reactors by end of CY2016.
In another important development, after extensive debate and numerous drafts,
the European Commission on April 9, 2014 adopted, in principle, the new rules
designed to replace subsidies for renewables with market based schemes. The
rules will take effect from July 1, 2014 and from 2017 all member states will be
required to adopt the new process, following a pilot phase during 2015-16. These
new rules are seen as being supportive of nuclear generation development due to
the introduction of market realities into renewable generation economics.
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.
ACN 061 681 098
FOR FURTHER INFORMATION PLEASE CONTACT:
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
Greg Taylor
Investor Relations Contact
+1 905 337-7673 or Mobile: +1 416-605-5120 (Toronto)
greg.taylor@paladinenergy.com.au
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