Shares in emerging uranium producer
The contract calls for the supply of about 973 tonnes of yellowcake to a major U.S. utility between 2007 and 2012. Pricing will reflect market conditions at the time of each delivery, with escalating floor and ceiling prices. A subsequent contract will see Paladin supply another utility company with 943 tonnes under similar conditions over the same period.
Langer Heinrich is set to begin producing around 1,180 tonnes of U3O8 in September. That rate will slip to 401 tonnes during years 12-15, as lower-grade stockpiles are processed. Average life-of-mine operating costs are projected at US$14.18 per lb. U3O8, based on uranium prices ranging from US$26 per lb. to US$35 per lb. over the 15-year lifespan.
The open-pit operation will target recently revised measured and indicated resources totalling 32.3 million tonnes grading 0.07% U3O8, for 20,200 contained tonnes. Another 40 million tonnes of inferred material runs 0.06% U3O8, for 23,800 contained tonnes. The estimates employ a cutoff grade of 0.025% U3O8.
The US$92-million project is expected to pay for itself in 3.5 years.
“This sales arrangement signifies a very important occasion for Paladin and the uranium supply industry generally,” the company said in a statement. “Few new companies have entered into the uranium market in the past 25 years, reflecting a period of dismal outlook and a uranium mining industry essentially in retreat.”
Looking ahead, Paladin’s 100%-owned Kayelekera project in northern Malawi is expected to go into production in 2008.
A recently completed round of 5,394 metres of infill drilling in 120 reverse-circulation holes has led to a revised, National Instrument 43-101-compliant resource estimate at Kayelekera. Australian-based geological consultants Hellman & Schofield peg measured and indicated resources at 15.3 million tonnes grading 0.09% U3O8. Another 3.4 million tonnes of inferred material runs 0.06% U3O8. The estimates are based on a 0.03% cutoff.
A previous estimate in 2004 was confined to inferred resources only and totalled 9.4 million tonnes averaging 0.12% U3O8.
Paladin says that the lower grade of the new resource figure reflects the addition of peripheral zones of lower-grade material, as the deposit’s higher-grade core was well defined by previous drilling. In the end, contained uranium metal has increased by nearly 46% to 15,819 tonnes.
Annual production at Kayelekera is forecast at 1,000 tonnes of U3O8 over a planned 10-year mine life. The proposed operation carries an estimated price tag of US$75 million. Paladin hopes to wrap up an ongoing US$2.3-million bankable feasibility study in August.
Paladin also owns the Manyingee (12,000 tonnes U3O8 at 0.08%) and Oobagooma (9,950 tonnes U3O8 at 0.12%) projects in West Australia. Manyingee is the more advanced of the two, but still requires a 3-year, staged feasibility study. Both projects are currently on hold.
Paladin finished 21, or nearly 10% higher at $2.34 after the news, and continued to climb, reaching a new high of $3.10 on Jan. 30. The shares trade in a 52-week window of 86-$3.10. The spot uranium price was sitting at a quarter-century high of US$37 per lb. on Jan. 23.
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