Record production lifts Paladin

Uranium miner Paladin Energy (PDN-T) picked a good time to beat production ­estimates.

With the market warming to the uranium story thanks to renewed interest in building nuclear reactors in China and Japan, Paladin announced record production from its Langer Heinrich mine in Namibia, and its Kayelekera mine in Malawi.

Combined, the two mines generated 2.19 million lb. uranium oxide (U3O8), which represents a 13.6% increase over the previous quarter, and means that taken together, the mines are operating at 103% of their nameplate capacities.

The operations’ increased output contributed to record revenues of US$133.9 million. In total, Paladin sold 2.78 million lb. U3O8 at an implied price of US$48.10 per lb. The amount of material sold was higher than the amount produced because of delivery schedules, which the company predicted.

The wholly owned Langer Heinrich mine produced 1.42 million lb. U3O8 — a 10% increase over the previous quarter — and reached record recovery levels of 87.4%. Including stockpiles, Langer Heinrich has proven and probable reserves of 111.3 million tonnes grading 0.053% U3O8 for 130.5 million lb. of the metal.

At Kayelekera, which is 85% owned by the company, record production was also achieved, as the mine turned out 772,000 lb. U3O8 in a 21% hike over the previous quarter’s total. Kayelekera has 9.52 million tonnes of reserves, including stockpiles, with an average grade of .0953% U3O8 for 20 million lb. U3O8.

Paladin is optimizing operations at Kayelekera, including adding an acid-recovery plant that will be commissioned in July. The company expects the addition of the plant will help reduce operating costs at Kayelekera, which are higher than they are at Langer Heinrich.

Paladin also issued a production guidance for 2013, which it says should come in at 8 million to 8.5 million lb. U3O8.
BMO Capital Markets analyst Edward Sterck acknowledged that the better-than-expected quarter reflects improving operations, but said the increased sales weren’t a total surprise, given that the company carried an excess inventory of U3O8. Sterck also pointed to possible red flags on the horizon.

“Paladin is demonstrating operational improvement, [but] concerns remain over the company’s balance sheet, and the potential need for additional funds by fiscal 2014 if uranium prices remain at current levels, or fiscal 2016, if Paladin continues to achieve prices in the high US$40s per lb.,” Sterck writes in his research note.

BMO lists Paladin as “market perform,” with a target price of $1.50.

The news helped lift the company’s shares by 8%, or 9¢, to $1.28 on 14.4 million shares traded. The company’s shares have moved between 79¢ and $2.11 over the last 52-week period.