Paladin Energy (ASX:PDN, ASX:TSX) has positively revised certain items in its full year FY17 guidance due to a successful December half at the Langer Heinrich uranium mine, located in Namibia.
Uranium production guidance has been increased to in excess of 4.0 million pounds U3O8 compared to the previous guidance of 3.8-4.0 million pounds U3O8.
Furthermore, C1 cash costs at the mine are now expected to be within the range of US$16.50-18.50 per pound compared with the previous guidance of US$17-19 per pound.
The Langer Heinrich Mine (LHM) produced 2.5 million pounds of U3O8 for the six months ended 31 December 2016, up 7% from 2015.
The C1 unit cost of production for 2016 was US$16.25 per pound, a decrease of 39% from US$26.50 per pound in 2015.
Paladin, the world’s seventh largest uranium producer, is well positioned for a rebound in uranium prices.
Paladin is a uranium production company with two mines in Africa and projects in Australia and Canada with a strategy to become a major uranium mining house.
It owns 75% of the low-cost Langer Heinrich mine, the world’s fourth largest open pit uranium mine, located in Namibia.
The Langer Heinrich mine commenced production in 2007 and is a calcrete uranium deposit being mined through a conventional open pit with a project life of 20 years.
The Stage 3 expansion is complete with production at 5.2 million pounds per annum. Studies are underway for a further expansion.
The company’s second mine, Kayelekera, is located in the African country of Malawi and was placed in care and maintenance in May 2014 after opening in 2009.
Paladin owns a number of pipeline uranium deposits and projects located in Australia and Canada.
Capital restructure proposal
Last month, Paladin resolved to enter into a proposal to restructure its balance sheet providing the company with an opportunity for a clear runway into the next decade.
The proposal to restructure looks to reduce Paladin’s debt obligations and extend the maturity of remaining debt.
The main purpose of the restructure proposal is to address the upcoming maturity of Paladin’s outstanding US$212 million convertible bonds due 30 April 2017.
The restructure contemplates the exchange of its existing 2017 convertible bonds (US$212 million) and 2020 convertible bonds (US$150 million) into US$115 million of new secured bonds due 2022, US$102 million of new 2024 convertible bonds and US$145 million of Paladin shares.
The restructure proposal continues to progress and bondholders representing 71.6% of the 2017 convertible bonds and 45.9% of the 2020 convertible bonds have already signed undertakings to support the restructure.
A restructure provides the opportunity for a holistic solution that provides a stable and sustainable capital structure for the benefit of all stakeholders and a platform for future growth when the uranium market improves.
Uranium prices bouncing
Uranium spot prices have bounced 45% to US$26 per pound from the November 2016 lows.
Increased term market activity has been seen since December 2016 and improved demand levels are expected to continue into 2017.
The election of Donald Trump to the U.S. presidency is anticipated to be positive for nuclear power and the approval of the Future Energy Jobs Bill in Illinois in December 2016 will allow Exelon’s Clinton and Quad Cities nuclear power plants to continue operating.
A rising uranium price positions Paladin well whose strategy is to maximise LHM operating cash flows through optimisation initiatives that preserve the integrity of the long-term life of mine plan.
Paladin is trading up over 70% year to date, currently priced at $0.15.