Paladin Energy (PDN) disappointed brokers with the uranium price it realised in the December quarter but it delivered a positive, if measured, outlook commentary. The company has trimmed FY15 production guidance to what brokers believe is a more realistic 5.2-5.5m pounds but Paladin is nonetheless considered to be in a better position now to benefit from a more sustained recovery in the uranium market.
It’s been a tough year for uranium producer Paladin Energy (PDN) as the spot uranium price has plummeted, reversing the upside advantage the company enjoyed pre-Fukushima when it could sell uranium at healthy spot prices while longer established peers were still stuck with longer dated contract pricing commitments. As the uranium price fell and cash began to burn, Paladin’s debt position weighed heavily.
Australian-listed uranium producer Paladin Energy (PDN) last week announced it would place its Kayelekera project in Malawi into care and maintenance until “a sustained price recovery occurs”. The shutdown at least temporarily removes around three million pounds of U3O8 from annual supply.
Uranium miner Paladin Energy (PDN) has been diligent in cutting costs but unable to keep up with the falling price of the yellow stuff. Rapid falls in the uranium price this year have had a negative impact on the company’s cash flow and it doesn’t look like getting better any time soon.
Citi’s decision to downgrade Paladin to Neutral from Buy is predominantly inspired by yet another downgrade to future uranium prices. Citi projects the company will only generate modest operational cash flow over the years ahead.
The company reported a US$16m loss in the March quarter with sales revenue affected by weak prices and the timing of volumes. Paladin has lowered FY16 production guidance and raised cost guidance. Cash costs are still guided to US$38-40/lb.