Paladin Better Positioned For Uranium Upswing

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.

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Paladin Clears The Way For Uranium Upside

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.

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PDN – UBS rates the stock as Neutral

Paladin reported another loss for the March quarter but it was the first time since Dec quarter 2010 that no impairments were announced, the broker notes. Positive operating cashflow was achieved but PDN still needs a recovery in uranium prices to finance its convertibles bonds in overall cost. Otherwise cash is still being burnt.

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Uranium’s Worst Month Since Fukushima

Despite a widely held belief of commodities analysts that the global demand-supply balance for uranium into the medium term points to higher prices, spot uranium has continued to slide away on lack of genuine buying interest, dragging medium and longer term price indicators down with it. Spot uranium endured its worst month in October since March 2011, in the wake of Fukushima.

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Positive Signs For Paladin?

For the full year to June 30 uranium producer Paladin Energy (PDN) reported a worse than expected headline loss of US$173 million, the result being impacted by a number of impairments relating to inventories and the Kayelekera project. Underlying earnings were also impacted by higher costs and weak uranium prices during the period.

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