Paladin Energy makes bold call to restart uranium production
Current uranium prices aren't high enough to incentivise profitable production
Source: iStock
Mentioned
KEY POINTS
- Paladin Energy expects to resume producing uranium in the March quarter of 2024
- Project restart costs have surged 26% to US$118m due to inflation
- Uranium prices have stalled from April highs of almost US$65/lb, down to US$46/lb
Paladin Energy (ASX: PDN) has made a bold call to bring its Langer Heinrich Mine in Nambia back online by 2024.
“With the strength of the Company’s uranium offtakes and the continuing strong uranium market fundamentals, Paladin has made the decision to return the globally significant Langer Heinrich Uranium Mine to production,” commented Paladin CEO, Ian Purdy.
Paladin flagged that total project capital expenditure has increased to US$118m, up 26.4% from its previous guidance of US$87m, primarily as a result of inflationary pressures across the entire supply chain.
A bold call
Uranium prices have backtracked to US$46 per pound in mid-July, down from April highs of almost US$65. The US$60 level is widely viewed as the ‘incentive price’ that’ll encourage new uranium production to hit the market.
Uranium spot price (Source: TradingEconomics)
Langer Heinrich’s C1 cost of production is forecast to be US$27.4/lb, according to Paladin Energy’s April 2022 capital raising presentation,
Additional costs on top of production costs include:
Freight and logistics: US$1/lb
Sustaining capex: US$3.2/lb
Government royalties: 3%
Export levy: 0.25%
Notwithstanding the current inflationary environment that has likely pushed logistics and capex costs higher, total cost metrics would come in at US$32.67/lb.
Vote of confidence
Still, the move to restart production reflects managements view that "the Langer Heinrich Mine remains a low risk, robust, long-life operation that is poised to take advantage of the improving uranium market conditions."
There has been no shortage of bullish headlines for uranium, as nations look past taboos over nuclear power and refocus on its role as a reliable, low emission energy source. Recent developments include:
Germany reconsidering plans to shutter nuclear plants at the end of 2022
Japan has given the green light to restart 10 nuclear reactors that were idled after the Fukushima Daiichi disaster in 2011
China plans to build 150 new reactors in the next 15 years, more than the rest of the world has built in the past 35
Paladin Energy share price chart
