Uranium

The definitive guide to ASX uranium stocks, Part 4: Paladin Energy

Mon 27 Nov 23, 11:02am (AEDT)
uranium mining
Source: Shutterstock

Key Points

  • The ASX hosts some of the most prospective uranium companies in the world
  • ASX-listed uranium companies are at various stages of development, and just a few are close to production
  • This mini-series provides investors with a comprehensive overview of ASX-Listed uranium companies

This is Part 4 of my mini-series on ASX uranium companies. Make sure to check out Part 3 on Boss Energy and my in-depth look at the demand and supply dynamics of the uranium market.

The perennial bridesmaid

Paladin Energy (ASX: PDN) owns a 75% stake in the Langer Heinrich mine in Namibia. The mine sits within a well-known uranium province which contains several producing and historically producing uranium mines. This means Langer Heinrich is close to the key infrastructure required to get production to market.

Investors pay a premium for companies whose projects are located within stable mining jurisdictions. Certainly, the three projects we've discussed so far: Olympic Dam and Honeymoon in South Australia, and Rook I in Canada, fall into this category.

We have seen several recent examples where governments have nationalised, or taken significant control of mineral assets (DRC, Zambia, and Argentina come to mind). Namibia is widely considered a "mining friendly" country. That said, in June, the Namibian Government banned the export of unprocessed critical minerals like lithium, cobalt, manganese, graphite, and rare earths.

Uranium wasn't included, and it remains one of the country's key exports. Still, investors should consider sovereign risk when assessing and comparing prospective mining projects.

Like Boss's Honeymoon, Langer Heinrich was also a working mine. Paladin produced 43 Mlbs U3O8 between 2007 and 2018 when the mine was placed on care and maintenance due to the low uranium price. So, this is another re-development / restart project.

According to Paladin's most recent update, the Langer Heinrich restart is approximately 80% complete and first production is on track for the first quarter of 2024. Restart operations are progressing in line with the company's US$118m budget. Paladin is fully funded to production.

Paladin MINERAL RESOURCES AND ORE RESERVES SUMMARY, Namibia
Mineral resources and ore reserves, Langer Heinrich, 15 November 2023. Source: Paladin Energy

Langer Heinrich contains Measured and Indicated resources of over 120 million pounds U3O8 at an average grade of 426 ppm U3O8. Approximately 22 Mlbs of this is ore in stockpiles which Paladin intends to process in the first year of Langer Heinrich's restart, before mining new ore in year two.

Paladin expects Langer Heinrich will produce 6 Mlb p.a. at peak production in seven years, and it should operate for 17 years at current resources. The life of mine all all-in sustaining cost "AISC" is US$27.40/lb (compared to BHP US$27/lb, Nexgen US$7.58/lb, and Boss Energy US$25.68/lb).

Paladin Langer Heinrich production schedule life of mine, source-Paladin Energy
Langer Heinrich production schedule, life of mine. Source: Paladin Energy

In Langer Heinrich's first phase, Paladin forecasts it could account for as much as 4% of global uranium supply. Offtake agreements are in place for 48% of estimated production, while approximately 90% of the life of mine production remains exposed to market-related pricing (i.e., able to take advantage of a higher uranium price).

Paladin aims to expand the resource with exploration programs planned where mineralisation remains open. Further, beyond Paladin's Namibian operations, it also owns three other uranium exploration and development assets in Canada (Michelin), and in Australia (Mount Isa and Manyingee & Carley Bore). Paladin claims to have a globally substantial 445 Mlb U3O8 (Measured, Indicated, and Inferred) across its various projects.

Paladin MINERAL RESOURCES AND ORE RESERVES SUMMARY, Canada & Australia
Mineral resources and ore reserves Canada & Australia, Langer Heinrich, 15 November 2023. Source: Paladin Energy

I couldn’t find any recent data from Paladin on Langer Heinrich's NPV. A bankable feasibility study was completed in 2005 prior to first production in 2007. The mine operated for several years prior to being put on care and maintenance in 2018 - so that data is irrelevant.

I did find a Citi research report from 31 October which suggests Langer Heinrich's NPV is "$1.8 billion". Citi didn't state its assumptions for the uranium price, nor the discount rate they used in deriving this valuation, so you'll just have to assume they know what they're talking about.

I suggest it's a guide from a credible source, and my goal here is only to make a very broad comparison with Paladin's current market capitalisation of $3 billion. So make of that what you will! The company had US$100 million in the bank as of September 30.

Next time…

Next time, I’ll continue my investigation of ASX uranium pure plays with a company that claims to have the largest amount of potential uranium in the ground compared to any other ASX uranium pure-play. Stay tuned for a deep dive on Deep Yellow (ASX: DYL)!

Missed any of the previous articles in this series?

Check out my articles on the other Top 5 ASX Uranium Companies: Part 1: BHP Group, Part 2: NexGen Energy, and Part 3: Boss Energy, and Part 5: Deep Yellow, and my article on Demand and supply dynamics of the uranium market.

Don't forget to read…

To get a better understanding of the jargon used in the analysis of mining companies, I suggest you read these articles on how to interpret mining company resources, reserves, and drilling results and the stages of mining company development.

Written By

Carl Capolingua

Content Editor

Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.

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