Paladin Energy: Financial Report for Nine Months Ended 31 March 2014
May 15 2014 - 8:14AM
Marketwired Canada
Paladin Energy Ltd ("Paladin" or "the Company") (TSX:PDN)(ASX:PDN) announces the
release of its consolidated Financial Report for the nine months ended 31 March
2014. The Financial Report is appended to this News Release.
HIGHLIGHTS
OPERATIONS
-- Combined production for the nine months ended 31 March 2014 of 6.342Mlb
(2,877t) U3O8 is an increase of 4% over the nine months ended 31 March
2013.
-- Combined production for the quarter ended 31 March 2014 of 2.089Mlb
(948t) U3O8 is an increase of 5% over the quarter ended 31 March 2013.
-- C1 cost of production(1) continues to fall:
-- Langer Heinrich Mine (LHM) C1 cost of production has fallen 3% from
US$29.8/lb in the March 2013 quarter to US$29.0/lb in the March 2014
quarter.
-- Kayelekera Mine (KM) C1 cost of production has decreased 17% from
US$39.8/lb U3O8 in the March 2013 quarter to US$32.9/lb in the March
2014 quarter.
-- LHM produced a record 4.253Mlb (1,929t) U3O8 for the nine months ended
31 March 2014, achieving an 8% improvement on the nine months ended 31
March 2013.
-- Following the decision to place KM on care and maintenance, Paladin
revised its FY14 production guidance to 7.8 - 8.0Mlb U3O8 and this
remains on track.
SALES AND REVENUE
-- Sales revenue totalled US$259.6M for the nine months from sales of
6.853Mlb U3O8.
-- Average realised uranium sales price for the nine months was US$37.9/lb
U3O8, compared to the average UxC spot price for the period of
US$35.4/lb U3O8.
CORPORATE INITIATIVES
-- Refinancing of the LHM and the KM project finance facilities completed.
-- Completion of sale of a 25% equity stake in LHM in Namibia for US$190M
expected by 30 June 2014, with proceeds to be used to repay debt. US$20M
non-refundable deposit received in April 2014.
-- KM to be placed on care and maintenance after production ceases and
circuit clean-up in June 2014.
-- Institutional placement of shares in August 2013 raised US$80.6M
OTHER
-- Net debt repayments totaling US$59.6M.
-- A number of cost reduction initiatives have been completed with
additional measures yet to be implemented.
-- Impairment of Queensland exploration assets at 31 December 2013 of
US$226.5M after tax.
C1 cost of production = cost of production excluding product distribution costs,
sales royalties and depreciation and amortisation before adjustment for
impairment. C1 cost, which is non-IFRS information, is a widely used 'industry
standard' term.
Results
(References below to 2014 and 2013 are to the equivalent nine months ended 31
March 2014 and 2013 respectively).
-- Safety and Sustainability:
-- The Group incurred nine lost time injuries (LTIs) across the
organisation for the March 2014 quarter - six at LHM, two at KM and
one in exploration. At LHM, two were lower back injuries, two ankle
injuries, one wrist dislocation and one fingertip injury. At KM,
both involved minor fractures (leg and thumb). The exploration
injury at Michelin involved low level hypothermia. Full
investigations have been conducted and recommendations made are
being implemented. The Group's 12-month moving average Lost Time
Injury Frequency Rate (LTIFR) increased to 2.8 from 1.0.
-- A major health and safety review was undertaken at LHM. This
identified several areas for improvement including additional safety
training, which is a major initiative for the next 12-24 months. The
annual NOSA CMB 253 (HSE) audit was conducted at LHM and resulted in
a 3 star Platinum accreditation dropping from its 4 star rating the
previous year.
-- Production:
-- Combined production of 6.342Mlb (2,877t) U3O8 for the nine months
ended March 2014, up 4% on the nine months ended 31 March 2013.
-- Combined production for the quarter ended 31 March 2014 of 2.089Mlb
(948t) U3O8, an increase of 5% over the quarter ended 31 March 2013.
-- Langer Heinrich Mine (LHM):
-- Record production for the nine months to 31 March 2014 was 4.253Mlb
(1,929t), an increase of 8% over the nine months to 31 March 2013:
-- overall recovery YTD of 87.4%.
-- feed grades YTD of 784ppm U3O8.
-- previous water issues resolved
-- LHM C1 cost of production for the nine months has fallen to
US$28.1/lb U3O8, down 8% from US$30.4/lb U3O8 for the nine months to
March 2013.
-- LHM C1 cost of production for the quarter ended 31 March 2014 has
fallen to US$29.0/lb U3O8, down 3% from US$29.8/lb U3O8 for the
March 2013 quarter.
-- C1 cost reductions were due mainly to reductions in soluble loss,
reagent usage and impact of foreign exchange movements.
-- Kayelekera Mine (KM):
-- KM to be placed on care and maintenance to preserve the remaining
ore body until the Company determines that a sustained recovery in
the price of uranium oxide will enable production to resume on a
profitable basis.
-- Mining operations at KM have been suspended however the processing
of ore has continued during a transitional rundown phase. This
rundown/sterilisation phase will be completed during June 2014. At
this time, the plant will be sterilised, shut down and placed on
care and maintenance.
-- Paladin is committed to maintaining the mine and infrastructure at
KM in good working order to facilitate a rapid resumption of
production when market conditions dictate that it is possible to do
so profitably. For this reason, KM will retain a core group of
Malawi national employees and expatriate staff to maintain the site,
including staff to strengthen physical security measures at KM.
-- During the period of care and maintenance, subject to being granted
the necessary exploration licences, exploration work will be carried
out on the existing Mining Lease and adjoining tenements. This work
will be focused on expanding the current mineral resource base in
order to extend the project life once operations resume. A number of
social community programmes will be continued.
-- Placing KM on care and maintenance will improve Paladin's forecast
cash flow position by US$7M-US$10M (net of care and maintenance
establishment costs) in calendar year 2014 and US$20M-US$25M in
calendar year 2015. Paladin anticipates that the ongoing cost of
maintaining KM on care and maintenance of approximately US$16M per
annum will be funded from proceeds to be received from the sale of
uranium oxide on hand and produced during the rundown phase.
-- approximately US$16M per annum will be funded from proceeds to be
received from the sale of uranium oxide on hand and produced during
the rundown phase.
-- Production for the nine months to 31 March 2014 was 2.089Mlb, a
decrease of 4% over the nine months to 31 March 2013 in line with
care and maintenance budget:
-- overall recovery for March 2014 quarter of 86.7%.
-- acid recovery plant successfully commissioned.
-- KM C1 cost of production for the nine months has fallen to US$34.8
U3O8, down 21% from US$43.9/lb U3O8 for the nine months to March
2013.
-- KM C1 cost of production for the March 2014 quarter has fallen to
US$32.9/lb U3O8, down17% from US$39.8/lb U3O8 for the March 2013
quarter.
-- C1 cost reductions were due mainly to improvements in resin in pulp
(RIP) recovery and ore blend, and commissioning of the nano-
filtration/acid recovery plant which has led to a reduction in acid
consumption.
-- Cost Reduction Initiative:
-- Further cost savings and optimisation initiatives are being
implemented to further improve unit costs for LHM and reduce
corporate costs over financial years 2014 and 2015.
-- Profit and Loss:
-- Total sales volume for the nine months of 6.853Mlb U3O8 reflected a
16% increase over sales of 5.928Mlb U3O8 for the nine months ended
31 March 2013.
-- Sales revenue decreased 14% from US$301.0M in 2013 to US$259.6M for
the nine months ended 31 March 2014, as a result of a 25% decrease
in realised sales price offset by a 16% increase in sales volume.
The average realised uranium sales price in the nine months ended 31
March 2014 was US$37.9/lb U3O8 (2013: US$50.8/lb U3O8) compared to
the average UxC spot price for the nine months of US$35.4/lb U3O8.
-- Gross loss for the nine months of US$27.6M compared to a gross
profit in 2013 of US$25.4M was due to lower uranium prices and a
higher impairment of KM inventory of US$24.9M (2013: US$13.7M). This
has been partially offset by a 16% increase in sales volume.
-- Impairment of Queensland exploration assets at 31 December 2013 of
US$226.5M after tax.
-- Net loss after tax attributable to members of the Group of US$274.9M
was recorded for the nine months.
-- Cash Flow:
-- Positive cash flow from operating activities totalled US$33.5M for
the nine months ended 31 March 2014 after interest payments of
US$17.0M. The remaining expenditure was US$1.2M for exploration.
-- Cash outflow from investing activities of US$23.4M for the nine
months:
-- plant and equipment acquisitions of US$19.2M, predominantly the
new tailings facility at LHM and nano filtration equipment and
tailings pipeline at KM; and
-- capitalised exploration expenditure of US$5.0M. Exploration
expenditure in foreseeable periods will be lower.
-- Cash inflow from financing activities of US$15.5M in the nine months
ended 31 March 2014 is mainly attributable to:
-- the net proceeds received from the share placement of US$78.2M;
and
-- net debt repayments of US$59.6M. Full repayment of the existing
project finance facilities for KM of US$68.1M and LHM of
US$101.5M which have been partially offset by proceeds received
from the drawdown of the new LHM project finance facility of
US$110M.
-- Cash Position:
-- Cash of US$103.3M at 31 March 2014.
-- Sale of a 25% joint-venture equity stake in LHM for US$190M to China
Uranium Corporation Limited, a wholly owned subsidiary of China
National Nuclear Corporation (CNNC), announced in January 2014.
-- Completion is subject to certain Chinese regulatory approvals which
are expected to be obtained by June 2014. Paladin satisfied the
conditions to allow release of the escrowed US$20M non-refundable
deposit from CNNC. The escrow agent forwarded these funds to
Paladin's bank account in April 2014.
-- Exploration and Development:
-- Manyingee Project, Western Australia - As announced on 13 January
2014, a revised Mineral Resources estimate for the Manyingee Deposit
conforming to both the JORC (2012) code and Canadian National
Instrument 43-101 has been completed. The results include an
Indicated Mineral Resource of 15.7Mlb U3O8 and an Inferred Mineral
Resource of 10.2Mlb U3O8, both at an average grade of 850ppm U3O8,
using a 250ppm and 0.2m minimum thickness cut off. Compared to the
previous Mineral Resource estimate announced in 1999 (reported at a
300ppm U3O8 cut off), the updated 2014 Mineral Resource estimate
shows a minor reduction in contained U3O8 for the Indicated portion
of the Mineral Resource and an increase in the Inferred portion of
the Mineral Resource. Despite the change in disequilibrium factor
used to determine uranium grades, which resulted in a reduction in
the Indicated Mineral Resource material grade, the overall grade of
the deposit has increased due to revised geological modelling and
estimation techniques.
-- Aurora - Michelin Uranium Project, Canada - As announced on 7 May
2014, the winter infill drilling programme was successfully
completed confirming both the robust nature and high grade of this
deposit. The drilling was successful in further defining the
extensive mineralisation at the Michelin deposit with all 13 holes
intersecting mineralisation, 6 returning significant intersections
and infilling a number of key data voids within the Mineral Resource
estimate. The results from this drilling will be incorporated into
an upcoming Mineral Resource estimate update expected during the
June 2014 quarter. From work already completed using data from the
2012 and 2013 drilling campaigns it is expected that there will be a
significant improvement to the current mineral resource
classification as well as a small increase in total mineral
resource.
-- Guidance FY2014
-- Following the decision to place KM on care and maintenance,
Paladin's revised FY14 production guidance of 7.8-8.0Mlb U3O8
remains on track.
-- Sales Volumes
-- Uranium sales volumes are expected to fluctuate quarter-on-quarter
due to the uneven timing of contractual commitments and resultant
scheduling by customers. Now that production has reached design
levels, sales, production volumes and inventories are expected to be
comparable on an annualised basis.
-- Langer Heinrich Minority Interest Sale
-- On 20 January 2014, the Company announced that it had signed an
agreement on 18 January 2014 to sell a 25% joint-venture equity
stake in its flagship Langer Heinrich uranium mining operation in
Namibia to China Uranium Corporation Limited, a wholly owned
subsidiary of CNNC, the leading Chinese nuclear utility, for
consideration of US$190M.
-- An offtake component of the agreement will allow CNNC to purchase
its pro-rata share of product based on the prevailing market spot
price at the time of sale. There is also an opportunity for Paladin
to benefit by securing additional long term offtake arrangements
with CNNC, at arm's length market rates, from Paladin's share of
Langer Heinrich production.
-- Completion is now subject only to certain Chinese regulatory
approvals (including the National Development and Reform
Commission), which are expected to be obtained by 30 June 2014.
Consents for the transaction from Paladin's project financiers and
the Bank of Namibia have been received and as a consequence on 16
April 2014 the US$20M deposit paid by CNNC was1 released from escrow
to Paladin and is non-refundable.
-- Proceeds from the sale will be utilised to repay debt across the
Company.
-- Successful Refinancing of Langer Heinrich and Kayelekera Facilities
-- On 17 January 2014, the Company announced it had entered into
agreements with its lenders to refinance the LHM and the KM project
finance facilities.
-- This new facility provides significant cash flow benefits to both
projects and leaves the Company in a much stronger financial
position. The annual principal repayments across both projects have
been reduced from US$53.8M to US$18.3M in calendar year 2014, a
substantial reduction of US$35.5M, with the first repayment not
being due until June 2014.
-- In calendar year 2015, annual principal repayments under the
existing facilities compared to the new facility will be reduced by
a further US$23.7M.
-- The KM finance facility was repaid in full immediately, however, the
facility and existing security arrangements will remain in place to
support the US$10M Performance Bond.
-- Overall, this rationalisation in the project financing reduces the
Company's debt position and, by substantially reducing repayments
over the next three years, conserves operational cash flow.
The documents comprising the Financial Report for the nine months ended 31 March
2014, including the Management Discussion and Analysis, Financial Statements and
Certifications are attached and will be filed with the Company's other documents
on Sedar (www.sedar.com) and on the Company's website
(www.paladinenergy.com.au).
Generally Accepted Accounting Practice
The news release includes non-GAAP performance measures: C1 cost of production,
non-cash costs as well as other income and expenses. The Company believes that,
in addition to the conventional measures prepared in accordance with GAAP, the
Company and certain investors use this information to evaluate the Company's
performance and ability to generate cash flow. The additional information
provided herein should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
Declaration
The information in this announcement that relates to minerals exploration and
mineral resources is based on information compiled by David Princep BSc, FAusIMM
(CP) who has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the activity that
he is undertaking to qualify as Competent Person as defined in the 2012 Edition
of the Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves (JORC Code). Mr Princep is a full-time employee of Paladin
Energy Ltd. Mr. Princep consents to the inclusion of the information in this
announcement in the form and context in which it appears. The mineral resources
for the Manyingee deposit were announced to the ASX on the 13 January 2014 and
the information contained within has not materially changed since it was last
reported.
Conference Call
Conference Call and Investor Update is scheduled for 06:30 Perth & Hong Kong,
Friday 16 May 2014, 18:30 Toronto and 23:30 London, Thursday 15 May 2014.
Details are included in a separate news release dated 13 May 2014.
ACN 061 681 098
FOR FURTHER INFORMATION PLEASE CONTACT:
John Borshoff
Managing Director/CEO
Tel: +61-8-9381-4366 or Mobile: +61-419-912-571
john.borshoff@paladinenergy.com.au
Alan Rule
Chief Financial Officer
Tel: +61-8-9381-4366 or Mobile: +61-438- 942-144
alan.rule@paladinenergy.com.au
Andrew Mirco
Investor Relations Contact
Tel: +61-8-9381-4366 or Mobile: +61-409-087-171
andrew.mirco@paladinenergy.com.au
Greg Taylor
Investor Relations Contact
Tel: +1-905-337-7673 or Mobile: +1-416-605-5120
(Toronto)
greg.taylor@paladinenergy.com.au
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