Paladin Energy Ltd ("Paladin" or "the Company") (TSX:PDN)(ASX:PDN) is pleased to
provide its Quarterly Activities Report for the three month period ended June
30, 2014.
HIGHLIGHTS
-- Langer Heinrich minority Joint Venture US$190M sale successfully
completed.
-- CNNC now formally in joint venture with Paladin.
-- Balance of US$170M paid 23 July 2014.
-- Strong production for FY14 and guidance met.
-- Combined production of 7.943Mlb (3,603t) U3O8 down 3.8% from FY13
and at the upper end of stated guidance (7.8Mlb to 8.0Mlb).
-- Langer Heinrich produced a record 5.592Mlb (2,537t) U3O8 up 5.7%
from FY13.
-- Kayelekera produced 2.350Mlb (1,066t) U3O8 down from FY13 due to the
implementation of Care and Maintenance.
-- Langer Heinrich produced 1,338,831lb (607t) U3O8 for the June quarter.
-- Recovery for the quarter was steady at 85.6%.
-- Feed grade for the quarter was 781ppm U3O8.
-- Kayelekera produced 262,060lb (119t) U3O8 for the June quarter.
-- Recovery for the quarter was 88.5%.
-- Production ceased on 6 May, plant clean out was completed on 23 May
and the project is now on Care & Maintenance.
-- Michelin Project.
-- Positive mineral resource update with 25% increase in Measured and
Indicated Resources.
SAFETY
The Company incurred two lost time injuries (LTIs) during the quarter,
substantially below the nine LTIs during the past quarter - one at Langer
Heinrich Mine (LHM) and one at Kayelekera Mine (KM). At LHM an employee suffered
a minor eye injury and at KM an employee suffered minor chest trauma following a
vehicle accident. Both employees have now fully recovered.
Full investigations have been conducted and recommendations made, which are
being implemented. The Company's 12 month moving average Lost Time Injury
Frequency Rate (LTIFR) increased to 3.1 from 2.8 last quarter.
A major health and safety review and action plan has been underway since last
quarter. This plan includes additional staff and resources in the safety area
(particularly at LHM) and intense in-house training.
QUARTERLY URANIUM SALES
Sales for the quarter were 1,811,841lb U3O8 generating revenue of US$69.28M,
representing an average sale price of US$38.24 U3O8 (average weekly Ux spot
price for the quarter was $29.65/lb U3O8).
Sales for the year ending 30 June 2014 (FY14) were 8,665,264lb U3O8 generating
revenue of US$328.84M representing an average sales price of US$37.95. Sales
volume increased 5% against FY13 deliveries and revenue decreased 19% compared
to FY13 (average Ux spot price for FY14 was US$33.88/lb U3O8).
LANGER HEINRICH MINE, Namibia (100%)
Production by quarter and FY14 total
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LHM Sep Qtr Dec Qtr Mar Qtr Jun Qtr FY14
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U3O8Production (lb U3O8) 1,429,374 1,431,307 1,392,694 1,338,831 5,592,206
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The quarterly production of 1,338,705lb U3O8 was down slightly on the preceding
quarter, however the annual production of 5,592,206lb was 5.7% above FY13.
Mining
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Mar Qtr June Qtr FY14
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Ore mined (t) 909,533 534,259 3,735,294
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Grade (ppm U3O8) 1,021 949 791
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Additional low grade ore mined (t) 357,922 500,984 2,786,886
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Grade (ppm U3O8) 325 325 328
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Waste (t) 3,729,823 4,028,054 15,049,032
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Total Ore and Waste 4,997,298 5,063,277 21,571,212
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Waste/ore ratio 2.94 3.89 2.31
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Ore mining activities concentrated on the eastern side of the deposit in Pit G1
and Pit G3. Waste stripping continued from Pit H which is located on the western
side of the deposit. Less ore was mined during the period as the focus was on
waste stripping in order to expose high grade ore in Pit H, however, overall
mined tonnages were slightly greater than the previous quarter consistent with
the mine plan. During the next quarter ore mining will resume in Pit H and
further waste stripping will be continuing in the Pit H2 area.
ROM ore stocks have been maintained at approximately four weeks' supply and are
being supplemented by medium grade ore from long term stockpiles in line with
the mine plan.
Process Plant
The plant again maintained steady improvement during the quarter and the fiscal
year. Throughput for the year was up 8.2% and feed grade down by 3.6% from the
previous year. Overall recovery for the year increased from 86.0% in FY13 to 87%
this year.
The IX resin replacement disclosed in the previous quarterly is well underway
and process recoveries and uranium production are expected to increase in the
coming quarters as a consequence. Scale build-up identified during the quarter,
which also restricted production, was rectified post quarter.
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Mar Qtr Jun Qtr FY14
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Ore milled (t) 982,209 908,238 3,723,555
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Grade (ppm U3O8) 750 781 783
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Overall recovery (%) 85.8 85.6 87.0
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Production (lb U3O8) 1,392,694 1,338,831 5,592,206
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The process optimisation strategy has focussed on continuous improvement during
the year, seeking to better utilise existing equipment to make further
production and unit cost gains where possible. This process has also focussed on
reducing unit water consumption with considerable success. Over the last two
years, water consumption per tonne of leach feed has been reduced from greater
than 1Kl/t to less than 0.5Kl/t.
Water supply to the project continues to be sufficient, stable and secure under
the water supply agreement executed with NamWater in November 2013. This initial
one-year agreement which is based upon the supply of desalinated sea water from
existing infrastructure is being re-negotiated to extend the term and
rationalise the price.
Future Cost Optimisation Focus
The focus has also remained on process innovation with considerable success and
further substantial gains expected. There are many targets for innovation in the
Langer Heinrich process due to it being new and consequently at the start of its
evolution to a mature and optimised process. In particular leach and IX
reagents, which represent a high proportion of the current C1 costs, represent a
significant opportunity. The successful use of nano-filtration at the Kayelekera
mine has also opened this pathway for innovation at Langer. Flowsheet
improvements incorporating this emerging technology and other established
technologies are currently being considered and developed, all of which Paladin
believes will provide a pathway to C1 costs reaching $22/lb U3O8 (in FY14 terms)
by FY16.
The sustained reduction in operating cost and improved plant performance
demonstrated over the past is a reflection of the prior success of these twin
strategies of optimisation and innovation.
KAYELEKERA MINE, Malawi (85%)
Production by quarter and FY14 total
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KM Sep Qtr Dec Qtr Mar Qtr Jun Qtr FY14
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U3O8Production (lb) 614,603 777,015 696,710 262,060 2,350,388
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Uranium production for the June quarter was affected by the transitioning of the
mine towards Care and Maintenance, although it was in line with revised
estimates. Production ceased on 6 May when most reagents were depleted. The
production for FY14 was 2,350,388lb U3O8 down from the previous year as a result
this early operational cessation.
Mining
There was no mining production during the June quarter as a result of the
decision to implement a period of Care and Maintenance. There were sufficient
existing ROM stockpiles to feed the plant while the mine transitioned towards
Care and Maintenance. The mining contractor continued the process of fleet
demobilisation at the end of the quarter with the target of being completely off
site in July.
Mining data
------------------------------------------
Mar Qtr June Qtr FY14
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Ore mined (t) 571,320
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Grade (ppm) U3O8 1,200
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Additional low grade ore mined (t) No mining No mining 285,463
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Grade (ppm) 445
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Waste (t) 1,377,030
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Waste/ore ratio 1.61
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Process plant
Operating data
---------------------------------------------
Mar Qtr14 Jun Qtr14 FY14
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Mill feed (t) 325,416 129,097 1,043,365
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Grade (ppm) U3O8 1,141 1,052 1,207
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Overall recovery (%) 86.7 88.5 86.2
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Production (lb) 696,710 262,060 2,350,388
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Production ceased on 6 May as the operation went into a transition phase where
all mining, processing and administrative activities were focused on
preparations for Care and Maintenance.
The Acid Recovery Plant, one of the recent successful products of the Innovation
Initiative at Kayelekera was operational up to the cessation of ore processing
and continued to improve beyond its design criteria.
Care and Maintenance
On 7 February, the Company announced that the mine would be placed on Care and
Maintenance due to the low uranium price and non-profitability of the operation.
With this decision being taken, the plant operated until all reagents in the
supply chain were consumed to the maximum extent possible and the plant stopped
production on 6 May. After a transition period, during which the site was made
safe, the plant cleaned and all remaining product dispatched to customers, the
Care and Maintenance period was commenced on 26 May. During Care and Maintenance
the project will be maintained on near ready status with an adequate component
of staffing to keep the project in good working order and to preserve the
critical aspects of IP and operational knowhow.
It is expected that production will recommence once the uranium price provides a
sufficient incentive (circa US$75/lb) and a grid power supply (ESCOM) is
available on site to replace the existing diesel generators with low cost
hydroelectricity.
PRODUCTION GUIDANCE
Revised production guidance for FY14 was achieved at 7.943Mlb U3O8 which was at
the upper end of the range (7.8Mlb - 8Mlb U3O8) advised on 7 February 2014.
As Kayelekera is now on Care and Maintenance, guidance for Langer Heinrich for
FY15 is 5.4Mlb to 5.8Mlb.
It should be noted that, as a result of the scheduled resin replacement
programme and de-scaling works carried out, production for the September quarter
is expected to be slightly lower than the pro-rata component of guidance.
AURORA, MICHELIN PROJECT, Canada (Paladin 100%)
On 26 June 2014 Paladin announced that a revised mineral resource estimate for
the Michelin Deposit (the "2014 Mineral Resource Estimate"), conforming to both
the JORC(2012) Code and National Instrument 43-101 - Standards of Disclosure for
Mineral Projects of the Canadian Securities Administrators ("NI 43-101") was
completed. For a more detailed review of the new resource please consult the
complete announcement of that date.
The 2014 Mineral resources estimate for the Michelin Deposit was successful in
converting some 13.2Mlb U3O8 of previously Inferred category material into the
Measured and Indicated categories as well as adding an additional 3.8Mlb U3O8
for a Measured and Indicated mineral resource total of 84.1Mlb U3O8. This is
equivalent to a 25% increase in Measured and Indicated material and a 36%
increase in the grade of the resources recoverable using open pit mining
techniques. Mineral resources remaining in the Inferred category now stand at
22.9Mlb U3O8.
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Classification Open Pit portion Cut-off grade 250ppm
---------------------------------------------------------------------------
Volume M bcm M tonnes Grade ppm M lb
Measured 3.88 10.46 938 21.63
Indicated 2.21 5.94 937 12.26
M + I 6.09 16.39 938 33.89
Inferred 0.61 1.64 1,343 4.86
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Underground portion Cut-off grade 500ppm
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Measured 1.89 5.11 1,104 12.45
Indicated 5.93 16.00 1,072 37.79
M + I 7.82 21.11 1,080 50.24
Inferred 2.66 7.17 1,140 18.02
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Combined Combined
---------------------------------------------------------------------------
Measured 5.78 15.57 993 34.08
Indicated 8.13 21.93 1,035 50.05
M + I 13.91 37.50 1,017 84.13
Inferred 3.27 8.81 1,178 22.88
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All historical data, both Brinex from the 1970's and more recent Aurora data for
the period 2005 to 2008 has been validated and entered into the geological
database. The additional drilling that Paladin completed in 2012 and 2013 has
infilled some areas within the previous mineral resource and has allowed for the
creation of a much more robust geological interpretation.
The Michelin Deposit is still open along strike and at depth and, due to the
difficulty in drilling from lake based platforms, still has a number of internal
under-drilled areas. Drilling programmes have already been designed to both
infill and extend the existing mineral resource. In addition there are also a
number of promising targets within the Michelin - Rainbow trend which are
actively being explored and are expected to contribute to the economic viability
of the project. Additional mineral resources for other deposits within the
Michelin project are detailed below.
----------------------------------------------------------------------------
Measured Mineral Indicated Mineral Inferred Mineral
Deposit Resource Resource Resource
----------------------------------------------------------------------------
Cut-off 0.05%
& 0.02% U3O8 Mt Grade % t U3O8 Mt Grade % t U3O8 Mt Grade % t U3O8
----------------------------------------------------------------------------
Jacques Lake 0.9 0.09 747 6.0 0.07 4,327 8.1 0.05 4,103
----------------------------------------------------------------------------
Rainbow 0.2 0.09 193 0.8 0.09 655 0.9 0.08 739
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Inda 1.2 0.07 826 3.3 0.07 2,171
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Nash 0.7 0.08 564 0.5 0.07 367
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Gear 0.4 0.08 270 0.3 0.09 279
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940 6,642 7,659
Total 1.1 0.09 (2.1Mlb) 9.1 0.07(14.6Mlb)13.1 0.06(16.9Mlb)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The mineral resources for the satellite deposits are reported at cut-off grades
that contemplated underground (0.05% U3O8 cut-off) and open pit (0.02% U3O8
cut-off) mining, based on preliminary economic assumptions carried out by
Aurora.
Information in the table above in relation to the Michelin project area mineral
resources was prepared and first disclosed under the JORC Code 2004. It has not
been updated since to comply with JORC Code 2012 on the basis that the
information that the estimates are derived from has not materially changed since
it was last reported.
The updated 2014 Mineral Resource Estimate for the Michelin Deposit has provided
added confidence in the character of the mineralisation with the significant
increase in Measured and Indicated category material. Importantly, in addition,
the near surface open pittable portion of the deposit now contains a substantial
increase in both uranium grade and contained metal. Future drilling will
concentrate on expanding the mineral resources at both the Michelin Deposit and
the deposits and prospects occurring in the immediate surrounds.
CORPORATE
Langer Heinrich Minority JV Sale
Paladin advised on 24 June that settlement associated with the sale of a 25%
joint venture equity stake in its flagship Langer Heinrich uranium mining
operation in Namibia to CNNC Overseas Uranium Holding Limited, a wholly owned
subsidiary of China National Nuclear Corporation (CNNC), the leading Chinese
nuclear utility, for consideration of US$190M was completed at a
signing/settlement ceremony held in Beijing.
The offtake component of the agreement allowing CNNC to purchase its pro-rata
share of product at the prevailing market spot price has also been finalised.
Paladin has been successful in attracting a highly-respected organisation such
as CNNC because of the Company's achievements within the conventional uranium
mining industry.
With this major initiative to joint venture a minority equity stake in Langer
Heinrich now completed, the door is open to pursue other opportunities,
utilising the unique platform Paladin has developed in the global uranium mining
industry, to further consolidate and strengthen its balance sheet. This will, in
turn, also prepare the Company for growth into a major Tier 1 uranium producer.
Successful Refinancing of Langer Heinrich Facility
As also advised Paladin has refinanced the existing US$110M project finance
facility and US$20M working capital facility into a new US$70M syndicated loan
facility. Proceeds from the LH minority sale were utilised to prepay US$30.83M
of the existing facility, taking the outstanding balance to US$70M.
This new facility will provide significant cash flow benefits and further
strengthens Paladin's financial position. As shown below, the annual principal
repayments will be reduced by US$32.4M over the first 3.5 years of the facility,
from US$18.33M pa to US$9.09M pa with the first repayment of US$4.55M not due
until December 2014.
New CFO Appointment
In May Paladin announced the appointment of Mr Craig Barnes as Chief Financial
Officer, effective 1 July 2014, replacing the current CFO.
Craig joins Paladin as a member of the Institute of Chartered Accountants of
Australia and South Africa with more than 15 years of experience in a career
comprising both financial services and resource industry experience including
the last 7 years as CFO.
Craig brings to Paladin a broad range of finance skills, experience in
international financing of mining projects and well-credentialed commercial
experience in the mining sector.
URANIUM MARKET COMMENTS
The June quarter saw a decline in the Ux spot price to US$29.00/lb U3O8 in early
May before seeing trading in a narrow range of US$28.00/lb U3O8 - $28.25/lb U3O8
for the remainder of the period. June quarter spot market volume (5.7Mlb U3O8)
was noticeably lower than over the past several years when the three month
period showed an average of more than 9Mlb U3O8 being transacted.
Contracting activity in the longer-term market increased somewhat with mid-year
volumes reported as slightly above 50Mlb U3O8. The Ux long-term price which
began the quarter at US$47/lb U3O8 weakened further to US$45/lb U3O8 at the end
of April and has remained flat since that time.
During May, China announced the commercial operation of two reactors, Ningde-2
and Hongyanhe-2, bringing the total operating nuclear fleet to 20 reactors. A
further 29 reactors (33.0Gwe) are under active construction with 57 units
(61.2Gwe) in the planned category. The country anticipates adding 8.6Gwe of
nuclear capacity during 2014, as compared to 3.2Gwe in 2013.
Post reporting period, on 16 July, the Japanese Nuclear Regulatory Authority
(NRA) released its safety evaluation report on the Sendai 1 & 2 reactors stating
that these units comply with the newly-promulgated nuclear safety criteria. The
two reactors will now proceed into a 30 day public comment period before local
authorities are requested to grant their assent to commence operations.
Declaration
The information in this Announcement relating to exploration and mineral
resources is, except where stated, based on information compiled by David
Princep B.Sc who is a Fellow of the AusIMM. Mr Princep 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 a
Competent Person as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves", and as a
Qualified Person as defined in NI 43-101. Mr Princep is a full-time employee of
Paladin Energy Ltd and consents to the inclusion of this information in the form
and context in which it appears.
ACN 061 681 098
FOR FURTHER INFORMATION PLEASE CONTACT:
John Borshoff
Managing Director/CEO
+61-8-9381-4366
Mobile: +61-419-912-571
john.borshoff@paladinenergy.com.au
Greg Taylor
Investor Relations Contact
+1 905 337-7673
Mobile: +1 416-605-5120 (Toronto)
greg.taylor@paladinenergy.com.au
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