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Ground Breakers: Paladin looking for long-term contracts as uranium catches a vibe
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Uranium stocks are a vibe right now.
That has been driven by Sprott, the investment group which has sent the spot market on a run this year by taking around 36Mlbs of yellowcake off the open market.
While that has seen prices on the tight spot market increase 44% this year, the prospect that mothballed operations will restart still seems to be a bit further down the track.
The biggest of the idled uranium miners on the ASX, Paladin Energy (ASX:PDN) today announced a new restart plan for its Langer Heinrich mine in Namibia.
Is there any indication of when that might be? Nah, not yet, but it did say discussions with utilities are getting more frequent.
“Paladin continues to engage with global nuclear energy utilities with the intent of securing uranium offtake contracts with sufficient duration and value to underpin the restart of the LHM,” Paladin told the market today.
“The Company notes an increase in market queries from utilities and an increase in long term market pricing.”
Recapitalised Paladin sets price, timeline for Langer restart
Paladin collapsed on the back of a mountain of debt and overexposure to a crumbling spot market in 2017, then returned to the boards of the ASX and recapitalised to become a $2.5 billion developer again.
Paladin says it would cost around US$81 million and take around 18 months to get into production, but it is investigating whether to use its ~$40m cash reserves to self-fund early works and accelerate the timeframe when a decision to mine is made.
Langer Heinrich would produce around 77.4Mlb over 17 years of mine life at an average cash cost of US$27.40/lb, up from US$26.90/lb previously due to inflation in contract mining markets.
The mine, which has an ore reserve of 84.8Mt, will produce at a maximum rate of 6Mlb a year, equivalent to ~5% of global mined production.
“The Restart Plan Update is the conclusion of an extensive work stream aimed at further de-risking the ramp up and operational readiness of the globally significant Langer Heinrich uranium mine,” Paladin CEO Ian Purdy said.
“The workstreams reinforce our confidence in Langer Heinrich as a low risk, robust, long-life operation that is poised for a restart to take advantage of the improving uranium market conditions. ”
“As the world continues to move towards a decarbonised economy, Paladin is in a unique and enviable position of having a robust capital structure with no corporate debt and a project with a low-risk pathway to production with strong economics and importantly a well-known product from our 10 years of prior operation,” Purdy said.
“We will continue to position Paladin to be ready to restart operations under the right uranium price environment.
“The improving structural outlook for uranium markets and Paladin’s opportunity to positively contribute to the decarbonisation of global electricity generation provides the platform for an exciting period ahead for Paladin and I look forward to updating you on our progress.”
An important point is that Paladin is committed to locking in long-term contracts to back its return to production.
Once they are in place that should vanquish some past demons.
Paladin Energy share price today:
Coal futures surge
Thermal coal futures charged ahead in China amid expectations of a cold winter, indirectly driving demand for Aussie coal futures.
Government officials reportedly told traders and miners on Wednesday it would slow down the pace of intervention after Zhengzhou futures more than halved in a week.
“Coal futures in China surged amid expectations of colder-than-normal temperatures boosting demand for power and heating. This is despite government action to limit future price gains. The most active futures contract on the Zhengzhou Commodity Exchange rose 9.7% to close at CNY978/t,” ANZ’s John Bromhead said.
“This flowed into the international market, with Newcastle coal futures rising more than 11% to US$157.5/t.”
New Hope Corporation (ASX:NHC) was 5.5% higher this morning, while Coronado (ASX:CRN) was up more than 4%.
