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Monsters of Rock: Paladin (almost) back in action and all the quarterlies you (may have) missed
Mining
share
- MinRes and Fortescue were the headliners today, but plenty of other companies were on reporting duty
- Paladin edges closer to restart of Langer Heinrich uranium mine
- Grange Resources surges on high iron ore prices while Regis is delirious about closing its hedgebook
Uranium hopeful Paladin Energy (ASX:PDN) is inching towards the revival after six long years of the Langer Heinrich uranium mine in Namibia, feeding the first ore to its processing plant as spot prices sit at 16 year highs of $106/lb.
Already up over 20% year to date, Paladin shares have been on a tear in recent times some six years after shutting the mine and seven since falling into administration.
It says the restart of the Langer Heinrich mine is now more than 93% complete with capex estimates pushed up from US$118m to US$125m, not awful by the standards of modern project overruns.
Commercial production has been targeted for the end of the March quarter, though “lower contractor productivity” over the Christmas period could see that timeframe pushed out to the June term.
Paladin has over US$60m in the bank to see it through to first production and announced a US$150m debt facility today with Nedbank and Macquarie to provide additional capital and progress ‘growth options’ which will include exploration at the Michelin project in Canada.
“After more than six years of care and maintenance it is exceptionally pleasing to see production activities recommence at the Langer Heinrich Mine, with first ore feed to the processing plant achieved in January,” Paladin CEO Ian Purdy said.
“Executing a syndicated debt facility ahead of operations has been a key strategy for Paladin and will provide increased capital flexibility as we transition through ramp up and progress to full production at Langer Heinrich.
“With a strong uranium price outlook and a return to production imminent, Paladin remains well positioned to generate strong returns for our stakeholders”.
It is one of two miners expected to restart operations early this year alongside Boss Energy (ASX:BOE), owner of the Honeymoon project in South Australia, at a time when supply issues from major producers, rising nuclear capacity builds and extensions, spot purchasing by hedge funds and producers and a new contracting cycle have coalesced to put a rocket up prices.
Paladin said it currently has 80% of its product with “uncapped upside exposure” to the uranium spot price through the end of 2030.
Paladin Energy (ASX:PDN) share price today
Unhedged, footloose and fancy free
Regis Resources (ASX:RRL) has had the shadow of an onerous hedge book that saw it receive hundreds of dollars less than the spot gold price on much of its sales removed in a quarter that saw it perform ahead of expectations.
The mid-tier gold miner has spent several years in the doldrums, but generated $97m of cash after producing 109,200oz at all in sustaining costs of $2133/oz, including 70,400oz at $2276/oz at the Duketon mine and 38,800oz for its 30% share of AngloGold’s Tropicana at $1795/oz.
Its sales totalled 104,000oz at an average price of $2671/oz, with hedges hitting the bullion producer’s bottom line by $40m.
At spot levels gold is currently fetching around $3065/oz, having been elevated since the Hamas invasion of Israel and Israel’s subsequent military offensive against Gaza in October.
Regis spent $98m in the December quarter to close out the hedge book early, giving it unfettered access to strong gold prices.
“I can actually hold a glass of water and talk about hedging without shaking,” Regis MD Jim Beyer said today. “And we’ve been free of that hedging which we’ve been dealing with now for nearly four years.
“This will clearly a strengthening of our balance sheet from here.”
The company maintained guidance today of 415,000-455,000oz at $1995-2315/oz for the 2024 financial year, in an update RBC’s Alex Barkley said was positive for the $1.6b stock.
“A strong Q2 result for RRL. Gold production was flattish QoQ, which was enough to beat RBCe by 7% (in-line cons). Pit ramp-ups at DSO and Tropicana performed above our expectations. We had seen this as a risk heading into the quarter,” he said.
“These good early results position RRL well vs FY24 guidance. Partly offsetting this was weaker production at DNO (Duketon North). However, the lower value site (RBCe 4cps) is due for closure in FY24 so read-through is less important.
“We expect RRL’s Q2 result will help ease some market concerns around RRL operating predictability; and RRL should trade higher today. RRL shows decent value at 2.9x FY25e EV/EBITDA, and 22% FCF Yield if ex-McPhillamys.
“Upcoming potential catalysts could be a Garden Well Main maiden resource or McPhillamys approvals and DFS.”
Also on the bill in the gold space today was West African Resources (ASX:WAF), which delivered few surprises from its Sanbrado mine in Burkina Faso, producing 58,047oz at US$1030/oz and selling 66,059oz at an average price of US$1978/oz in the December term.
It was on guidance for 2023, producing full year gold of 226,823oz at US$1126/oz, to end the year with $135m and and $10m of bullion in the bank, generating $50m in cash flow in the fourth quarter after $17m in tax payments.
A ten year production target is expected to be released in the coming quarter alongside 2024 guidance, with WAF also drawing down US$100m for the development of the 219,000ozpa Kiaka project.
The African gold miner expects to produce 400,000ozpa from 2025-2032.
Stepping into iron ore for a second and Grange Resources (ASX:GRR) shares surged 9% on an improved quarter across virtually all metrics.
The high grade Tassie miner saw concentrate production lift from 647,000t and pellet sales 645,000t to 684,000t and 648,000t respectively quarter on quarter.
Prices at port rose from US$137.82/t ($210.03/t) in September to US$159.65/t ($243.14/t) for its product in December, revealing the massive premium Grange draws to benchmark pricing, while costs fell from $139.44/t to $132.59/t.
That saw it lift from $261.44m in cash and $28.46m in liquid investments at September 30 to $282.61m cash and $57.73m in trade receivables.
