Paladin hunkers down on Namibian uranium mine restart plan as the price continues to climb
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Uranium is benefiting from a strong tailwind with the continued shutdowns of major producers such as Cigar Lake in Canada and Kazatomprom’s mines in Kazakhstan due to the COVID-19 pandemic.
This has aggravated the underlying structural supply deficit and is expected to accelerate the depletion of inventories that kept the price low until April this year.
Prices jumped from just under $US24 ($34.89) per pound to $US34.20 ($49.72) per pound in late May and has largely remained in the band between $US33 and $US34 per pound since then.
Paladin Energy (ASX:PDN) has already completed a restart plan for its Langer Heinrich mine in Namibia once the price reaches the right level.
The company expects to be able to bring the mine back into production for $US81m.
This includes $US34m to mobilise the work force, undertake maintenance and provide the working capital requirements to commence production and $US47m to improve process plant availability and reliability to lift production capacity by more than 10 per cent.
Langer Heinrich is expected to have all-in sustaining costs (AISC) of about $US32 per pound and be capable of producing at a peak rate of 5.9 million pounds of U3O8 per annum for the first seven years after ramp-up.
AISC is a good measure to appraise the profitability of a project because it includes everything, from mining, refining and transport, through to administration and exploration.
Production will then drop to 3.5 million pounds in the next nine years.
Paladin says stockpiled material will be used during the ramp-up phase in the first year, which will reduce start-up risk and provide a platform to move towards nameplate capacity.
The company has a 75 per cent stake in Langer Heinrich, which produced and sold over 43 million pounds of U3O8 between the start of operations in 2007 and when it was placed on care and maintenance in August 2018.
Paladin says that while discussions are ongoing with potential customers, the current spot price and long-term pricing of about $US39 per pound do not deliver the economic returns required to restart the mine.
However, the company noted that term contract pricing was starting to respond to the growing imbalance between supply and demand.
Other companies have also been having a second look at their legacy projects, with gold-focused Marmota Energy (ASX:MEU) kicking off a strategic review of its existing Junction Dam uranium resource in South Australia earlier this month.