Global uranium company Paladin Energy is implementing a number of cash reduction initiatives which will enable the company to become cash flow positive in 2016 – even at current low uranium prices.
The company expects to reduce its total cash costs by more than USD$33 million in 2016 and will achieve this material reduction in its forecast FY16 cash flow break-even level through a sustainable reduction in its forward all-in cash costs (including capital expenditure, corporate costs and debt servicing).
Further to this, Paladin will implement additional measures within the December 2015 quarter which are expected to bring the company’s overall cash flow to a break-even level that is sustainable even if the current low uranium price environment continues.
Paladin still firmly believes the uranium market is near an inflection point, after which materially higher prices are expected. The cost reduction initiatives outlined today, in conjunction with the pending measures, are intended to make the company cash flow positive during FY16, enhancing shareholder leverage to any future uranium price upturn.
Key elements of the company’s cost reduction initiatives include:
Langer Heinrich mine (Namibia)
Key elements of the reduction include renegotiation of terms with the mining contractor, reduced reagent consumption linked to further optimisation of the bicarbonate recovery plant and deferment of some planned capital expenditure.
Revised forecast forward C1 cash cost of approximately $26/lb for FY16 based on 5.2 Mlb of production reducing from $29.07/lb in FY15.
This will result in a significant decrease in total cash cost (including royalties, transport, logistics and capital expenditure) reducing from $36.44/lb in FY15 to $30.74/lb and represents a reduction of almost $6/lb including a deferment of $10 million capital expenditure into FY17.
Corporate and exploration
Paladin will cut its corporate cots by 35% to $9.7 million and the company will focus on essential exploration, including a small amount of potentially high impact drilling.
Total corporate and exploration costs are reduced to approximately $16 million.
Kayelekera care and maintenance (Malawi)
Paladin has achieved a $5 million saving at the mine, resulting in Kayelekera care and maintenance costs of approximately $11 million for FY16.
This $33 million cash cost saving is a key step for Paladin to achieve sustainability in the current low uranium price environment. Paladin expects, as a minimum, to be cash flow neutral by the end of calendar year 2015.
The further cost reductions undergoing review in the next three months will be implemented once verified and are aimed at lowering total all-in cash costs to achieve the cash flow neutral position.
Alongside the cost reductions, a revised Life of Mine plan for Langer Heinrich is well advanced and Paladin expects its completion to result in further operational improvements.
Continued cost reduction, combined with the positive outlook for uranium and the globally competitive position of its flagship Langer Heinrich project, means Paladin will have greater leverage to an improving uranium market with its established projects, an extensive project pipeline and industry-leading IP as it continues its optimisation initiatives.