HomeEnergy MineralsWhy investors are selling Paladin Energy stock after revenue soars 79%

Why investors are selling Paladin Energy stock after revenue soars 79%

ASX-listed uranium miner Paladin Energy’s sales revenue of US$69.9 million for the December quarter has shot up 79% over previousStock-drop-crash-generic quarter, yet shares have dropped 2.8%.

Despite this strong growth, investors are selling out of Paladin Energy’s stock because the company is selling uranium at an average price of US$36.58 per pound, which is well below the production cost. “Once you consider all the other expenses the company has to consider, all-in sustaining costs are well above the current price, so Paladin will likely report another massive loss this financial year, following the US$338 million loss in 2014,” explains investment analystMike King.

Total sales for the quarter were 1.911 Mlb U3O8, producing a revenue of US$69.9 million. “These figures are within the guidance provided in the September quarterly report. The TradeTech weekly spot price average was US$37.66/lb,” the company said in a statement.

Paladin Energy operational update

Mining production volumes remained on target at 700 000 bank cubic metres and was consistent with budget. The ore to waste ratio during the quarter was up slightly as a result of mining in the deeper Western Pit areas. ROM ore stockpiles were sufficient at the end of the quarter for approximately three weeks’ ore supply and are being supplemented by medium grade ore from long term stockpiles in line with the mine plan.

Construction of tailings storage facility three extension and re-establishment of Kuell’s Wash, a major south-north drainage channel, will start in late January 2015 and should be completed within three months.

Nevertheless, Paladin Energy added that lost production in the early part of the year and the current tightening of the world uranium market has affected target production at budgeted rates for the remainder of the year, focusing on reducing operating costs and improving process efficiencies. “As a consequence, the FY2015 annual production guidance has been revised to 5.2Mlb to 5.5Mlb U3O8 (a reduction of less than 5%),” the company said.

Process plant

The remedial measures reported in the September quarterly report have been effective in bringing the plant back to stable operation. Throughput has returned to acceptable levels, although the improvement in recovery is slower than anticipated, despite the positive impact of new resin. Throughput for the quarter was up 24.8% from the past quarter and recovery was up by 1.8%, resulting in overall production increasing by 27% from the September quarter levels.

The process optimisation strategy continues to focus on better utilisation of existing equipment, unit operating costs, operator training (the Company is currently revising all process operating manuals) and supervision and the further integration of process control. The new resin introduced during the previous quarter continued to perform well with improved barren solution grades.

Water supply to the project has been secured with a recent 12-month water supply agreement executed with NamWater with a further one year option. The Namibian Government has recently announced that it is currently in negotiations with Areva to purchase the Areva water desalination plant near Swakopmund to supply water to nearby mines and surrounding communities. It is expected that the acquisition of this plant will provide further stabilisation to the longer-term water supply.

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