Paladin Energy: Financial Report for Nine Months Ended 31 March 2013
May 14 2013 - 7:42AM
Marketwired Canada
Paladin Energy Ltd ("Paladin" or "the Company") (TSX:PDN)(ASX:PDN) announces the
release of its consolidated Financial Report for the nine months ended 31 March
2013. The Financial Report is appended to this News Release.
HIGHLIGHTS
OPERATIONS
-- Combined production for the nine months of 6.112Mlb U3O8, an increase of
26% over the nine months ended 31 March 2012, achieving 96% of nameplate
production for the nine months.
-- Quarterly combined production of 1.992Mlb U3O8, an increase of 12% over
the March 2012 quarter achieving 95% of nameplate production for the
quarter.
-- C1 cost of production continued to fall quarter by quarter. Langer
Heinrich C1 cost of production for the quarter remained steady compared
to the December 2012 quarter at US$29.8/lb U3O8 and has decreased 8%
since June 2012. Kayelekera C1 cost of production for the quarter
decreased 8% to US$39.8/lb U3O8 in the March quarter and has decreased
24% since June 2012.
-- Both mines now operating at nameplate performance and production
optimisation initiatives continue to improve recoveries and reduce unit
operating costs.
-- Completion Tests satisfied at both Langer Heinrich and Kayelekera.
-- FY2013 production guidance of 8.0 - 8.5Mlb U3O8 remains on target.
-- Due to continued uranium price weakness, an impairment expense of
US$44.8M recorded at Kayelekera for the March 2013 quarter, totalling
US$140.8M for the nine months.
SALES AND REVENUE
-- Strong sales of US$106M for the quarter selling 1.92Mlb U3O8 at an
average realised sales price of US$55.22/lb.
-- Sales revenue for the nine months increased by 25% from US$240.0M in
2012 to US$301.0M in 2013. Sales volume for the nine months increased by
33% from 4.457Mlb U3O8 in 2012 to 5.928Mlb U3O8 in 2013.
-- Average realised sales price of US$50.8/lb U3O8 for the nine months
ended 31 March 2013, compared to average UxC spot price of US$44.95lb.
CORPORATE
-- Final payment of US$150M received from Electricite de France S.A.
("EdF") pursuant to the Long Term Off-take Contract.
-- Total debt repayment of US$181M during the nine months including
repayment of balance of March 2013 Convertible Bond of US$134.
-- Cash of US$112.9M at 31 March 2013.
-- Strategic initiatives to unlock value from some of Paladin's assets have
advanced with keen interest and final bids are being assessed. Results
expected during the June 2013 quarter.
Results
(References below to 2013 and 2012 are to the equivalent nine months ended 31
March 2012 and 2012 respectively).
- Safety and Sustainability:
- Continued high safety performance with a 12-month moving average Lost
Time Injury Frequency Rate of 1.2.
- The annual NOSA HSE grading audit for Langer Heinrich confirmed a 4
Platinum Star rating.
- Kayelekera achieved a milestone 365 LTI free days on 28 March 2013.
- Production:
- Combined production for the nine months of 6.112Mlb U3O8, an increase of
26% on the nine months ended March 2012, achieving 96% of nameplate
production of 6.375Mlb U3O8 for the nine months.
- Quarterly combined production of 1.992Mlb U3O8, a decrease of 9% on the
December 2012 quarter, achieving 95% of nameplate production of 2.125Mlb
U3O8 for the quarter.
- Langer Heinrich Mine:
- Production for the nine months of 3.939Mlb U3O8, an increase of 27% over
the nine months ended 31 March 2012 achieving 101% of nameplate design
capacity.
- Quarterly production of 1.230Mlb U3O8 is a decrease of 13% over the
previous quarter and achieved 96% of nameplate design capacity.
- Strong recovery of 86.7% versus design of 85%.
- Feed grades of 810ppm U3O8 versus design of 800ppm.
- Production was influenced by temporary water constraints and some
operational issues. Those are being resolved with improved water
conservation measures in place and desalinated water scheduled to be
introduced in mid May 2013.
- Production capacity remains robust and above nameplate.
- Further optimisation initiatives underway.
- Kayelekera Mine:
- Production for the nine months of 2.173Mlb U3O8, an increase of 24% over
the nine months ended 31 March 2013, achieving 88% of nameplate design
capacity.
- Quarterly production of 0.762lb U3O8 is a decrease of 1% over the
previous quarter and achieved 94% of nameplate design capacity.
- Record recovery of 87.1%.
- Feed grades of 1,094ppm U3O8 on track (design is 1,100ppm).
- Average daily production at an all-time high for the quarter.
- Maintaining self-sufficiency on acid requirements.
- Benefits of process optimisation continue to be realised.
- Impairment:
- Due to continued uranium price weakness, an impairment expense of
US$44.8M has been recorded at Kayelekera for the March 2013 quarter,
totalling US$140.8M for the nine months.
- Completion Tests:
- The Completion Tests under both the Langer Heinrich Mine project finance
facility and the Kayelekera Mine project finance facility were satisfied
during the quarter which has resulted in a reduction in interest charges
and provides greater flexibility with regards to voluntary prepayments
and distributions under both facility agreements.
- Sales:
- Sales revenue increased 25% from US$240.0M in 2012 to US$301.0M for the
nine months ended March 2013, as a result of higher sales volumes. The
average realised uranium price for the nine months was US$50.8/lb U3O8
(2012: US$53.8/lb). The average UxC spot price for the nine months was
US$44.95/lb.
- Total sales volume for the nine months of 5.928Mlb U3O8 - a 33% increase
over the nine months ended March 2012 sales of 4.457Mlb U3O8.
- Uranium sales volumes are expected to fluctuate quarter-on-quarter due
to the uneven timing of contractual commitments and resultant scheduling
by customers. Now that production has reached design levels, sales and
production volumes are expected to be comparable on an annualised basis.
- C1 Cost of Production:
- Langer Heinrich C1 cost of production for the March 2013 quarter
remained steady at US$29.8/lb U3O8 compared to the December 2012
quarter. The underlying cost base reduced and C1 costs reductions would
have been realised if nameplate production had been achieved. C1 cost
has decreased 8% since June 2012, in line with the Company's
projections.
- Kayelekera C1 cost of production continued to drop substantially to
US$39.8/lb, a reduction of 8.5% in the March 2013 quarter from the C1
cost of production of US$43.5/lb U3O8 for the December 2012 quarter. C1
cost of production for the March 2013 quarter decreased 24% from
US$52.7/lb in the March 2012 quarter.
- Further improvements in C1 costs are expected as a number of cost saving
initiatives at both sites have yet to be fully implemented.
(1)C1 Cost of production = cost of production excluding product
distribution costs, sales royalties and depreciation and amortisation
before adjustment for impairment. C1 cost, which is non-IFRS
information, is a widely used 'industry standard' term.
- Cost Reduction/Production Optimisation Initiative:
- Following both operations reaching nameplate performance, the sites have
now entered a period of optimisation, which is leading to improved
process recoveries and reduced unit operating costs. Some elements of
this work have the potential to expand the reserve base at Langer
Heinrich by being able to use lower ROM feed grades.
- In November 2012, the Company announced its programme to reduce costs
within the Group, which is expected to realise US$60M to US$80M total
savings over FY13 and FY14. The comprehensive cost and production
optimisation review is part of the process of moving from development to
a sustained production phase. The cost review encompassed examination of
all activities within the Paladin Group from its mining operations,
corporate/administration overheads, future development considerations,
exploration, sales and business development. Opportunity for re-
negotiation of key mining and consumables contracts has arisen, paving
the way for material cost reductions over the next two years.
- The Company remains focused on reducing costs across all facets of the
business and work continues to identify more cost saving opportunities.
These cost cutting measures are proceeding in accordance with the
targets outlined in the November 2012 cost cutting announcement.
- The two key optimisation projects at Kayelekera identified in the last
quarterly, grid power and acid recycling, are progressing well, although
both have experienced minor delays. Notwithstanding the delays, costs
remain within budget expectation.
- Two further optimisation initiatives at Kayelekera are also underway.
Continuous resin advance will be trialled in the coming quarter with a
view to full implementation in the following quarter. In addition to
this initiative, the milling classification circuit is also being
upgraded with a view to reducing milling power consumption and grind
size. The reduced grind size will result in improved leach and RIP
performance.
-- Profit and Loss:
---------------------------------------------
Three Months Ended Nine Months Ended
31 March 31 March
---------------------------------------------
2013 2012 2013 2012
US$M US$M US$M US$M
---------------------------------------------
Revenue 106.4 67.8 301.9 241.2
Costs before depreciation and
amortisation (77.8) (44.0) (230.2) (168.0)
Impairment loss in prior year
relating to inventory sold
during the year 9.7 2.5 29.1 13.7
Impairment - inventory (3.3) (11.9) (13.7) (11.9)
Royalties and distribution (4.5) (2.8) (15.1) (11.8)
Depreciation and amortisation (14.1) (8.3) (43.1) (32.9)
---------------------------------------------
Gross profit 16.4 3.3 28.9 30.3
Exploration expenses (0.3) (0.2) (1.2) (1.6)
Site non-production costs (4.7) (4.0) (12.3) (14.1)
Corporate, marketing and
administration (5.9) (4.8) (17.6) (15.7)
---------------------------------------------
5.5 (5.7) (2.2) (1.1)
Non-cash costs (1.2) (2.3) (4.8) (6.8)
Other income & expenses (44.0) (3.4) (143.0) (188.5)
---------------------------------------------
Loss before interest and tax (39.7) (11.4) (150.0) (196.4)
Finance costs (16.0) (10.7) (49.6) (38.6)
---------------------------------------------
Loss before income tax (55.7) (22.1) (199.6) (235.0)
Income tax (expense)/ benefit (4.8) 2.7 (84.5) 74.8
---------------------------------------------
Loss after tax (60.5) (19.4) (284.1) (160.2)
Non-controlling interests 6.4 1.9 36.4 22.5
---------------------------------------------
Net loss after tax attributable
to members of the parent (54.1) (17.5) (247.7) (137.7)
---------------------------------------------
- Gross profit for the nine months decreased to US$28.9M from US$30.3M in
2012 due to lower prices, partially offset by a 33% increase in sales
volumes and a US$13.7M impairment of inventories at Kayelekera (2012:
US$11.9M).
- Site non-production costs for the nine months were reduced by US$1.8M to
US$12.3M due mainly to a decrease in expenditure relating to the Langer
Heinrich Mine Stage 4 expansion evaluation study, which is being
reviewed in the light of the experience gained through the optimisation
of Stage 3 and the new pathways that have been identified. This has been
partially offset by US$1.2M expenditure on process optimisation testing
and pilot work at Kayelekera.
- Corporate and marketing costs were US$1.9M higher for the nine months
predominantly due to restructure costs of US$0.4M and one-off costs in
relation to consultants and advisory services.
- Non-cash costs for the nine months, mainly share-based payments, were
reduced by US$2.0M to US$4.8M as a result of a reduction in share rights
granted compared to 2012.
- Other income and expenses for the nine months mainly reflect the
impairment of the Kayelekera Mine asset expense of US$140.8M (2011:
US$178.9M) caused by the continued low uranium price. Further pit
optimisation work is being undertaken and, in addition, benefits should
arise when future U3O8 price forecasts reflect the supply/demand
imbalance. Additionally, other expenses include the write-off of fixed
costs during the plant shutdowns of US$2.6M (2011: US$9.2M).
- Income tax expense for the nine months of US$84.5M is predominantly the
result of the de-recognition of the net deferred tax asset ("DTA") at
December 2012 of US$98.2M at Kayelekera arising from unrealised foreign
exchange differences and carry forward tax losses previously recognised.
The unrealised foreign exchange difference had arisen on intercompany
loans due to the extreme devaluation of 104% in the Malawian Kwacha over
the last 12 months from an average of US$1=MKW160 to US$1=MKW327 at 31
December 2012.
- Net loss after tax of US$247.7M was recorded for the nine months, mainly
as a result of the US$98.2M de-recognition of the Kayelekera Mine net
DTA, US$140.8M impairment associated with the write-down of the
Kayelekera Mine assets, the US$13.7M inventory impairment at Kayelekera
and finance costs relating to interest payable on the outstanding
convertible bonds and project finance loans.
- Cash Flow:
- Positive cashflow from operating activities of US$216.9M for the nine
months ended 31 March 2013 was primarily due to receipts from customers
of US$323.6M and receipt of the off-take agreement funds of US$200.0M.
Positive cash flow of US$67.4M was generated by the Langer Heinrich and
Kayelekera operations before investment in working capital required to
support higher production levels, payments for administration, marketing
and non-production costs of US$28.6M. The remaining expenditure
comprises US$1.2M for exploration and net interest paid of US$26.8M.
- Cash outflow from investing activities of US$34.9M for the nine months
ended 31 March 2013 relating mainly to plant and equipment acquisitions
of US$21.6M, predominantly the new tailings facility at Langer Heinrich
and capitalised exploration expenditure of US$14.3M. Exploration
expenditure in foreseeable periods will be lower.
- Cash outflow from financing activities of US$181.5M for the nine months
ended 31 March 2013 was mainly attributable to repayment of the US$134M
remaining on the US$325M Convertible Bonds issued on 11 March 2008,
repayment of project financing for KM of US$29.9M and LHM of US$17.0M.
- Cash Position:
- Cash of US$112.9M at 31 March 2013.
- Long-term Off-take Contract with a US$200M prepayment:
- US$200M payment received pursuant to the Long Term Off-take Contract
with Electricite de France S.A.
- Mid-term Sales Contracts Secured:
- Two mid-term off-take agreements secured for a total of 6.3Mlb U3O8
being delivered from late 2012 to end of 2015 at approximately 2Mlb pa
from both mines. Pricing will be determined predominately by the market
price at the time of delivery (without floor or ceiling limitations),
while a minority portion of the delivery prices will be in accordance
with a series of specified fixed prices, which exceed current spot
uranium prices.
- Exploration and Development:
- Aurora - Michelin Uranium Project, Canada - Winter infill drilling
programme has been completed. An updated mineral resource estimate for
the Michelin deposit is planned for late June/early July 2013 after all
assays have been received and validated.
- Manyingee Project, Australia - Evaluation of the 2012 drilling results
is concentrating on developing an updated JORC-compliant resource and
new hydrogeological model to be used in any future in-situ recovery
('ISR') leach trial operations. An updated mineral resource estimate is
expected in the June 2013 quarter.
- Guidance FY2013
- The continued solid and stable quarterly and year to date production
over the 9 months ended 31 March 2013 of 6.112Mlb U3O8, with clear
opportunities for continued improvement, place the Group in a good
position to achieve its stated production target guidance of 8.0 to
8.5Mlb U3O8.
- Strategic Initiative Efforts
- Considerable effort has been applied to advance the strategic initiative
to unlock value from Paladin's asset base. There was keen interest by
those selected parties to become involved in the final phase to select a
specific partner.
- Post this reporting period, progress has been made according to schedule
for which an announcement is expected to be made in the June quarter.
- The proceeds from these initiatives will be applied to debt reduction
and strengthening the balance sheet.
The documents comprising the Financial Report for the nine months ended 31 March
2013, including the Management Discussion and Analysis, Financial Statements and
Certifications are attached and will be filed with the Company's other documents
on Sedar (sedar.com) and on the Company's website (paladinenergy.com.au).
Generally Accepted Accounting Practice
The news release includes non-GAAP performance measures: C1 cost of production,
non-cash costs as well as other income and expenses. The Company believes that,
in addition to the conventional measures prepared in accordance with GAAP, the
Company and certain investors use this information to evaluate the Company's
performance and ability to generate cash flow. The additional information
provided herein should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
Declaration
The information in this Announcement relating to exploration and mineral
resources is, except where stated, based on information compiled by David
Princep B.Sc who is a Fellow of the AusIMM. Mr Princep has sufficient experience
that is relevant to the style of mineralisation and type of deposit under
consideration and to the activity that he is undertaking to qualify as a
Competent Person as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves", and as a
Qualified Person as defined in NI 43-101. Mr Princep is a full-time employee of
Paladin Energy Ltd and consents to the inclusion of this information in the form
and context in which it appears.
Conference Call
Conference Call and Investor Update is scheduled for 06:30 Perth & Hong Kong,
Wednesday 15 May 2013, 18:30 Toronto and 23:30 London, Tuesday 14 May 2013.
Details are included in a separate news release dated 10 May 2013.
ACN 061 681 098
To view the Third Quarter Report, please visit the following link:
http://media3.marketwire.com/docs/Q3ResultsPaladin.pdf.
FOR FURTHER INFORMATION PLEASE CONTACT:
Paladin Energy Ltd
John Borshoff
Managing Director/CEO
+61-8-9381-4366 or Mobile: +61-419-912-571
john.borshoff@paladinenergy.com.au
Paladin Energy Ltd
Alan Rule
Chief Financial Officer
+61-8-9381-4366 or Mobile: +61-438-942-144
alan.rule@paladinenergy.com.au
Paladin Energy Ltd
Greg Taylor
Investor Relations Contact
+1 905 337-7673 or Mobile: +1 416-605-5120 (Toronto)
greg.taylor@paladinenergy.com.au
Paladin Energy Ltd
Andrew Mirco
Investor Relations Contact
+61-8-9381-4366 or Mobile: +61-409-087-171
andrew.mirco@paladinenergy.com.au
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