Paladin Energy (PDN-T) picked a good time to beat production estimates.
With the market warming to the uranium story recently thanks to renewed interest in building nuclear reactors in China and Japan, Paladin announced record production levels from its Langer Heinrich Mine in Namibia and its Kayelekera Mine in Malawi.
Combined the two mines generated 2.19 million lbs of U3O8, which represents a 13.6% increase over the previous quarter and means that taken together the mines are operating at 103% of their name plate capacities.
The increase in output from the operations was the biggest contributor to record revenues of US$133.9 million. In total, Paladin sold 2.78 million lbs. of U3O8 sold at an implied price of US$48.10 per lb. The amount of material sold was higher than the amount produced because of delivery schedules as forecasted by the company previously.
The wholly owned Langer Heinrich Mine produced 1.42 million lbs of U3O8, a 10% increase over the previous quarter, and reached record recovery levels of 87.4%. Including stockpiles, Langer Heinrich has proven and probable reserves of 111.3 million tonnes grading 0.053% U3O8 for 130.5 million lbs of the metal.
At Kayelekera, which is 85% owned by the company, record production was also achieved as the mine turned out 772,000 lbs. of U3O8, a 21% hike over the previous quarter's total. Kayelekera has 9.52 million tonnes of reserves, including stockpiles, with an average grade of .0953% U3O8 for 20 million lbs of U3O8.
Paladin is currently putting Kayelekera through an optimization process which includes the addition of an acid recovery plant that is scheduled to be commissioned in July. The company expects the addition of the plant will help reduce operating costs at Kayelekera, which are currently higher than at Langer Heinrich.
Paladin also issued production guidance for 2013, which it says should come in at 8 to 8.5 million lbs of U3O8.
BMO Capital Markets analyst Edward Sterck acknowledged that the better-than-expected quarter reflects improving operations, but said the increased sales weren't a total surprise given that the company had been carrying excess inventory of U3O8. Sterck also pointed to possible red flags on the horizon.
"Whilst Paladin is demonstrating operational improvement, concerns remain over the company’s balance sheet and the potential need for additional funds by fiscal 2014 if uranium prices remain at current levels, or fiscal 2016 if Paladin continues to achieve prices in the high US$40s/lb." Sterck wrote in his research note.
BMO has Paladin listed as "market perform" with a target price of $1.50.
The news helped lift the company's shares by 8% or 9 cents to $1.28 on 14.4 million shares traded. The company's shares have moved between 79 cents and $2.11 over the last 52-week period.
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