Or so they think, I'll admit that I beg to differ!
TORONTO (miningweekly.com) – Uranium miner Paladin Energy on Tuesday said it believed that it was “ticking all the right boxes” across the whole range of its activities and its cost cutting measures, aimed at slashing operating expenditures by between $60-million to $80-million, would make the company more sustainable even at low prices.
TSX- and ASX-listed Paladin said it believed that the current slump in the spot price of uranium, which is about $41.25/lb, was the result of near-term market imbalances, and expected that the price could recover to between $45/lb and $50/lb over the next months.
Paladin said the increased price is required to incentivise essential overall supply growth, which, due to current price levels, is “completely on hold”.
However, the company said it should be noted that owing to its blend of term prices and fixed price contracts, together with spot sales, Paladin was likely to achieve average sales prices about 10% to 15% above the prevailing average uranium spot price in the current market.
In its quarterly report for the three months to September, released to the market on Wednesday, the miner announced it had undertaken a cost and production optimisation review as part of its process of moving from a development to a sustained production phase.
Paladin said the cost review had become even more relevant with the recent weakening of the uranium spot price, but added that the price decrease did not detract from the commodity’s strong fundamentals in the mid- to long term.
The cost review found that the Langer Heinrich operations, in Namibia, could deliver a cost saving of $10-million over 2013, with the Kayelekera mine, in Malawi, contributing a further $10-million cost saving through discretionary spending and improvements in mining cost.
In 2013, Paladin would also scale back its exploration spend by some 20%, or $4-million, by deferring nonessential drilling, while inventory management would save another $15-million in 2013. Paladin was also targeting a 10% reduction in corporate overheads.
The company said optimisation programmes have also been included for integration and along with the cost-cutting measures over 2013 and 2014, substantial cost reductions of at least 15% for Langer Heinrich and 22% for Kayelekera could be achieved.
Following an analyst conference call, Paladin reiterated that production at both its mining operations was “going well”, having reached design targets and having been, essentially, derisked, were producing at or very near nameplate capacities.
So far, during the fourth quarter, Langer Heinrich had produced 10% above design and Kayelekera was at 96% of design capacity.
Paladin said it expects to produce between 8-million and 8.5-million pounds of uranium during 2013.
“This strengthening of the company will enable it to be in full readiness to take advantage when the uranium price makes its expected recovery,” the company said in a statement.