Paladin best over three years

Uranium company Paladin Resources was the top performing Western Australian stock for the three years to June by a wide margin, with an average annual total shareholder return of 618 per cent.

It was one of four companies in the top 10 with a focus on uranium.

Summit Resources, which is the subject of a Paladin takeover offer, and two junior explorers, Strike Resources (formerly Fast Scout) and Extract Resources, all have some exposure to uranium.

Most other companies in the top 10 are moving toward development of mineral projects.

These include aspiring Pilbara iron ore miner Fortescue Metals Group, African gold explorer Moto Goldmines and vanadium project developer Precious Metals Australia.

The top performers also include two takeover targets – gold explorer Andean Resources and property developer Axiom Properties.

Paladin managing director John Borshoff, who has taken the company from a ‘penny dreadful’ to having a market value of about $2 billion, is very bullish on its prospects.

“We have great ambitions way beyond where we are at now,” he said.

Its prospects are underpinned by what Mr Borshoff calls “one of the most amazing paradigm shifts” in the global nuclear industry, which was seen as static or dying until two or three years ago.

“To show how uniformly this belief was accepted, categorically Paladin was the only company in the world that was aggressively seeking uranium assets,” he said.

Mr Borshoff said the number of new nuclear reactors worldwide being planned had increased from 25 two years ago to about 180 currently.

He predicts the number of reactors in operation will increase from 440 currently to 900 by the year 2050.

While many other companies have entered the fray in the past two years, Mr Borshoff believes Paladin is uniquely placed to keep on growing.

“We are the only company in the last 25 years that has built a complete new conventional uranium mine.”

Mr Borshoff’s plan is to develop a new mine every 18 months and for Paladin to become the world’s third largest uranium producer by 2012 with annual output of up to 16 million pounds.

 “I’m hoping we will be on all four major continents with operating uranium mines by 2012,” he said.

Paladin’s first mine will be the Langer Heinrich project in Namibia, in southern Africa, which it bought for a bargain basement price in 2002.

The $125 million project is due to start commissioning next month and will make its first sales in 2007.

The mine will initially produce 2.6 million pounds a year, rising to 3.7 million pounds, at which point it will generate a $130 million cash operating surplus each year.

The company has already locked-in sales contracts with three US power utilities for 6.6 million pounds of uranium over five years, which covers the term of its bank debt.

Paladin’s second project will be Kayelekera in Malawi, also in southern Africa.

Engineering firm GRD Minproc, which designed and built Langer Heinrich, is conducting a bankable feasibility study into the mine, which has been subject to extensive analysis over many years by previous owners.

If all goes to plan, Paladin will proceed with Kayelekera early next year and be in production 12 to 15 months later.

Kayelekera is expected to produce 2.3 million pounds annually.

While Mr Borshoff declines to say where the company’s third mine will be developed, he acknowledges the company has potential in several countries. He believes the political opposition to uranium mining in Australia will fall away over the next few years, and if it does the company has several development options.

These include the Manyingee and Ooobagooma deposits in WA.

Paladin recently moved to expand its Australian prospects by launching a $174 million takeover offer for Valhalla Uranium, which owns 50 per cent of a large uranium deposit in Queensland.

While Paladin’s stock has been strongly supported on the Australian Stock Exchange, the company has turned to the international market for its big capital raisings.

Its international moves included a successful listing on the Toronto Stock Exchange, which has become the world’s biggest mining exchange.

Several other Australian companies developing projects in Africa, including Anvil Mining, Equinox Minerals and Moto Goldmines, have also listed on the TSX.

Another notable development has been the appointment of new people to help the company manage its growth. The latest move was the recruitment last month of the ASX’s Perth manager Brendan O’Hara as general manager special projects.

Mr Borshoff has no plans to hand over the reins, but says he is passing on his knowledge of the nuclear industry to Paladin’s lean 16-person management team. He believes the opportunity for Paladin extends well beyond the current supply shortage.

Mr Borshoff described the nuclear industry as being defined by its unique history, which meant suppliers were segmented by geopolitics and most producers were focused only on production costs.

“There is no parallel to any other commodity,” Mr Borshoff told WA Business News. “The upside for nuclear is not just on shortages; its on marketing, on distribution, on mining and supply, and we are engaging at all those levels.”