12/11/2008 - 22:00

Paladin maintains faith in uranium

12/11/2008 - 22:00

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URANIUM miner Paladin Energy says demand for the commodity, widely touted as a growth sector under the Liberal state government, remains extremely strong in the medium to long term.

Paladin maintains faith in uranium

URANIUM miner Paladin Energy says demand for the commodity, widely touted as a growth sector under the Liberal state government, remains extremely strong in the medium to long term.

The company was commenting after reporting a small quarterly loss of $US4.7 million ($A7.1 million) despite achieving nameplate production at its flagship mine in Africa.

This was down on the after-tax loss of $US14.5 million for the corresponding period in 2007 due to higher sales revenue after performance improved at its Langer Heinrich mine in Namibia.

The latest result includes a $US13.3 million ($A19.82 million) profit for the mine, but finance costs and other expenses increased.

The company said the uranium oxide price was $US53 per pound at the end of the September quarter, down from $US59 per pound at the end of June this year and about half the levels that prevailed two years ago.

Paladin said the fall was consistent with the sell down of most commodities as a result of continuing international credit problems and the liquidation of commodity investment positions.

Managing director John Borshoff said he was nonplussed by variations in the spot market price for uranium, predicting it would rebound from $US46 a pound this week to $US90 per pound in 2009.

Mr Borshoff said the price had started to recover from recent lows of $US44 a pound and would approach $US60 a pound by the end of the year.

He said the uranium spot market was very small and gave consumers the opportunity to top up their inventories.The vast majority of uranium sold through long-term contracts.

Supply would be tight in the foreseeable future, with almost all major companies failing to achieve targets, he said.

Mr Borshoff said uranium was one of the few commodities where demand hadn't changed that much.There were signs that India's demand would strengthen, while the outlook for demand from China, Russia and Middle East was also positive.

"Most of the growth is coming from those areas, and even the Americans are not backing off," he said.

The company said reactor construction and forward planning for new plants continued strongly in China and other Asian countries, as well as in Russia.

While Paladin is mainly focused on its projects in Namibia and Malawi, it is one of many companies holding large undeveloped deposits in WA.

The Barnett government has signaled it supports a lifting of bans on uranium mining, which is expected to encourage increased exploration spending in WA. It is likely to be several years before that translates to mining and export of uranium.

September quarter production at Langer Heinrich of 650,554 pounds equates to 2.6 million pounds on an annualised basis, which would soon expand to 3.7 million pounds a year.

The company said the expansion was on budget and on schedule for completion by the end of calendar 2008 for a cost of $US50 million ($A74.54 million).

Mr Borshoff said the expansion costs might run $US2 million ($A2.98 million) over budget.

A study has commenced to evaluate a further expansion to 6 million pounds a year in 2010. Mr Borshoff said Paladin aimed to produce at a rate of 9.3 million pounds a year by 2011-12.

"That presumes we start the stage three expansion (of Langer Heinrich) next year," he said.

It also assumes Paladin will commission and ramp-up its second mine, Kayelekera in Malawi, in the March quarter.

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