Paladin Energy has placed its Kayelekera mine in Malawi on care and maintenance, saying operations at the mine are no longer sustainable in light of the depressed uranium market.
Paladin Energy has placed its Kayelekera mine in Malawi on care and maintenance, saying operations at the mine are no longer sustainable in light of the depressed uranium market.
Paladin confirmed the news in an announcement to the ASX late on Friday after the close of trade.
The uranium producer admitted it was no longer sustainable to maintain production at the loss-making mine.
Based on the current uranium spot price of $US35 per pound, Paladin said it would have had to inject a further $US20 million to $25 million in cash for each of the next two calendar years to maintain operations at the mine.
Paladin chief executive John Borshoff said while the Kayelekera mine had performed exceptionally well technically, the company could not continue to keep it operating.
“The Kayelekera mine has performed exceptionally well technically, with production levels recorded at or near nameplate capacity over the past 12 months and significant achievements made in Paladin (Africa) Limited's cost reduction programme," Paladin chief executive John Borshoff said.
"Nevertheless, despite these considerable efforts, Kayelekera continues to operate at a loss due to the low prevailing uranium price.
"Paladin is unable to continue to provide the level of financial support that Paladin (Africa) Limited has required in recent years, hence the decision at this time.”
The decision to place the mine on care and maintenance will result in a "significant" number of redundancies, the company said.
However, Paladin said it was committed to maintaining the mine and infrastructure at Kayelekera in good working order with the hopes of eventually resuming production and will therefore retain 194 Malawi national employees and 27 expatriate staff.
The government of Malawi has a 15 per cent interest in Paladin (Africa) Limited, the responsible entity for the Kayelekera mine.
The negative impact of the low uranium price following the Fukushima nuclear disaster in 2011 had been partially offset by several higher-priced term sales contracts but Kayelekera delivered its last product under these contracts in September last year.
Since then, Kayelekera's production has been fully exposed to the depressed uranium market.
Paladin said placing Kayelekera on care and maintenance would improve its forecast cash flow position by $US7 million to $US10 million this year and by $US20 million to $US25 million next year.
Paladin has revised its 2014 financial year production guidance to 7.8mlb to 8.0mlb, down from 8.3mlb to 8.7mlb.
It says the decision will not affect operations at its larger Langer Heinrich mine.
