has it bottomed out?, page-194

BellPotter article.
Source: Company accounts, Thomson Reuters, UBS estimates. (UBS) valuations are stated before goodwill, exceptionals and other special items. Valuations: based on an average share price that year, (E): based on a share price of A$0.43 on 10 Oct 2013 19:11 EST


Paladin Energy Limited

Price premium received, but not enough…


?? September quarter production of 2.04Mlb. Guidance maintained.

PDN reported SQ 13 production of 2.04Mlbs (-5% q/q) vs UBSe of 2.12Mlbs. The production miss was due to a one week extension to the Kayelekera shut down offset by higher production from Langer Heinrich. Sales for the quarter were 1.67Mlbs (-28% q/q), though PDN is guiding to 2.6Mlbs for the DQ 14, implying H1 14 sales of 4.27Mlbs compared to UBSe of 4.24Mlbs. We see the difference q/q as timing-related. Production guidance of 8.3 – 8.7Mlbs U3O8 for FY 14 and cost reduction targets were reiterated.


?? Lower uranium price than forecast drops earnings

We have marked to market for SQ 13 resulting in a 5% reduction to our realised U3O8 price for FY 14 to US$47/lb. We note this is based on a spot price of US$45/lb (current spot US$35.25/lb). Our FY 14 earnings estimate drops to a loss of US$24m while our NPV remains $1.99ps (assumes US$2.50/lb for undeveloped resources).


?? Cash burn despite realising a premium price to spot in the quarter

We estimate PDN’s all in cash spend (opex, SG&A, interest & capex) in FY 14 to be ~US$400m or US$47/lb. With ~US$66m in principal repayments PDN’s cash outflow in FY 14 is ~US$55/lb. At today’s price of ~US$35/lb and a US$5-6/lb premium over spot (US$5.38/lb premium in SQ), PDN would burn ~US$120m in FY 14. Our simple cash flow model estimates PDN’s cash balance at US$69m by end FY 14, suggesting an asset sale is necessary within the next 12 months.


?? Valuation: A$1.99ps (DCF, 10% d.r.)

PT 70cps, a 30% disc. to our $1.03ps NPV excl. any value for undeveloped resources.