pdn, page-34

http://www.afr.com/p/business/companies/weak_uranium_prices_forces_closure_6Jq1zMnOONO3LAxC4jQkTM

The Australian Financial Review

Persistently dire uranium prices have forced the closure of one of Paladin Energy’s mines with chief executive John Borshoff saying the operation would not resume operations until it was profitable.

Production at the Kayelekera mine in Malawi is being shuttered to “preserve the remaining ore body under a sustained price recovery occurs,” Paladin said.

High costs at the Kayelekera, the smaller of Paladin’s two producing miners, has caused an “unsustainable” demand for cash. Mr Borshoff said that despite great efforts to cut costs, the mine was still operating at a loss because of low prices.

“Paladin is unable to continue to provide the level of financial support that Paladin (Africa) Ltd has required in recent years, hence the decision at this time,” he said in the statement, released late Friday.

Mr Borshoff is a renowned bull on the uranium price but his confidence in an increasing supply-demand imbalance pushing up prices has so far been misplaced. Uranium prices slumped after the Fukushima nuclear disaster in Japan in March 2011 and have never recovered. Spot rates are in the mid $US30s per pound range, down from more than double that before the accident.

He said the decision to place the mine on “care and maintenance” was in the best interests of Paladin (Africa) shareholders, including the government of Malawi. Paladin’s larger mine, the Langer Heinrich site in Namibia which operates at a lower cost, is continuing operating as normal.

Paladin said that at $US35 a pound for uranium oxide, it would have had to inject up to $US25 million in cash for each of the next two years to maintain Kayelekera. Shutting the mine will improve forecast cash flow by $US7 million-$US10 million this year, and by $US20 million-$US25 million in 2015, it said.

Keeping Kayelekera on care and maintenance will cost about $US12 million a year, to be funded from sales of uranium oxide already on hand at the site, which will be produced as mining operations are run down.

The closure of the mine has forced Paladin to cut its production guidance for 2014, from 8.3 million-8.7 million pounds of uranium oxide, to 7.8 million-8 million pounds.

Mr Borshoff also ruled out any expansion of production in Namibia until uranium prices reach at least $US75 a pound and are sustainable at or above that level.

He said Paladin would invest in future production only when it made economic sense, which included restarting Kayelekera.