Rather than relying on gut instinct or wishful thinking in regard to where you’d like the share price to be, I’d suggest reviewing the filings about the Langer Heinrich (LH) mine restart that PDN released back in July 2020; these provide something of a basis for putting a value on the LH project and, ultimately, the company. You’ll also need to calculate the present value of the various corporate-level charges that PDN will bear (which are unrelated to the LH operation), including post-refinancing (2023) interest expense, and estimate the value of the exploration assets that PDN holds in Canada and Australia (a bit of a wild guess, maybe AUD150mn [?], but this will obviously rise if the UXA spot price rises further). If you do all this, you’ll realise fairly quickly that the price at which PDN is able to contract to sell output from the LH mine (in which it has a 75% stake, other 25% held by China's CNNC) is one of the more critical variables in the whole equation (aside perhaps from your discount rate). By my estimates, if management contract 70-75% of output at USD50/pound, PDN looks pretty overvalued right now. If you think - for whatever reason - they can, in time, secure term contracts at USD60-65/pound, the dynamics change considerably – PDN would be very attractive at 0.30/share. And if you think they could secure USD70-80/pound, then the stock is a screaming buy. On the conference call back in July, management noted that FCF from the LH project (as a whole), before corporate level charges etc., would be in the realm of USD100mn per year assuming term contract sales at USD50/pound, rising in increments of USD60mn for every USD10 increment in sale price, during the first eight years from the restart date. Thereafter, mining would cease, but processing of smaller volumes (c. 60% vs. Yrs1-8 levels) would continue for a further 10 years.
Predicting the UXA price is above my paygrade, I’m afraid, but a lot of what I read and listen to suggests it’s likely to be higher rather than lower as the second half of the decade draws near. So if you don’t mind hanging on through the ups and downs, PDN may be for you. For my part, I was intending to sell down a bit (within my SMSF, so low CGT rate) after watching the share price hit 35-36c last Friday, but it obviously hasn't held those levels, so I'm going to do nothing for now.
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