PERTH, WESTERN AUSTRALIA--(Marketwired - Nov. 20, 2014) - Paladin Energy Ltd (TSX:PDN) (ASX:PDN) ("Paladin" or the "Company") herein provides the Chairman's Address in relation to the Annual General Meeting held earlier today. Also, the presentation given at the meeting, along with the Proxy Voting results, may be found at http://media3.marketwire.com/docs/PDN_Pres.pdf as well as at the Company's website: www.paladinenergy.com.au
Dear Fellow Shareholders
The financial year ending 30 June 2014 and indeed the period since then marked a time of considerable activity at your Company. Now is an opportune moment to reflect on events over the past 15 months and the positive impact your Board believes these combined events have had on Paladin's financial position and long-term strategic outlook.
Paladin successfully completed three significant strategic initiatives since mid-January that have strengthened the Company's balance sheet and forecast cash flow in 2014 and 2015. These are:
- The sale of a 25% interest in the Langer Heinrich operation.
- The successful refinancing of the Langer Heinrich and Kayelekera project finance facilities.
- The suspension of production at Kayelekera.
Individually, each of these developments is significant; together, they positively impact Paladin's cash flow by more than US$295M. I mentioned in my letter in the Annual Report that these events provide a strong financial and strategic foundation to navigate the current low uranium price environment and to prepare for a period of future growth when prices inevitably recover. Of course we have now seen a substantial improvement in the uranium price over the past few weeks and this has provided my Board and no doubt shareholders with improved confidence in the Company's capacity to complete on positive terms the final steps to deal with balance sheet reform.
As shareholders will be aware, the price of uranium has faced a severe downturn since 2011. Since July 2013, the spot uranium price traded down to US$28/lb, the lowest level seen for approximately 8 years. August 2014 saw the start of a welcome improvement in the price and then with a very strong movement up to US$43/lb over the past 2 weeks for a number of reasons, including the news from Japan that an initial two nuclear power plants have received approval to re-commence operations in the very near future.
Whilst it must be recognised that considerable further uplift in the uranium price is needed to support a global sustainable supply industry, this recent uplift in price provides some welcome relief for existing producers.
The introduction of CNNC Overseas Uranium Holding Limited, a subsidiary of China National Nuclear Corporation, as Paladin's new 25% partner at Langer Heinrich is a significant development which I believe will have broad positive implications for Paladin's future.
Paladin's alignment with the leading nuclear organisation in China, is a carefully considered strategic move. China's impressive nuclear programme has a growing necessity for primary uranium supply as it continues its expansion programme, so there is obviously future potential and logic for further collaboration with Paladin in order to satisfy those needs.
Paladin offers a unique platform in the global uranium industry through its combination of unparalleled project development and technical expertise, a large resource base spread across several of the world's major uranium basins and, importantly, an independent corporate structure.
Shareholders should also recall the US$200M long-term offtake agreement Paladin entered into with Électricité de France S.A (EdF) in September 2012. EdF is the world's largest uranium consumer.
Through our new partnership with CNNC and the offtake agreement with EdF, Paladin has formed long-term strategic partnerships with two of the world's most important nuclear organisations. We view this unique position as a strong endorsement of Paladin's corporate strategy, asset base and technical expertise. It gives rise to the potential for a range of strategic initiatives and alternatives which can add meaningful value for Paladin shareholders.
The first half of 2014 also has seen a continuation of our decisive action to reduce the Company's cost base. Paladin has undertaken a range of cost reduction measures across its business in response to the difficult conditions. In the past two years, Paladin has reduced its corporate head count by 35% and taken US$80 - US$100M in cash costs out of the operations. The cost reduction programme will continue in FY15, when cash costs at the Langer Heinrich operation are expected to be further reduced.
In early February, Paladin made a difficult decision to suspend production at the Kayelekera Mine in Malawi. Putting an operation onto care and maintenance is never an easy decision. Paladin regrets the impact this painful but necessary decision has had on many Kayelekera employees and their families and, more broadly, on the Malawian economy, but it came only after the Company had endured years of financial burden in supporting the loss-making operation.
The support of the Government of Malawi during this transition to care and maintenance is appreciated and it is important to state that Paladin remains committed to maintaining a strong presence in Malawi.
A considerable amount of work completed in 2014 culminated in the landmark announcements I outlined earlier, however the entire Paladin team is conscious there is still much work to be done in the current financial year.
Sadly, two fatalities during 2013 was a stark reminder to all that a fresh and renewed focus on safety awareness was necessary. This is now underway as explained in the safety and health section of the Annual Report. Through the Sustainability Committee and at the full Board level, considerable focus also continues on maintaining sound environmental practices.
I again extend my appreciation on behalf of the Board to John Borshoff and his team for their hard work during another complex and difficult period. On behalf of the Paladin Board and management team, I also would like to thank our shareholders for their ongoing support and I look forward to sharing with you the benefits of what I believe is a new nuclear industry recovery.
RICK CRABB, Chairman
20 November 2014
ACN 061 681 098