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Paladin Energy: Financial Report for Nine Months Ended 31 March 2013

May 14 2013 12:00AM

Marketwire

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PERTH, WESTERN AUSTRALIA -- (Marketwired) -- 05/14/13 -- Paladin Energy Ltd ("Paladin" or "the Company") (TSX: PDN)(ASX: PDN) announces the release of its consolidated Financial Report for the nine months ended 31 March 2013. The Financial Report is appended to this News Release.

HIGHLIGHTS

OPERATIONS

-- Combined production for the nine months of 6.112Mlb U3O8, an increase of 26% over the nine months ended 31 March 2012, achieving 96% of nameplate production for the nine months.-- Quarterly combined production of 1.992Mlb U3O8, an increase of 12% over the March 2012 quarter achieving 95% of nameplate production for the quarter.-- C1 cost of production continued to fall quarter by quarter. Langer Heinrich C1 cost of production for the quarter remained steady compared to the December 2012 quarter at US$29.8/lb U3O8 and has decreased 8% since June 2012. Kayelekera C1 cost of production for the quarter decreased 8% to US$39.8/lb U3O8 in the March quarter and has decreased 24% since June 2012.-- Both mines now operating at nameplate performance and production optimisation initiatives continue to improve recoveries and reduce unit operating costs.-- Completion Tests satisfied at both Langer Heinrich and Kayelekera.-- FY2013 production guidance of 8.0 - 8.5Mlb U3O8 remains on target.-- Due to continued uranium price weakness, an impairment expense of US$44.8M recorded at Kayelekera for the March 2013 quarter, totalling US$140.8M for the nine months.



SALES AND REVENUE

-- Strong sales of US$106M for the quarter selling 1.92Mlb U3O8 at an average realised sales price of US$55.22/lb.-- Sales revenue for the nine months increased by 25% from US$240.0M in 2012 to US$301.0M in 2013. Sales volume for the nine months increased by 33% from 4.457Mlb U3O8 in 2012 to 5.928Mlb U3O8 in 2013.-- Average realised sales price of US$50.8/lb U3O8 for the nine months ended 31 March 2013, compared to average UxC spot price of US$44.95lb.



CORPORATE

-- Final payment of US$150M received from Electricite de France S.A. ("EdF") pursuant to the Long Term Off-take Contract.-- Total debt repayment of US$181M during the nine months including repayment of balance of March 2013 Convertible Bond of US$134.-- Cash of US$112.9M at 31 March 2013.-- Strategic initiatives to unlock value from some of Paladin's assets have advanced with keen interest and final bids are being assessed. Results expected during the June 2013 quarter.



Results

(References below to 2013 and 2012 are to the equivalent nine months ended 31 March 2012 and 2012 respectively).

- Safety and Sustainability: - Continued high safety performance with a 12-month moving average Lost Time Injury Frequency Rate of 1.2. - The annual NOSA HSE grading audit for Langer Heinrich confirmed a 4 Platinum Star rating. - Kayelekera achieved a milestone 365 LTI free days on 28 March 2013.- Production: - Combined production for the nine months of 6.112Mlb U3O8, an increase of 26% on the nine months ended March 2012, achieving 96% of nameplate production of 6.375Mlb U3O8 for the nine months. - Quarterly combined production of 1.992Mlb U3O8, a decrease of 9% on the December 2012 quarter, achieving 95% of nameplate production of 2.125Mlb U3O8 for the quarter.- Langer Heinrich Mine: - Production for the nine months of 3.939Mlb U3O8, an increase of 27% over the nine months ended 31 March 2012 achieving 101% of nameplate design capacity. - Quarterly production of 1.230Mlb U3O8 is a decrease of 13% over the previous quarter and achieved 96% of nameplate design capacity. - Strong recovery of 86.7% versus design of 85%. - Feed grades of 810ppm U3O8 versus design of 800ppm. - Production was influenced by temporary water constraints and some operational issues. Those are being resolved with improved water conservation measures in place and desalinated water scheduled to be introduced in mid May 2013. - Production capacity remains robust and above nameplate. - Further optimisation initiatives underway.- Kayelekera Mine: - Production for the nine months of 2.173Mlb U3O8, an increase of 24% over the nine months ended 31 March 2013, achieving 88% of nameplate design capacity. - Quarterly production of 0.762lb U3O8 is a decrease of 1% over the previous quarter and achieved 94% of nameplate design capacity. - Record recovery of 87.1%. - Feed grades of 1,094ppm U3O8 on track (design is 1,100ppm). - Average daily production at an all-time high for the quarter. - Maintaining self-sufficiency on acid requirements. - Benefits of process optimisation continue to be realised.- Impairment: - Due to continued uranium price weakness, an impairment expense of US$44.8M has been recorded at Kayelekera for the March 2013 quarter, totalling US$140.8M for the nine months.- Completion Tests: - The Completion Tests under both the Langer Heinrich Mine project finance facility and the Kayelekera Mine project finance facility were satisfied during the quarter which has resulted in a reduction in interest charges and provides greater flexibility with regards to voluntary prepayments and distributions under both facility agreements.- Sales: - Sales revenue increased 25% from US$240.0M in 2012 to US$301.0M for the nine months ended March 2013, as a result of higher sales volumes. The average realised uranium price for the nine months was US$50.8/lb U3O8 (2012: US$53.8/lb). The average UxC spot price for the nine months was US$44.95/lb. - Total sales volume for the nine months of 5.928Mlb U3O8 - a 33% increase over the nine months ended March 2012 sales of 4.457Mlb U3O8. - Uranium sales volumes are expected to fluctuate quarter-on-quarter due to the uneven timing of contractual commitments and resultant scheduling by customers. Now that production has reached design levels, sales and production volumes are expected to be comparable on an annualised basis.- C1 Cost of Production: - Langer Heinrich C1 cost of production for the March 2013 quarter remained steady at US$29.8/lb U3O8 compared to the December 2012 quarter. The underlying cost base reduced and C1 costs reductions would have been realised if nameplate production had been achieved. C1 cost has decreased 8% since June 2012, in line with the Company's projections. - Kayelekera C1 cost of production continued to drop substantially to US$39.8/lb, a reduction of 8.5% in the March 2013 quarter from the C1 cost of production of US$43.5/lb U3O8 for the December 2012 quarter. C1 cost of production for the March 2013 quarter decreased 24% from US$52.7/lb in the March 2012 quarter. - Further improvements in C1 costs are expected as a number of cost saving initiatives at both sites have yet to be fully implemented. (1)C1 Cost of production = cost of production excluding product distribution costs, sales royalties and depreciation and amortisation before adjustment for impairment. C1 cost, which is non-IFRS information, is a widely used 'industry standard' term.- Cost Reduction/Production Optimisation Initiative: - Following both operations reaching nameplate performance, the sites have now entered a period of optimisation, which is leading to improved process recoveries and reduced unit operating costs. Some elements of this work have the potential to expand the reserve base at Langer Heinrich by being able to use lower ROM feed grades. - In November 2012, the Company announced its programme to reduce costs within the Group, which is expected to realise US$60M to US$80M total savings over FY13 and FY14. The comprehensive cost and production optimisation review is part of the process of moving from development to a sustained production phase. The cost review encompassed examination of all activities within the Paladin Group from its mining operations, corporate/administration overheads, future development considerations, exploration, sales and business development. Opportunity for re- negotiation of key mining and consumables contracts has arisen, paving the way for material cost reductions over the next two years. - The Company remains focused on reducing costs across all facets of the business and work continues to identify more cost saving opportunities. These cost cutting measures are proceeding in accordance with the targets outlined in the November 2012 cost cutting announcement. - The two key optimisation projects at Kayelekera identified in the last quarterly, grid power and acid recycling, are progressing well, although both have experienced minor delays. Notwithstanding the delays, costs remain within budget expectation. - Two further optimisation initiatives at Kayelekera are also underway. Continuous resin advance will be trialled in the coming quarter with a view to full implementation in the following quarter. In addition to this initiative, the milling classification circuit is also being upgraded with a view to reducing milling power consumption and grind size. The reduced grind size will result in improved leach and RIP performance.-- Profit and Loss: --------------------------------------------- Three Months Ended Nine Months Ended 31 March 31 March --------------------------------------------- 2013 2012 2013 2012 US$M US$M US$M US$M ---------------------------------------------Revenue 106.4 67.8 301.9 241.2Costs before depreciation and amortisation (77.8) (44.0) (230.2) (168.0)Impairment loss in prior year relating to inventory sold during the year 9.7 2.5 29.1 13.7Impairment - inventory (3.3) (11.9) (13.7) (11.9)Royalties and distribution (4.5) (2.8) (15.1) (11.8)Depreciation and amortisation (14.1) (8.3) (43.1) (32.9) --------------------------------------------- Gross profit 16.4 3.3 28.9 30.3Exploration expenses (0.3) (0.2) (1.2) (1.6)Site non-production costs (4.7) (4.0) (12.3) (14.1)Corporate, marketing and administration (5.9) (4.8) (17.6) (15.7) --------------------------------------------- 5.5 (5.7) (2.2) (1.1)Non-cash costs (1.2) (2.3) (4.8) (6.8)Other income & expenses (44.0) (3.4) (143.0) (188.5) --------------------------------------------- Loss before interest and tax (39.7) (11.4) (150.0) (196.4)Finance costs (16.0) (10.7) (49.6) (38.6) --------------------------------------------- Loss before income tax (55.7) (22.1) (199.6) (235.0)Income tax (expense)/ benefit (4.8) 2.7 (84.5) 74.8 --------------------------------------------- Loss after tax (60.5) (19.4) (284.1) (160.2)Non-controlling interests 6.4 1.9 36.4 22.5 ---------------------------------------------Net loss after tax attributable to members of the parent (54.1) (17.5) (247.7) (137.7) --------------------------------------------- - Gross profit for the nine months decreased to US$28.9M from US$30.3M in 2012 due to lower prices, partially offset by a 33% increase in sales volumes and a US$13.7M impairment of inventories at Kayelekera (2012: US$11.9M). - Site non-production costs for the nine months were reduced by US$1.8M to US$12.3M due mainly to a decrease in expenditure relating to the Langer Heinrich Mine Stage 4 expansion evaluation study, which is being reviewed in the light of the experience gained through the optimisation of Stage 3 and the new pathways that have been identified. This has been partially offset by US$1.2M expenditure on process optimisation testing and pilot work at Kayelekera. - Corporate and marketing costs were US$1.9M higher for the nine months predominantly due to restructure costs of US$0.4M and one-off costs in relation to consultants and advisory services. - Non-cash costs for the nine months, mainly share-based payments, were reduced by US$2.0M to US$4.8M as a result of a reduction in share rights granted compared to 2012. - Other income and expenses for the nine months mainly reflect the impairment of the Kayelekera Mine asset expense of US$140.8M (2011: US$178.9M) caused by the continued low uranium price. Further pit optimisation work is being undertaken and, in addition, benefits should arise when future U3O8 price forecasts reflect the supply/demand imbalance. Additionally, other expenses include the write-off of fixed costs during the plant shutdowns of US$2.6M (2011: US$9.2M). - Income tax expense for the nine months of US$84.5M is predominantly the result of the de-recognition of the net deferred tax asset ("DTA") at December 2012 of US$98.2M at Kayelekera arising from unrealised foreign exchange differences and carry forward tax losses previously recognised. The unrealised foreign exchange difference had arisen on intercompany loans due to the extreme devaluation of 104% in the Malawian Kwacha over the last 12 months from an average of US$1=MKW160 to US$1=MKW327 at 31 December 2012. - Net loss after tax of US$247.7M was recorded for the nine months, mainly as a result of the US$98.2M de-recognition of the Kayelekera Mine net DTA, US$140.8M impairment associated with the write-down of the Kayelekera Mine assets, the US$13.7M inventory impairment at Kayelekera and finance costs relating to interest payable on the outstanding convertible bonds and project finance loans.- Cash Flow: - Positive cashflow from operating activities of US$216.9M for the nine months ended 31 March 2013 was primarily due to receipts from customers of US$323.6M and receipt of the off-take agreement funds of US$200.0M. Positive cash flow of US$67.4M was generated by the Langer Heinrich and Kayelekera operations before investment in working capital required to support higher production levels, payments for administration, marketing and non-production costs of US$28.6M. The remaining expenditure comprises US$1.2M for exploration and net interest paid of US$26.8M. - Cash outflow from investing activities of US$34.9M for the nine months ended 31 March 2013 relating mainly to plant and equipment acquisitions of US$21.6M, predominantly the new tailings facility at Langer Heinrich and capitalised exploration expenditure of US$14.3M. Exploration expenditure in foreseeable periods will be lower. - Cash outflow from financing activities of US$181.5M for the nine months ended 31 March 2013 was mainly attributable to repayment of the US$134M remaining on the US$325M Convertible Bonds issued on 11 March 2008, repayment of project financing for KM of US$29.9M and LHM of US$17.0M.- Cash Position: - Cash of US$112.9M at 31 March 2013.- Long-term Off-take Contract with a US$200M prepayment: - US$200M payment received pursuant to the Long Term Off-take Contract with Electricite de France S.A.- Mid-term Sales Contracts Secured: - Two mid-term off-take agreements secured for a total of 6.3Mlb U3O8 being delivered from late 2012 to end of 2015 at approximately 2Mlb pa from both mines. Pricing will be determined predominately by the market price at the time of delivery (without floor or ceiling limitations), while a minority portion of the delivery prices will be in accordance with a series of specified fixed prices, which exceed current spot uranium prices.- Exploration and Development: - Aurora - Michelin Uranium Project, Canada - Winter infill drilling programme has been completed. An updated mineral resource estimate for the Michelin deposit is planned for late June/early July 2013 after all assays have been received and validated. - Manyingee Project, Australia - Evaluation of the 2012 drilling results is concentrating on developing an updated JORC-compliant resource and new hydrogeological model to be used in any future in-situ recovery ('ISR') leach trial operations. An updated mineral resource estimate is expected in the June 2013 quarter.- Guidance FY2013 - The continued solid and stable quarterly and year to date production over the 9 months ended 31 March 2013 of 6.112Mlb U3O8, with clear opportunities for continued improvement, place the Group in a good position to achieve its stated production target guidance of 8.0 to 8.5Mlb U3O8.- Strategic Initiative Efforts - Considerable effort has been applied to advance the strategic initiative to unlock value from Paladin's asset base. There was keen interest by those selected parties to become involved in the final phase to select a specific partner. - Post this reporting period, progress has been made according to schedule for which an announcement is expected to be made in the June quarter. - The proceeds from these initiatives will be applied to debt reduction and strengthening the balance sheet.



The documents comprising the Financial Report for the nine months ended 31 March 2013, including the Management Discussion and Analysis, Financial Statements and Certifications are attached and will be filed with the Company's other documents on Sedar (sedar.com) and on the Company's website (paladinenergy.com.au).

Generally Accepted Accounting Practice

The news release includes non-GAAP performance measures: C1 cost of production, non-cash costs as well as other income and expenses. The Company believes that, in addition to the conventional measures prepared in accordance with GAAP, the Company and certain investors use this information to evaluate the Company's performance and ability to generate cash flow. The additional information provided herein should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Declaration

The information in this Announcement relating to exploration and mineral resources is, except where stated, based on information compiled by David Princep B.Sc who is a Fellow of the AusIMM. Mr Princep has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves", and as a Qualified Person as defined in NI 43-101. Mr Princep is a full-time employee of Paladin Energy Ltd and consents to the inclusion of this information in the form and context in which it appears.

Conference Call

Conference Call and Investor Update is scheduled for 06:30 Perth & Hong Kong, Wednesday 15 May 2013, 18:30 Toronto and 23:30 London, Tuesday 14 May 2013. Details are included in a separate news release dated 10 May 2013.

ACN 061 681 098

To view the Third Quarter Report, please visit the following link: http://media3.marketwire.com/docs/Q3ResultsPaladin.pdf.



Contacts:
Paladin Energy Ltd
John Borshoff
Managing Director/CEO
+61-8-9381-4366 or Mobile: +61-419-912-571
john.borshoff@paladinenergy.com.au

Paladin Energy Ltd
Alan Rule
Chief Financial Officer
+61-8-9381-4366 or Mobile: +61-438-942-144
alan.rule@paladinenergy.com.au

Paladin Energy Ltd
Greg Taylor
Investor Relations Contact
+1 905 337-7673 or Mobile: +1 416-605-5120 (Toronto)
greg.taylor@paladinenergy.com.au

Paladin Energy Ltd
Andrew Mirco
Investor Relations Contact
+61-8-9381-4366 or Mobile: +61-409-087-171
andrew.mirco@paladinenergy.com.au





Source: Marketwire


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