FY2014 Cost reductions:
-- Langer Heinrich Mine (U$10M) - An additional 7.5% reduction in unit costs is targeted as the operation is fully optimised with continued process refinement and further reductions in mining costs.-- Kayelekera Mine (U$20M) - An additional 15% reduction in unit costs is expected by gaining access to grid power supply and completion of the key production optimisation programmes.
These cost saving initiatives are being implemented and will represent a significant reduction in operating expenditure. However, these cost reductions and production optimisation efforts do not include the additional benefits anticipated from identified technical innovation, which will deliver further operational efficiencies and improved recoveries, which are briefly described in the LHM and KM sections of this report.
URANIUM MARKET COMMENTS
The Ux spot price weakened during the quarter, moving from US$46.50/lb U3O8 in July to a low of US$40.75/lb U3O8 in November before recovering to US$43.50/lb U3O8 in December. The Ux term price also fell from US$60.00/lb U3O8 to US$56.00/lb U3O8.
Four key developments that have occurred recently are expected to re-focus attention on the dynamics of mid to long term uranium supply growth, which is currently at a standstill.
-- The new government elected in Japan in December has promised to review the previous government's nuclear phase-out policy and has expressed support for the construction of new nuclear plants. Re-starts of the 48 nuclear plants currently offline for safety inspections will begin once the Nuclear Regulation Authority releases its new safety guidelines, which is expected by mid-year.-- Nuclear power plant construction has resumed in China with four new construction starts in November and December bringing the total number of new plants under construction to 29 (28,753 MW). Worldwide, there are now 67 plants under construction and 437 in operation (including the 48 on standby in Japan).-- Uranium producers are shelving variously stated plans for further production increases or have deferred new projects until the market recognises the need for consistently higher prices to ensure adequate sustainable uranium supply in the future.-- Industry consolidation continues with the recent announcement of the planned acquisition of full ownership of Canadian producer Uranium One Inc. by JSC Atomredmetzoloto (ARMZ), which is a subsidiary of the Russian Rosatom State Energy Corporation.
This dual event of the return to positive growth in the nuclear industry and a virtual standstill in uranium supply growth is unsustainable and only uranium price increases will rectify this major problem for the industry to be incentivised and start new development.
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.
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