Paladin Snaps Up Fuel To Expand

Sydney Morning Herald

Wednesday August 27, 2008

Jamie Freed

PALADIN ENERGY has kick-started its new Paladin Nuclear marketing arm by buying uranium at $US60 ($70) a pound on the spot market in expectation the nuclear fuel's price has bottomed.

The spot price of uranium, which had peaked at a record $US138 a pound last July, had fallen to $US59 in June.

After reporting a $US36 million loss yesterday broadly in line with market expectations, the managing director of Paladin, John Borshoff, said Paladin Nuclear had taken advantage of the price dip to purchase 530,000 pounds on the spot market in June for $US31.8 million.

He said he thought the market had bottomed, as suggested by a recent rise to $US64.50 a pound after Cameco again delayed production from its Cigar Lake project in Canada.

Paladin Nuclear is part of the miner's vertical integration strategy and aims to offer more flexible uranium and nuclear supply packages.

The spot market for uranium is relatively small because nuclear power providers buy more of their uranium on long-term contracts to ensure security of supply.

Mr Borshoff told the Herald that as in the iron ore market, there was now much discussion among uranium producers about the best way to achieve maximum value for the product.

"It's a little bit difficult because there are 50 years of embedded tradition where utilities like anonymity in what they do and how they do it," he said.

"I agree more with the BHP model: that it's better to have a [London Metal Exchange]-like mark-to-market transaction. But I also see some difficulty there."

Paladin has had difficulties meeting production targets from its Langer Heinrich mine in Namibia, but Mr Borshoff said it remained on track to achieve its revised calendar-year target of 2.55 million to 2.6 million tonnes of uranium, with production skewed to the second half as it installed a sixth heat exchanger next month to give it added maintenance flexibility.

Paladin reported a $US11 million profit from Langer Heinrich last year but a loss overall due to exploration expenses and interest payments on its convertible notes.

The company has $US338 million in cash and is seeking to acquire advanced projects in Africa, the US and Asia.

© 2008 Sydney Morning Herald

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