Langer Heinrich Mining Operation URANIUM MINING - AN INDUSTRY IN CRISIS. John Borshoff, Managing Director/CEO

Transcription

1 Langer Heinrich Mining Operation URANIUM MINING - AN INDUSTRY IN CRISIS John Borshoff, Managing Director/CEO Australian Uranium and Rare Earths Conference July 2013

2 Uranium outlook Company status & highlights Operations update Paladin outlook 1

3 World Nuclear Capacity June 2013 Fukushima is behind us Demand is confirmed Current Nuclear Capacity Under Construction Planned Proposed Reactors / (Capacity) 435 (371.9GWe) 68 (71.2GWe) 162 (183.0GWe) 316 (358.7GWe) Countries China 17 (14.0GWe) 28 (30.6GWe) 49 (56.0GWe) 120 (123.0GWe) Russia 33 (24.2GWe) 10 (9.2GWe) 24 (24.2GWe) 20 (20.0GWe) India 20 (4.4GWe) 7 (5.3GWe) 18 (15.1GWe) 39 (45.0GWe) South Korea 23 (20.8GWe) 4 (5.4GWe) 6 (8.7GWe) - Japan 50 (44.4GWe) 3 (3.0GWe) 9 (13.0GWe) 3 (4.1GWe) United States 103 (101.6GWe) 3 (3.6GWe) 9 (10.9GWe) 15 (24.0GWe) Fukushima China, India, Russia, Emirates have reconfirmed their reactor build programmes Japan is returning 2

4 Industry Situation Unsustainable When you have a situation 1. Demand essentially sorted and quantified post Fukushima. 2. Current low prices make it impossible to achieve 2020 supply target. Supply industry in disarray. 3. Effective moratorium in place unless the critical US$70/lb threshold is achieved. 4. Strong chance with continued low price some high cost operations will be mothballed. 5. Investor/financing sector finding it difficult to understand the market and is basically a spectator. 6. Committed juniors struggling to raise sufficient capital to survive. 7. Huge capital blow out to develop new uranium projects and now need much higher uranium prices. Financial traders are profiting on small arbitrages in a secondary market. Mining industry cannot exist in these circumstances. 8. Vertically integrated companies tempted to forgo viability at the mining side but recover profits when selling enrichment services. Yellowcake is in danger of becoming a loss leader for some. 3

5 Supply/Demand Unbalanced supply shortfall will widen A supply shortage is unavoidable post Long lead times will severely limit achieving 2020 supply targets average lead time to full production 6 to 9 years insufficient projects able to bring sufficient new production online rapidly Prices in the range of $80/lb to $120/lb needed to incentivise new production supply shortfall remains under all of Paladin s pricing scenarios extreme costly measures needed resulting in uncertainty and high volatility Increasing constraints for supply growth technical, regulatory, financing, geo-political (e.g. Quebec, Niger) decreasing quality of available deposits (grade/metallurgy) Impossible task ahead to meet 2020 forecasted demand circa 15 new mines are required within the next 7 years to achieve target 4

6 Supply Growth Uncertainty The impossible challenge : Primary supply will have to increase by circa 90Mlb U 3 O 8 pa to meet 2020 requirements (in 7 years) In previous 7-year period ( ), production increased only by 48Mlb, and Kazakhstan accounted for ~40Mlb NO OTHER KAZATOMPROM OR PALADIN ON HORIZON TO REPEAT SUCH GROWTH 6.5 years 8???? 90 5

7 Project Development Costs Significant CAPEX blowout over the past 8 years US$ per Annual lb Production $250 Forecast $200 Actual $150 $100 $50 Design Criteria $0 2007/8 LHU Stage Kayelekera 2012 LHU Stage 3 Husab Toro Mkuju Capital $170M $300M $170M $2.5B $280M $700M Capacity 3.7Mlb/a 3.3Mlb/a 1.6Mlb/a 15.0Mlb/a 1.7Mlb/a 3.5Mlb/a US$/annual lb $46 $91 $106 $167 $165 $200 CAPEX required has increased by 335% from 2007/8 Financing costs (repayment over 5 years) have risen from circa US$10 to US$30-40 per lb U 3 O 8 6

8 Presentation Outline Uranium outlook Company status & highlights Operations update Paladin outlook 7

9 Disclaimer and Notes for JORC and NI Mineral Resources and Ore Reserves This presentation includes certain statements that may be deemed forward-looking statements. All statements in this presentation, other than statements of historical facts, that address future production, reserve or resource potential, exploration drilling, exploitation activities and events or developments that Paladin Energy Ltd (the Company ) expects to occur, are forwardlooking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. The Company does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise. In the following presentation, for those deposits that are reported as conforming to the Joint Ore Reserves Committee (JORC) 2004 code, the terms Inferred Mineral Resources, Indicated Mineral Resources, Measured Mineral Resources, Ore Reserves, Proved Ore Reserves, Probable Ore Reserves and Competent Person are equivalent to the terms Inferred Mineral Resources, Indicated Mineral Resources, Measured Mineral Resources, Mineral Reserves, Proven Mineral Reserves, Probable Mineral Reserves and Qualified Person, respectively, used in Canadian National Instrument (NI ). The technical information in this presentation that relates to Exploration Results, Mineral Resources and Ore Reserves is based on information compiled by David Princep B.Sc. and Simon Solomons M.Eng, both of whom are Fellows of the Australasian Institute of Mining and Metallurgy. Messrs Princep and Solomons each have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, and as Qualified Persons as defined in NI Messrs Princep and Solomons are full-time employees of the Company and consent to the inclusion of the relevant information in this announcement in the form and context in which it appears. Previous tonnages, grades, assays and other technical data relating to the Oobagooma deposit are taken from historical records prior to the implementation of the current NI While the data is believed to have been acquired, processed and disclosed by persons believed to be technically competent, they were estimated prior to the implementation of NI and are therefore regarded as historical estimates for the purposes of NI and as an exploration target for the purposes of JORC disclosure. A Qualified Person as defined in NI has not done sufficient work to classify the historical estimate as current Mineral Resources. The Company is not treating the historical estimates as current Mineral Resources as defined in NI and for this reason the historical estimates should not be relied upon. At present, the Company considers that these resources have no equivalent classification under NI and should therefore be considered as unclassified. The historical information is presented on the basis that it may be of interest to investors. 8

10 Quarterly/Annual Highlights Safety Maintained low Lost Time Injury Frequency Rate Sales June Qtr US$107M/2.33Mlb at US$46.22 Annual (FY13) - US$408M/8.25Mlb at US$49.82/lb average Production Quarterly combined production 2.142Mlb FY13 production 8.255Mlb (97% of total design capacity) LHM KM Continuous Improvement Production of 1.35Mlb (104% of nameplate) Water constraints and operational issues resolved Ability for derisked production expansion Production of 0.79Mlb (97% of nameplate) C1 cost of production continue to improve Sustainable production and recovery achievements KM - acid recycling September/grid power by March 2014 LHNM Hydro sort by Sept quarter 9

11 Paladin Turning Vision Into Reality Developing the mines LHM construction Annual growth 20%- 40% over 6 years of production LHM production (Mlb) KM construction KM production (Mlb) Clear commitment Steady growth, now at 8.0Mlb-8.5MIb pa capacity Applied new process technology First new conventional uranium mines in 20 years in the world FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014E LHM nameplate achieved KM nameplate to be achieved PDN is the worldwide leader in operating low to medium grade mines Developing the pipeline Portfolio resources (1) (Mlb) 6 acquisitions over 5 years Organic growth Michelin Paladin has invested $1.5bn in its project pipeline Impressive track record of resource expansion Globally diversified project pipeline 1 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 (1) Paladin s attributable R&R 2005 Portfolio Organic growth Valhalla uranium deposits at acquisition Summit deposits at acquistion Angela deposits at acquistion Fusion NGM Michelin

12 Current Price Will Not Incentivise New Production Paladin decision to proceed with construction Global Financial Crisis Fukushima Disaster

13 Geographically Diverse Project Pipeline 12

14 Uranium outlook Company status & highlights Operations update Paladin outlook 13

15 Langer Heinrich Project Three successful production capacity expansions completed: 5.2Mlb with Stage 3 starting mid 2012 currently producing above design Low quartile cost producer long term C1 target sub US$28/lb Design Criteria Stage 2 Stage 3 Design Actual FY13 Ore Throughput 2.5Mtpa 3.5Mtpa 3.54Mtpa Leach Throughput 1.5Mtpa 2.1Mtpa 1.99Mtpa Ore Feed Grade 850ppm 800ppm 812ppm Recovery 82% 85% 86% U 3 O 8 Production 3.7Mlbpa 5.2Mlbpa 5.3Mlb pa Production optimisation with further unit cost reduction CCD performance/ leach temperature management/improved beneficiation heat recovery/management +20 years project life further expansion potential up to 8.5Mlb pa 14

16 Langer Heinrich Quarterly Production Stage 3 Capacity 15

17 Kayelekera Project Production capacity of 3.3Mlb U 3 O 8 pa Achieved 97% nameplate in June 2013 quarter First modern resin-in-pulp (RIP) uranium processing facility C1 cost initiatives for FY13 successful and better than target C1 cost reduction FY13 achieved 24% C1 cost reduction FY14 targeting 12%-15% reduction Design Criteria Design Actual FY13 Ore Throughput 1.5Mtpa 1.3Mtpa Ore Feed Grade 1150ppm 1143ppm Recovery 87% 84.6% U 3 O 8 Production 3.3Mlbpa 3Mlb pa Q3/Q4 Production 97% of nameplate Production optimisation with further unit cost reduction improvements in RIP efficiency/grid power installation/acid recycling. trialling continuous resin advance for further recovery improvement 16

18 Kayelekera Quarterly Production KM Quarterly Production and Feed Grade 16 days planned maintenance 1 Design Capacity 1 Equates to 135,000lb reduced production 17

19 Uranium outlook Company status & highlights Operations update Paladin outlook 18

20 Strategic Initiative The Paladin platform becoming increasingly more attractive as uranium supply stagnates Key objectives from the strategic initiatives - unlock value from Paladin s extensive uranium asset base and accomplishments - utilise current platform for future growth leverage with the assistance of a strategic partner - reduce debt and strengthen the balance sheet EdF deal in Aug 12 contributed $200M to value unlocking High interest from participants reflects future supply concerns Sale of a minority interest in Langer Heinrich project in Namibia - revised bid received - results expected mid to late August

21 Positioned for the Future First phase of growth complete 8.5Mlb of installed production capacity pipeline established Site cost and corporate overhead reduction well advanced Continuation of optimisation and innovation production innovation and optimisation for continued unit cost reduction low capital intensity maximise return on investment Positioning for the next phase of rapid growth development and feasibility studies for next growth phase (pipeline projects) strategic initiatives and partnerships with key industry participants Finalisation of LHM minority interest sale introduce solid reputable partner place Company in strong position to achieve stated goals 20

22 Key Takeaways Uranium specialist company with demonstrated achievements only company in world outside Kazatomprom to have delivered new uranium mines has established a strong and positive reputation in industry Mining installed nameplate capacity of 8.5Mlb pa operations de-risked with improving cost and production efficiency Further expansion possible Stage 4 feasibility pending expansion uranium price dependent potential to increase to 11.8Mlb pa Diversified project pipeline contains world class uranium deposits staged project development schedule to 2025 and beyond focus on developing deposits in Western Australia and Eastern Canada in the medium term Proven builder / operator unique standing with optimal platform for consolidation and growth a solid and reliable operator to make rewarding, long term partnerships 21

23 Paladin Energy Ltd Contact Details Head Office Level 4, 502 Hay Street Subiaco Western Australia 6008 PO Box 201, Subiaco Western Australia 6904 Telephone: +61 (0) Facsimile: +61 (0) paladin@paladinenergy.com.au Website: Investor Relations Team Australasia: Andrew Mirco +61 (0) North America: Greg Taylor +1 (905)

24 Paladin - A Modern Uranium Company Uranium specialist company with demonstrated achievements employs 1,800 staff and contractors top 10 producer in the world founded 1994, head office in Perth Mining mines in Namibia and Malawi installed production capacity of 8.5Mlb U 3 O 8 pa operations in two climatic regions (arid zone and monsoonal) Further on site expansion possible to 11.8Mlb pa Diversified global project pipeline for future development Proven builder / operator X extensive uranium expertise in the group (technical, environmental, health, social) only company in the world to have successfully developed 2 conventional mines in past 20 years 23

25 Company Status and Highlights Safety Performance - continued high safety performance - Kayelekera achieved a milestone 459 days LTI free to end June 2013 X Operational Highlights - combined production for FY Mlb, up 19.8% on previous year - positive June quarter results Sustainable Cost Savings - average C1 cost of production for the quarter continue to reduce - production optimisation projects at both sites will deliver further cost savings - focus remains on reducing costs across all facets of the business Guidance - Achieved mid the given FY13 guidance range of 8.0Mlb to 8.5Mlb U 3 O 8 - FY14 guidance if forecast 8.3Mlb to 8.7Mlb U 3 O 8 Strategic Initiatives - sales process on schedule and results expected mid to late August

26 Nuclear Outlook Positive key drivers Japan sorting out schedule for re-starts Liberal Democratic Party (LDP) elected Dec 2012 reversed 2040 phase out policy LDP expected to win upper house July Unique opportunity to accelerate reactors starts Paladin s detailed assessment of Japanese reactor restarts 3-6 reactors return to service during 2HCY13 increasing to 75-80% by CY15/16 China - back to building the fleet Post Fukushima 2020 target 58GWe (could reach 70-75Gwe) construction activities initiated at 4 reactor sites Currently 28 reactors under construction Russia - aggressive repositioning for supply ARMZ acquiring Uranium One giving complete Russia control over production could take all uncommitted future Uranium One production ARMZ require significant additional primary uranium to meet 2020/22 target Russia will cease HEU down-blending programme as scheduled by Dec 2013 X 25

27 Major Global Uranium Mining Companies industry unprepared to deal with the supply challenge Government (vertically integrated) agencies: (3) ARMZ (UUU included) ] battling growth Areva ] have stumbled with new projects CGNPC ] new miner risks associated X Government (mining companies only) agencies: (2) KazatomProm (State organisation) ] at capacity, costs increasing Navoi (State organisation) ] at capacity Diversified mining houses: (2) Rio Tinto (ERA included) ] declining production, strategy focused elsewhere BHP ] Olympic Dam decision indefinitely postponed Publically listed, pure uranium miners: (2) Cameco ] has scaled back on growth, no new projects Paladin ] no expansion, unless $80/lb threshold surpassed Minor players and juniors (private and public) ] will only make small contribution Heathgate (Aust), Mestena (US), Uranium Energy (US) Essentially a moratorium declared by majors, no new projects until uranium price goes above US$70/lb 26

28 Paladin Positioned for Advantage Why Paladin is positioned to take advantage of the current outlook? Unique intellectual property experienced and committed management team technical team with the capability to develop new projects in challenging and complex environments sector leader in technology (capability to operate deposits at grade well below 1,000ppm in conventional mining) Industry position Paladin is the only sizeable non-aligned pure play producer consolidation almost completed by either larger mining groups and/or government owned players willing to secure sources of supplies. Further consolidation needed production growth profile provides timely supply security during anticipated volatile phase X Stable geographies presence on 3 continents / 3 main uranium friendly countries: Canada, Australia, Namibia security and diversity of supply in the long term 27

29 Conclusion Paladin on track to continue solid production results FY14 guidance Mlb Focused on further cost rationalisation Production optimisation through innovation to improve efficiency Strategic initiatives to reduce debt and strengthen the balance sheet Paladin s pipeline projects ready for expansion when incentive prices are sufficient ability to leverage growth via strategic partner plenty of expansion capability contained in the project pipeline if incentivised X Uranium Price Dependent 2015 Stage 4 Expansion Manyingee Michelin Project Tier 1 Producer Calendar years Pipeline 28