Paladin Energy Ltd

Thank you for standing by, and welcome to the Paladin Energy Limited December 2024 quarterly results call. All participants are in a listen-only mode. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Paul Hemborough, COO. Please go ahead.

Good morning, everybody, and welcome to Paladin Energy's second quarter report for Finance Year 25. My name is Paul Hember, I'm Chief Operating Officer at Paladin and with me today is Ian Poodie, our Chief Executive Officer, Anna Sudlow, our Chief Financial Officer and Alex Ryback, our Chief Commercial Officer. We're pleased to be here today to present our quarterly results and discuss the number of positive outcomes that we've achieved during the last quarter. The ramp-up of operations at Lange Heinrich continues and we're seeing positive progress in the operation, particularly coming out of the shutdown in November. The shutdown was well executed with all of the intended activities completed on time. December 2024 recorded the highest monthly production volume since the restart of commercial production in March 24. There are a number of notable achievements in the quarter, including the sustained improvement in recovery rates and stabilisation of water supply to the plant. Paladin also closed out the acquisition of Fish and Uranium Corporation on the 24th of December and completed listing on the Toronto Stock Exchange on the 27th of December. This work is well executed and is a significant milestone for the company. I'll now provide an update on the operations and I'll deep dive a couple of issues. But first I'll start with our safety performance. On a 12-month rolling basis, the company trip sits at 4.1 per million hours' work, which remains under our target of five. The health and safety of all of our people, no matter where they are or what role they play, is incredibly important to us, and we work hard to continuously improve our conditions, systems and processes that drive safer outcomes. In Namibia, production for the quarter was similar to the previous quarter at £639,000, with two weeks fewer operating days than quarter one due to the shutdown. In December, we achieved production of £308,000 of drum product, which is a step change coming out of the shut. So we remain on track to deliver the guidance range of three to 3.6 million pounds of products for FY25. The November shutdown was an important factor that led to the results that we saw in December. Some of the work included improvements to the flash unit in the leaching circuit, a new burner installation in steam generation to improve efficiency, and some additional pump and pipe work in the CCD to improve our recovery rates. The team has worked very hard to lock in the recovery improvements identified at the end of last quarter. And so we saw an uplift from recovery at 69% in quarter one to 88% this quarter, sustained through the entire quarter. This is a result that I'm very pleased with and comes from a lot of good analysis and problem solving from my team. We've also made great strides in delivering improvements to the water infrastructure and systems that support consistent supply. And we've proven the infrastructure and the capacity works as evidenced by the December result where we had no water-related interruptions. We've seen minor disruptions to our operations in January due to sulfur blooms affecting NAM water supply. These types of issues are routine events which we cater for in our guidance. So we've solved the infrastructure challenges and we've solved the capacity challenge and we continue to work with NAM water to optimise water supply and we're continuing to make improvements to our water efficiency and water management on site. As many of you may know, we're currently processing previously stockpiled ore, and our base case plan is to move to mining higher quality ore from the middle of this year. Now, we continue to experience variability in the grade of that stockpiled ore, so we'll continue to assess a range of options to increase ore grade, including blending strategies and bringing mining forward from the planned July start date. My team has been working on the mining phase now for six months with mine planning optimisation and scheduling work. We've selected a preferred contractor, we've identified the equipment that we need and as I previously noted some of that equipment is on site already constructing the next tailing stand. We will continue to identify mechanisms that may enable us to bring mining forward. Restarting a mine and large processing facility has a lot of moving parts, and we're now nine months into what is a 21-month ramp-up process. I'm extremely happy with the work my team has done and the results of their problem-solving efforts. We continue to lock in improvements such as recovery, water infrastructure and delivery, and when we deliver the mining phase, I believe it comes together to move us closer towards our target levels of performance. I'd like to hand over now to Ian Purdy for an update on the fission acquisition.

Thanks, Paul, and hi, everyone. Really strong finish to the year across the company. As Paul has said at Langer Heinrich, some great results. And really importantly for us, we were so pleased to bring the acquisition of Fission Uranium Corp to successful completion. It came together really well at the end of the day once we achieved the Canadian approvals with the full support of the Canadian government. We were able to close the transaction very quickly just before Christmas and we're extremely pleased to see our ticker up on the TSX before the new year. So we're up, we're running, the transaction is complete in every aspect, successfully completed and actually came together very, very smoothly at the end of the day. We're underway. We've really got our boots on the ground working with the Fission team. A couple of highlights for us, and for me in particular, really pleased that all of the Fission employees have come on board. There's a fantastic team at Fission, culturally very aligned to Paladin. Fission's always had a very can-do attitude, and their whole vision and their whole focus, which is evident from the work they've done, is delivering this world-class project and they're committed to that task and they're committed to moving that company and project forward so really pleased to be working alongside chris the cfo um gary the vp project development and kanan the vp exploration and paul and anna are working very closely with the team on the ground and the integrations um been a strong success. We're acting as one company already. We're very focused on the critical path and moving PLS forward, and everyone's really excited to be working together. So over the next little while, we'll start to outline what our priorities and plans are, but I can say it's a continuation of the Fission Program, which is delivering this world-class project to market as soon as makes sense. So with fishing, the short-term priority right now is we've approved the winter drilling program. We'd like to see an extension of the resource and the reserves. Incredibly prospective area. They've got a fantastic drilling program which is very well considered. So that will commence with activities expected to commence on the ground this current quarter. and then obviously with gary we're doing a full review of the project plans we'll be looking to bring additional resources to move the project forward the environmental approvals are well progressed and we're working with gary to see how we can bring that to a conclusion and we've also had some very constructive discussions with First Nations and Paul and I will be over in Canada in the next few weeks to move those discussions forward as well. So all systems go and we'll be providing a lot more information over the next few months. Thanks Paul.

Thanks Ian. Look I'm really excited about the project and certainly looking forward to heading over to Saskatchewan in a couple of weeks' time. So just a quick recap, strong operational performance in December underpinned by improvements in water supply infrastructure and the successful shutdown completed in November on time. Overall recovery results are exceptional. They are within the target range and were sustained throughout the entire quarter. We sold half a million pounds and delivered those successfully into the converters in Europe and the USA. We completed the acquisition of fission and listed on the TSX on the 27th of December 24th. So in summary, Paladin Energy had a strong quarter with good progress on the ramp-up of Lange Heinrich mine and completion of the acquisition of Fission Uranium Corporation. I'd like to now open the floor to questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up a handset to ask your question. Your first question comes from Daniel Rodden with Jefferies. Please go ahead.

G'day. Thanks, Anne-Alex and Paul, for taking my question. First one, I just wanted to I guess unpack, you know, there's a good recovery, 88% for the core. So I just wanted to get a gauge on, you know, what the exit rate for that was in December. And is that 88%? Was that pretty consistent over, like, pre- and post-shot? Or did you see a pretty big improvement post the rectification works at the plant?

In fact we saw an uplift in the last month of the first quarter to around the 86% and those results have been sustained between 86 and 89 for the entire quarter. So the work was largely done prior to the shut and sustained throughout the quarter.

And I just wanted to maybe just unpack a little bit more on the OpenPit ramp-up profile. You know, I think, you know, if you look at the balance sheet, I know it's not the, you know, definitely wasn't the rationale behind it, but the balance sheet is looking a lot healthier from the fishing kind of closure with the cash and deposits. So I guess, you know, what's stopping the investment into the OpenPit, you know, ramp-up if it's going to provide a bit more consistency in the feed profile?

What we have is a pre-mined stockpile. We started the process with about 6 million tonnes of product on that stockpile. It's located extremely close to the crushing circuit and it delivers very, very low cost tonnes into the plant. This year we have been cash positive as a consequence of the low-cost stockpile. We're looking at options to bring the mining forward. We originally planned for that to be in July, and there's a lot of moving parts to make that happen. So we do have some capacity on site building our TSS, but we just need to make sure that we can actually bring it forward in a timely manner. So we're looking at methods of doing that. We're looking at how we bring in the drill and blast program. So there's a fair bit of work to do to bring that forward. So we'll continue to look at ways we can do that. But the base case plan is to start mining in July.

Okay. And if we could probably just elaborate on that a bit further from there. But when it's scheduled to come into operation in July, what does the ramp-up profile for that look like?

So we're not going to provide specific details. So what we have provided is our guidance. We expect to be in the range of 3 to 3.6 for the full financial year and then we'll work towards achieving our target full production rates later in the year. Perfect. I'll hand it over. Thanks, guys.

Your next question comes from Cameron Taylor with Bank of America. Please go ahead.

yeah good morning thanks team um just a question on the water so you said you've had a good supply from nam water have you had any interruptions in january um and with the storage water storage tanks uh have you had to draw much on those buffer tanks over the last quarter or so or you've been pretty consistent with your name water supply uh thanks for the question uh cameron so yes we have had some minor disruptions as a consequence to

of sulphur blooms. Through the shut we were able to maximise our onsite storage facility and we've been operating very consistently. These sorts of sulphur blooms are fairly routine in that region and we've catered for those sulphur blooms in our guidance.

Okay, thank you. Just on bringing that mining forward from the open pit, Is there any sort of balance between the current uranium prices? Like I mean clearly the street's pretty bullish on uranium prices over the next 12 months and thereafter. Are you happy to punch through that low-grade stockpile and then mine the higher grade when you expect uranium prices to sort of push up a bit or does that not really come into play? Are you sort of setting your sights purely on FY25 guidance?

It doesn't affect our decision making process Cameron. We'll continue to move the medium grade stockpile through the plant. It's low cost tons. It's already pre-mined and we'll look at ways we can pull in the mining at an appropriate point in time.

Thanks Paul. Just one for Ian maybe on the fission update. You spoke briefly about the team. over there in Canada, but Ross McElroy had elected to resign at the last update. Can you give confidence to the shareholders that PLS projects should be successful without Ross?

Yes, it will be, Cam. Ross chose to step away on the completion, which... It's understandable as an independent CEO looking at a divisional role. Certainly I would have been very happy for Ross to stay on, come on the journey, and Ross and I are on very good terms. But that's understandable. I think what's really pleasing for me is that Chris, Gary and Kanan, the functional leaders and the guys on the ground are all absolutely committed to not only to becoming part of Paladin, but to really driving forward the project and the exploration outcomes. Give an example, Kanan, great guy, working very closely with Paul. He's overjoyed that we're fully committed to his winter drilling program because he sees the prospectivity of the region and he's just keen to get the drill rigs running. Gary's a fantastic guy. He used to run very significant underground operations for Cameco. Gary's totally committed to his project and the work he's done has been outstanding. And again, Paul, Gary and I talk a couple of times a week, sometimes daily. We're right in there moving forward. And Chris has been fantastic, the CFO. He's carried a lot of the workload for the actual completion of the transaction, which is quite significant. So Fission have a fantastic team. We're looking, as I said, to appoint a president of Canada. That role is going to have a really important part to play, but that's a strategic role. That's about government, First Nations, stakeholders, strategy. We're going full steam ahead while we recruit that role, and Paul and Anna are working very closely with the local teams. So we will be successful. It is a world-class project. I'm not sure all of our shareholders fully appreciate what we've achieved by buying that company. I think, as I mentioned to people last year, it was a hotly contested process. That is a highly sought-after project. It's now ours. And I think when you see our plans and the progress we make going forward, I think people will go, wow, that's pretty exciting. So, Cam, we're excited. We're on the right path. We will be successful. And we look forward to showing the market, you know, what we can do over the next few years with that asset.

Yeah, wonderful. Thanks, Ian. And just maybe another one quickly. Potentially for Alex, so with the ICA approval, there was requirements that they are restricting sales to China just purely to CGN under the existing contract. Does that hinder any upside for PLS volumes and potential pricing given China's appetite for uranium going forward?

Thanks Cameron. Look, when we announced the transaction, if you remember, one of the sort of key pillars of the transaction, if you like, was our belief that there's going to be shortage of material in the West. The Chinese utilities have been very quick to the market in contracting available uranium volumes and the Western utilities have been slower. And so we think definitely there's going to be that demand from the Western utilities. So we're very happy to target the Western utilities for the PLS material. And of course, we've got ability to sell Namibian origin material to China as well.

Perfect. Thanks, Alex. I'll pass it on.

Your next question comes from James Bullen with Canaccord. Please go ahead.

Thanks, and thanks to Ian and team. Paul, I guess this question is for you. Just obviously NAM water is fulfilling their side of the bargain, providing more steady water, but what's happening around the tails water recovery? Have you seen an improvement there?

Thanks, James. Good question. The water management has improved, but what we're seeing is a As a consequence of the stockpiled ore quality, we're seeing some, I guess, some water efficiency some water efficiency work that needs to be optimised. And so we'll continue working on mechanisms to improve our water efficiency and water management on site. So we have made some gains in terms of tailings recovery and we'll continue over the next quarter to resolve those transitionary issues that are related to stockpile quality. So those issues will be fully resolved once we move into the mining phase. I don't see those continuing at all past that point, James.

Okay, great. Thanks. Just as you go into the mining phase, we look back at the DSS numbers. I think you're about US$14 there. Are you still feeling relatively comfortable around those DSS numbers, obviously corrected for inflation for the mining phase?

Yeah, we're seeing the financial results in line with our expectations. So there's nothing that's surprising to us at all in that space.

That's brilliant. And just around PLS, what are the next major catalysts that the market should be looking for there or announcements?

I think, James, the first major catalyst, which I think the market is still interpreting, is the fact that this is now ours. and the fact that we've added this world-class asset to our existing portfolio um is is really a game changer for us as a company um you know we've got global scale we're in production in a world-class asset in namibia we're one of the largest producers in the world today for what we're producing today and we're only nine months into our ramp up We've got probably a top two project, uranium project in the world, which we own. It's ours. And we've got exploration upside and other projects in Canada, as well as two major assets in Australia. We sit here today and go, wow, when we look at what we've got in our company and we're dual listed one of the largest resource bases. Excuse me. So there's a huge catalyst we've had over Christmas which is still coming through and we think that catalyst will come through strongly as people start to fully appreciate the opportunity we've got to deliver on this amazing set of assets that we've compiled and put together. Secondly, we're well advanced on the environmental approvals. We're well advanced and have very deep relationships between fishing and First Nations. So obviously we're going to be very, very focused on approvals. And thirdly, you know, the project feasibility work and the detailed engineering is all set up and underway. The team are working closely with the CNSC. So I think we're going to have a fantastic news flow of bringing this asset forward towards production over the next several years and we've proven we can deliver a project on time on budget the fission team are really strong technically focused and very competent in what they're doing so we think there's going to be fantastic news coming out of pls consistently over the next few years and then you look across to namibia We're well on our way to ramping up Langer Heinrich to its target. That will continue. The good news will come out of Langer Heinrich. And there's movement at the station in Australia. And we'll be exploring and moving Michelin forward as well. So, James, there are endless catalysts coming, but what we're going to do, we're a company that likes to do the work and then tell the market what we've done rather than promise the world. So let us get into it. It's the start of a new year. We've got a busy year ahead, but I'm expecting some really good news flow out of Paladin this year.

That's great, Ed. I would look forward to your waiting in the ETS going up too. Thank you very much. Thanks, James.

Your next question comes from Andrew Hines with Shaw & Partners. Please go ahead.

Yeah, thanks, and well done, team. That's obviously a much better quarter than where we were in September, and all that hard work is starting to come off. Paul, a quick question for you. That plant recovery number, 88% in the quarter, that's actually surprisingly good at this stage of the ramp-up and commissioning. Do you have any sort of targets in your head around how high you can get the recoveries out of the plant?

Yeah. Thanks Andrew, good question. Our target range is in the 85 to 90 so we're well within that range and we're putting medium grade stockpile through the plant and delivering on that range so I'm very pleased with the result we've achieved. I'm more interested in seeing how we can progress mining and increase the grade and then re-optimise the process and drive that even further forward. So I'm cautiously optimistic about delivering better results than that, but I guess we'll see when we move into that phase of the operation.

Yeah, indeed. I guess with higher-grade material and more consistent free stock, you should be able to tweak it up a little bit. A quick question maybe for Anna on cash flow. It's good to see the operation cash flow positive. I think operating cash flow in the quarter of $43 million after the release. How much more capex is left to spend... I think it was only a modest amount that quarter, which I think was related to the tailing storage facility, if I'm correct, Anna. As you go into the mining operations, what's your CAPEX bill look like for the next six months?

Oh, thanks, Andrew. Look, we haven't provided guidance on the next six months' CAPEX, but we expect it to be, you know, reasonably aligned to, you know, what we said when we put out our original numbers. As you said, the majority of the cost in the next six months will be around DSF 6, So you expect to see some more cost come through for that in the next two quarters.

Okay, thanks. And the final one for me, perhaps for Alex, around the state of the market, I note that you've signed another contract in the quarter, so it takes you, I think, 11 off-take agreements. So you've obviously been out there and active. It's been a pretty quiet period over the last little period for contracting, and obviously the spot uranium price has also been a little bit on the soft side, just Alex, your thoughts about what's happening out there, what are the utilities doing, what's your expectations for the market this year?

Yeah, thanks, Andrew. As I said before, we are seeing good activity from utilities, and I think that that is a reflection of us being a producer, and I think other producers are seeing strong demand. I've seen Tratec just recently publish their Q4 report, and they've actually got 146 million pounds of contracted for the year to November. So not even just for the full year, and that reflects a relatively strong year. I think UX have a smaller number, but Trade Tax seems like they're seeing more contracts. And that is reflective of the interest we have, which is again, is translating into strong pricing and strong term pricing. There's obviously volatility in the spot, but we're very much more concerned with the term market dynamics. that we've seen quite strong last year and we expect to see even stronger dynamics this year as utilities turn their mind more to the contracting of U308. Obviously, they've been very concerned with making sure they've got enough conversion and enrichment, and that's really been the theme for last year, but we're seeing utilities turn their mind to uranium contracting and we should see the benefits of that this year.

Thanks, Alex. Can you give us any colour on the nature of that contract that you signed in the quarter? I presume it's a market-related contract. Are we still seeing sort of floors and ceiling-type contracts? Floors, I think they were sort of around 75 earlier in the start of the last quarter up to around 130 ceilings. Are those the same sort of numbers that you're seeing in the market?

Yeah, so without commenting on the individual contracts, we're seeing a prevalence of what we call hybrid contracts where you have a component of market-related and component of base escalated. The floors and ceilings, we're still seeing very healthy floors and ceilings. I mean, there's some discussions from the utilities every time the spot price moves, utilities expect particularly the ceilings to adjust with that. We tend to resist that level of discussion. I mean, a utility wants a corresponding reduction in the in the ceiling price, we sort of tend to move away from that because longer term, you know, we believe this, you know, there's just that, you know, basic math that you just can't ignore those deficits, growing deficits. So, yeah, broadly, you know, levels of floors and ceilings are very attractive and, you know, utilities are, you know, pretty much willing to give, you know, base escalator and a bit of market to entice the suppliers to contract.

That's great. Thanks. I'll hand it over to someone else. Well done, team. Again, on a good quarter and good to see Lange Heinrich performing exceptionally well. So well done.

Your next question comes from Jim Ariasinghe with UBS. Please go ahead.

Thanks, Janice. Just a couple of questions to round out. Just finishing up on the water. So it sounds like it was a good quarter, that the water issues had been mitigated for now. I just want to confirm, though, you've still got to ramp up the plants more to get the full one plate. I think at capacity maybe it's like 1.3, 1.2 million tonnes through the quarter. Hypothetically, if you were at full tilt now, would you have enough water to deal with that sort of throughput?

Yeah, we've demonstrated the capability of both the NAM water infrastructure and our infrastructure to manage full water flows, and our on-site storage capacity is more than sufficient. So, yes, we do have enough water at full production.

Yeah. Awesome. Okay, cool. Thanks. And then just on the costs, I don't think anyone's going to fault you too much during a ramp-up, but can you give us any guidance on... how you expect that to evolve over the course of the year, noting that still there's a bit of daylight between where you are now versus your original guidance. This is all on a unit cost base, so am I right in assuming there's just that fixed cost component and that smooths out as you continue to ramp up?

Yeah, thanks, Tim. It's Anna. I'll take that one. Look, I think what we're seeing on the cost of production is, as you say, predominantly driven by the volumes that are being processed. If we normalise the total production costs, we're seeing costs pretty much in line with our expectations. So we obviously will see an increase in cost as we commence mining, but we see pretty good cost results, honestly, once we remove that volume impact.

Great, thanks. And maybe just a last one, just to talk about the mining restart. Maybe you could just walk me through conceptually what needs to be done before July, like have you hired the contractors? I guess, yeah, what's left to do, I guess, before we start seeing you guys in the mine.

Yeah, thanks for the question. So we've identified a mining contractor. We have identified the fleet requirements. We have an optimised mine plan. We are working through optimisation of the schedule. The next thing we need to do is make sure we have the final contracts locked in. We have to mobilise plants and equipment to site. That typically in Namibia comes out of South Africa. We've demonstrated that that's not a particular challenge for our contractors. Mobilise the fleet to site. Then you go through the typical process around topsoil clearing, preparation for drilling, drill and blast, removal of overburden. So it becomes very standard after that. And then at an appropriate point in time, we start moving mine door into the ROM or directly into the crushers. So there is quite a bit of preparation to do and we'll continue to look at ways we might be able to accelerate that in a cost-effective manner.

Awesome. Okay, cool. Thanks. Yeah, congratulations again. Thank you very much.

Your next question comes from George Ross with Argonaut. Please go ahead.

Yeah, good morning, guys. Congratulations on the quarter and also the petition deal closing. Just as much as my question has been answered, but just in regards to shifting to the in-situ ore processing, is there any sort of view on if there's going to be any, I guess, impact on recoveries versus the stockpiled ore, positive or otherwise?

Sorry, just quickly. You mean when we move into the mining phase, are we expecting to see an uplift in

Yeah, yeah. Yes, yes, basically. Are there any expectations on whether or not the recoveries will change after you shift from the stockpiled ore to the mined ore?

If you increase grade and you have grade stability and material stability, then it does make it easier to optimise your process and improve recoveries. Our recovery rates are actually already within our target range so there may be some upside potential. I'm cautiously optimistic but I guess we'll have to see when we start feeding Mindore into the plant but conceptually it's possible.

Okay great. That's it from me. Everything else has been answered.

There are no further questions at this time. I'll now hand back to Mr Paul Himborough for closing remarks.

Thank you for the questions. We're really pleased with the progress on our ramp-up. Like I stated earlier, it's nine months into a 21-month program of work. We're really pleased with the results that we've delivered, particularly in the last quarter post the shutdown, and we're also very excited about bringing fishing into the company. It was a strong quarter, some very notable improvements that we've since locked in and we're just very happy with the work that's occurred in the last quarter. Really appreciate you joining us today and thank you for your participation.

That does conclude our conference for today. Thank you for participating. You may now disconnect.