Clock - Uranium Supply Crunch and Critical ... - Andrew Johns

Uranium Canada Research | Page 43 of 87Investment OverviewEstablished and Growing Mines. In FY2012A (ended June 30, 2012), Paladin produced6.9 Mlbs from its two mines, Langer Heinrich (4.4 Mlbs; 100%-interest) and Kayelekera(2.5 Mlbs; 85%-interest) and sold 7.4 Mlbs. Cash costs in F3Q12A were US$36/lb (fullyearcosts are not yet reported).For FY2013, Paladin guides to production of 8.0 Mlbs – 8.5 Mlbs, a healthy 16% – 23%y/y increase. We project both mines will maintain steady nameplate capacity bycalendar year-end – Kayelekera reached nameplate production in June 2012, whileLanger should soon gain the full, optimized benefit of new heat exchangers, NIMCIXcircuit, and other components. Given results from the Stage IV feasibility study – whichenvisions 8.7 Mlbs/year conventional, plus 1.3 Mlbs/year heap leach of lower gradematerial – have been deferred to year-end (pending clarity on success of Stage III rampup),we have excluded the Stage IV expansion from our model.Exhibit 56: Production and Cash Costs Profile12Production (Mlbs)1086420F2011A F2012E F2013E F2014E F2015E F2016E F2017E F2018E F2019EAustralia Kayelekera Langer Heinrich Cash CostSource: Raymond James Ltd., Paladin Energy403020100Cash Cost ($USD/lb)Capex at Mines Substantively Complete. After spending ~US$0.75 bln on projectdevelopment, Paladin announced following F3Q12A that it had completed major capexon the current phases of Langer and Kayelekera. Working capital expenditure will alsobe reduced now that inventories are near levels required for future contracts (Paladintargets four months of inventory). As stated above, we model no further expansions,which should bolster the company’s near-term ability to service its debt (note ourmodeled payback in FY2013E, FY2015E and FY2016E in Exhibit 57; further details inPotential Concerns section).Exhibit 57: Projected Cash Flows and EOP Cash for Paladin800US$ mln (Cash Flow per Period)6004002000-200-400-6003386634811717370142 1368178308F2008AF2009AF2010AF2011AF2012EF2013EF2014EF2015EF2016EF2017EF2018ESource: Raymond James Ltd., Paladin EnergyCFF CFI CFO Cash (EOP)Raymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2