Paladin Energy LTD (PDN)

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Geoffrey Jordan

Paladin Energy Ltd (Toronto Stock Exchange: PDN) is an Australian uranium producer with operations in Australia and Africa.

The Langer Heinrich Mine in Namibia is Paladin’s flagship project, with production targets of 10 million pounds of U3O8 uranium by 2014.^[1] The Kayelekera Mine in Malawi was opened in April 2009 and is progressing to production of 3.3 million pounds of U3O8 per year.^[1]

Paladin is listed on the Australian Securities Exchange, the Toronto Stock Exchange and the Namibian Stock Exchange.

Business Growth

In 2010, Paladin's sales revenue increased 81% to $202 million.^[1] Production increased 60% to 4.3 million pounds of U3O8 uranium, and exploration spending was up 40% to $17.1 million.^[1] In 2011, Paladin is targeting production of 7 million pounds of U3O8.^[1]

In 2010, the company also announced two mine expansions in association with China Guangdong Nuclear Power Corporation.^[1]

Trends and Forces

Japanese Earthquake and Tsunami Led to Sell-off in Uranium Stocks

The 9.0 earthquake in Japan on March 11, 2011, and subsequent tsunami caused four nuclear power plants in Northern Japan to fail, leading to a radiation release and overheating in the reactors. The Japanese nuclear crisis has shaken confidence in the future of nuclear energy, with Paladin's stock falling more than 30% in the aftermath of the earthquake.

Demand for uranium outstrips supply

Every year since 1985, the world's consumption of uranium has been greater than its production. To help meet this shortfall, reprocessed uranium and plutonium from the dismantling of Russian and U.S. nuclear weapons has been used.^[2] The World Nuclear Association estimates that uranium mining will need to increase by almost 300% in the next two decades.^[2]

There are 440 nuclear reactors operating worldwide and a total of 111 reactors under construction or planned for completion by 2020.^[3] The demand for processed uranium continues to rise as countries throughout the world increase their reliance on nuclear energy for electricity. Paladin is poised to benefit from the inevitable increase in uranium consumption by nuclear plants.

Alternative energy competes with nuclear energy

Wind, hydroelectric energy, and solar energy all compete with nuclear power for a share of the alternative energy market. Production costs are 8.8 cents (U.S.) per kilowatt hour for nuclear, 7.4 cents (U.S.) for coal, and 10.6 cents (U.S.) for natural gas.^[4] Though renewable energy sources will need to become more affordable and more widely adopted in order to become a more serious competitor to uranium, advances in technology are making investment in renewable energy more attractive. Paladin would be harmed by major technological advancements that make wind and solar power more cost competitive with nuclear power.

Competition

• Cameco (CCJ)
• Rio Tinto (RIO)
• BHP Billiton (BHP)
• Denison Mines (DNN)
• Energy Metals (ASX:EME)
• Summit Resources (ASX:SMM)
• Power Res (ASX:PWW)
• Alara Uranium (ASX:AUQ)
• Globe Uranium (ASX:GBE)

References

1. ↑ ^{1.0 1.1 1.2 1.3 1.4 1.5} Paladin Energy: 2010 Annual Report, Investor Relations
2. ↑ ^{2.0 2.1} CNN: "Nuclear power's white-hot metal"
3. ↑ European Nuclear Society: Nuclear power plants, world-wide
4. ↑ ^{4.0 4.1} Montana Environmental Information Center
5. ↑ Suzlon FY 07-08 Annual Report, Management Discussion and Analysis, p. 5
6. ↑ ^{6.0 6.1 6.2} Google Finance
7. ↑ Cameco Complete Business Review: Financial Highlights (p. 9)
8. ↑ Rio Tinto Performance
9. ↑ BHP Billiton Business Review 2008
10. ↑ Denison Mines: Home
11. ↑ Paladin Energy 2010 Annual Report