Paladin Energy Could Mothball Langer Heinrich Uranium Mine

Australia’s Paladin Energy (ASX:PDN) said Thursday (April 26) that mining is unlikely to resume at its Langer Heinrich mine in 2018. 

Mining was suspended at the mine last year, and since then the company has been using medium-grade stockpiled ore to produce uranium.

With these stockpiles expected to be exhausted before mid-2019, Paladin must now decide whether to start mining at Langer Heinrich again or formally put the asset on care and maintenance.

“It’s deeply distressing to have to consider suspending operations at [Langer Heinrich] because of the consequences for our employees, and the broader community,” said CEO Alex Molyneux.

He added, “[h]owever, as there has yet to be a sustainable recovery in the uranium market, and with the aim of preserving maximum long-term value for all stakeholders, it is clearly prudent to consider these difficult actions.”

The uranium market has been plagued by oversupply and low prices since the 2011 Fukushima disaster, with the U3O8 spot price sitting at US$20.85 per pound as of April 23.

Late last year, production cuts from major producers Kazatomprom and Cameco (TSX:CCO,NYSE:CCJ) sparked hopes of a rebound in prices. So far no rebound has emerged, but many analysts remain confident that uranium is a “when” story, not an “if” story.

Paladin says Langer Heinrich has operated continuously since 2007, with a notional capacity of 5.2 million pounds of uranium per year. Although mining was suspended last year, the mine still produced 3.4 million pounds of uranium from the company’s medium-grade stockpiled ore.

The company itself recently relisted on the ASX after an eight-month suspension. Paladin entered administration in July 2017 after failing to pay a major creditor, and the relisting came after a successful restructuring. Deusche Bank (NYSE:DB) is now the company’s largest shareholder.

Paladin expects to decide whether or not to put Langer Heinrich on care and maintenance within the next two months. Currently 600 people are employed at the mine.

Namibia was the fifth-largest producer of uranium in 2016 with output of 3,315 tonnes. Earlier this week, the country announced that it may relax black ownership requirements for miners in a bid to bring more companies into the country.

The company’s share price fell 13.3 percent after news about Langer Heinrich hit, closing the day at AU$0.13. Paladin is down 33.33 percent since it relisted on the ASX.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.