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The company said at the end of April that it was considering shutting down the Namibia-based mine. It produced 3.4 million pounds of uranium last year.
ASX-listed Paladin Energy (ASX:PDN) confirmed on Friday (May 25) that it will be taking its Namibia-based Langer Heinrich uranium mine offline.
In a press release, the company says that relevant stakeholders have given it the go ahead to place the mine on care and maintenance.
Mining was suspended at Langer Heinrich in 2017, and since then the company has been using medium-grade stockpiled ore to produce uranium. Paladin said at the end of April that with those stockpiles due to run out before mid-2019 it was considering shutting down the mine.
Now that the decision to put the mine on care and maintenance has been made, Paladin will stop sending ore to the plant at Langer Heinrich.
A “run-down” phase of up to three months will take place, with various stages of the plant being “progressively suspended and cleaned.” Some uranium production will take place during that time.
According to Paladin, the decision to put Langer Heinrich on care and maintenance “was not taken lightly,” but was “the most logical decision to preserve [the mine’s] valuable uranium resource and mitigate operating cash flow losses.”
Alexander Molyneux, CEO of Paladin, took to Twitter on Friday to discuss the move, commenting that persistently low uranium prices influenced the company’s decision to mothball Langer Heinrich.
$PDN – We just announced our world-class LH Mine is being put on care & maintenance. LHM is the lowest cost open-pit #uranium mine in the world but with #uranium price still near a 15-year low, it makes no sense to continue
— Alex Molyneux (@AlexMiningGuy) May 24, 2018
At full tilt, LHM is 4.5-5.0Mlb of annual capacity – now gone. The strategy is to perserve the world-class resource and Paladin’s significant cash balance for a re-start when the #uranium market normalises
— Alex Molyneux (@AlexMiningGuy) May 24, 2018
In Friday’s release, Paladin says that “absent external shocks, the uranium market appears set for normalisation over the next few years.”
It expects Langer Heinrich to be able to return to production quickly once prices improve as it is the lowest-cost open-pit uranium mine in the world. Paladin will be “uniquely placed to benefit at that time.”
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.
Its decision to halt production at Langer Heinrich is the latest in a series of high-profile uranium supply cuts. At the end of last year, major producers Cameco (TSX:CCO,NYSE:CCJ) and Kazatomprom both announced plans to reduce output.
Uranium market watchers have been hoping that these cuts will push the market into a long-awaited recovery. But thus far prices have not reacted as hoped — as of May 21 the U3O8 spot price was at US$22.65 per pound, up only marginally from the beginning of the year.
Paladin’s share price was sitting at AU$0.14 as pf 11:15 a.m. PST on Friday. The company is down 28.21 percent year-to-date.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
