Paladin Energy Ltd

Good morning, everyone, and thank you for joining Paladin Energy's quarterly conference call. With me today is Anna Sudlow, our Chief Financial Officer; Scott Barber, our Chief Operating Officer; Alex Rybak, our Chief Commercial Officer; and Paula Raffo, Head of Investor Relations.

On the call today, I'll cover a brief overview of the quarter, an update on Langer Heinrich, our FY '26 guidance revision, and progress in Canada at Patterson Lake South, and then we'll move into Q&A after that. So a couple of highlights from the quarter.

Production at Langer Heinrich Mine was 1.29 million pounds for the quarter, up 5% on the prior quarter, supported by strong plant performance. Sales volume was 1.03 million pounds at an average realized price of $68.30 per pound.

We increased Langer Heinrich Mine's 2026 production guidance to 4.5 million pounds to 4.8 million pounds. And in Canada, we received Saskatchewan government approval of the PLS EIS.

And we've also continued exploration drilling focused on the Saloon East deposits. More specifically, at Langer Heinrich Mine, mining continued to ramp up with delivery and commissioning of the remaining mining fleet completed and activity was heavily focused on the G Pit.

Total mined material was 6.17 million tonnes, up 12% from the previous quarter, and crusher throughput was 1.21 million tonnes at an average ore feed grade of 503ppm. We produced 1.29 million pounds of U3O8 at an average recovery rate of 92%.

Ramp-up remains on track for completion by the end of FY '26. We're monitoring potential impacts from the events in the Middle East.

Currently, inbound supplies to site and outbound shipments to customers are not impacted, and we're taking steps to maintain security of our key process inputs. On sales and cash, we sold 1.03 million pounds U3O8 at an average realized price of $68.30 per pound.

Cost of production was $40.30 per pound, benefiting from utilization of the remaining MG3 stockpile. At 31 March, we held unrestricted cash investments of USD 219.5 million with an undrawn USD 70 million revolving credit facility.

Quarterly sales revenue includes USD 47.3 million with cash receipts expected during the June 2026 quarter. And we made a scheduled $4 million payment on the term loan facility, reducing the balance to $36 million.

On guidance, following year-to-date production of 3.6 million pounds, we revised Langer Heinrich's 2026 production guidance to 4.5 million pounds to 4.8 million pounds from the 4 million pounds to 4.4 million pounds previously announced. Sales guidance remains 38 million pounds to 42 million pounds (sic) [ 3.8 million pounds to 4.2 million pounds ], and cost of production remains in the same range at USD 44 to USD 48 per pound, while capital and exploration expenditure guidance was revised to USD 15 million to USD 17 million from USD 26 million to USD 32 million.

The revised guidance is based on current operating conditions and assumptions and may be impacted by disruptions arising from the current geopolitical events, which we are closely monitoring. Turning to Canada and the PLS project.

We received ministerial approval for our Environmental Impact Statement on the 20th of February. It is a really important regulatory milestone and a prerequisite for further permits and licensing leading to the construction and operating permits.

On 31 March, we advised that the Metis Nation - Saskatchewan had applied for a judicial review to challenge the decision to approve the EIS, and we'll continue to actively engage in constructive conversations with local communities and indigenous people. We commenced an update of the front-end engineering design study during the quarter.

We continue to work closely with the Canadian Nuclear Safety Commission as we progress towards the license to construct. On exploration, we drilled just over 11,000 meters across the PLS project during the last quarter.

We're targeting the Saloon East deposit and resource conversion extension drilling at RRR. Assay results are still pending.

Finally, at Michelin Project, there were no substantive mining exploration activities during the quarter with prospective and target assessments continuing, and we commenced the regulatory process to reduce project tenure by approximately 18% as part of the tenement rationalization program. So we've been really busy delivering pounds and building momentum across the company, and I'm pleased with the progress that we're making.

I'm now happy to take questions.

Paul, Anna, Scott, Alex and Paula, and congrats on another strong result. You seem to be making a habit of good quarterly results, so well done.

Just first question is relating to your reagents. Can you just run through what your key reagents are for production?

And if possible, just comment on how those contribute to the cost structure in dollars per pound?

Thanks for the question, Alistair. What I might do is just sort of give you a very brief overview.

So we're an alkaline leach process. So we don't use a lot of sulfuric acid.

So our key reagents are typically things like sodium bicarbonate, sodium carbonate, sodium hydroxide, hydrogen peroxide, a little bit of sulfuric acid. A lot of flocculants for our CCDs, also HFO and diesel, of course.

In terms of the contribution to production, we don't really go into that level of detail. But what I can say right now is at the moment, we do have between 3 and 10 months supply of all of our key reagents, I think, which is a really important factor at this time given global events.

That's really helpful. And just a follow-up on the Metis Nation challenge at PLS.

Could you just run through how that challenge actually works? What happens now and what you're planning for?

Yes. What you might find is you did a bit of a Google search is that -- this is not an infrequent occurrence.

Now there have been other mining companies and projects that have had the same sort of challenge. This is really a challenge on the Saskatchewan government authority to give us -- to provide the approval for the project.

There haven't been any successful challenges to date. More importantly, we need to maintain a long-term working relationship with the Metis Nation.

And to date, the conversations have been really constructive and we'll continue to work closely with them. What we're doing right now is we're really focused on the FEED work and working with CNSC to get that license to construct.

And at this point in time, there's nothing stopping us from continuing down that pathway towards receiving the license to construct.

Congrats, Paul and team. Just a quick 1 around Orano's desal plant.

There's been a bit of talk about sulfur blooms and potential downtime up there. Plus also, I think they have to do a maintenance shut normally in May.

Can you just provide us with an update around water supply?

Thanks, James. This is Scott here.

The desal plant is in full operation. We haven't had any major disruptions to the water year-to-date.

There was a little bit of sulfur in the quarter, but nothing that really stopped us. Our bladders and TSFs evap ponds are all full.

There was actually a little bit of rain through the quarter, and that actually topped up all of our water supplies. So for us, yes, water is not a major issue.

There is a desal shutdown planned late in June, and we're just monitoring that, but we've got enough water to get through that.

Great. And just hitting across to PLS and the mutual benefit agreements, I think you've got 2 First Nation agreements done.

When NextGen went through this process, it took them well over 12 months longer than the others to get an agreement with Metis. Is this a risk to your FID timing at all getting an MBA with MNS?

Thanks, James. It's not absolutely compulsory to have a mutual benefit agreement.

But of course, it's what we want to do. We would like all of the stakeholders in the region to benefit from our presence there.

So if it takes a bit longer, it takes a bit longer. The most important thing is the engagement and consultation process.

So we'll continue to engage and consult with all of the First Nations group. And as you pointed out, we do have 2 MBAs in place with Clearwater River Dene Nation and Buffalo River.

So we'll continue to work on those. The other 2 are close.

We're in negotiations right now, and we'll just keep working towards that but it's not a prerequisite for receiving our permit to construct.

Congratulations on the second quarter. Just wanted to, I guess, get a view on, I guess, Q4 run rates.

It's a little -- I guess, the run rate is a little lower than your Q3 in the implied updated guidance. And so just a little bit of color around, I guess, what's going on and what's driving, I guess, the lower Q4?

And then how should we think about that kind of as the run rate entering FY '27?

Thanks, Dan. As I often say, it's an outdoor sport and all sorts of things can happen.

So we've reset the guidance to that range of 4.5 million pounds to 4.8 million pounds. I think it's realistic and achievable.

Our current rate is -- I think we're very satisfied with how we've gone. We've also moved to the back end of the G Pit, we're now moving into the next pit.

So there's that sort of transition process where you can typically get slightly lower grades as we move into the main ore body. We can get different ore handling characteristics.

So there's a few things that could happen. And in the meantime, we're trying to mitigate those risks with a number of different controls, our blending strategy for handleability, blending strategy for grade.

And we plan on maintaining the positive performance that we've seen in overall recovery rate. So there's still a couple of months to go for this quarter, but we're very happy with progress to date.

But there are a few things that could happen.

Yes, excellent. And I guess just on the -- like when you're looking at Q4 and FY '27, your recovery in Q3 has been, I think, well above expectations, even at a bit of lower grade.

So I guess just what's your assumption that you're using for your guidance on the recovery? And I guess is there a bit of upside potential there?

No. We set our target range of 85% to 90%.

That's typically the level at which this plant can operate. And I think the team at Langer Heinrich has done an exceptional job at tuning that performance throughout the consumption of G Pit.

And -- but I certainly don't expect that we'll stay in that range. I think as long as we hit the target range, 85% to 90%, I'll be pretty happy.

In terms of FY '27, I think we still plan to provide guidance in July. However, and I sort of caveat that now with a level of uncertainty around what's happening in the Middle East.

And -- so I don't really want to provide too much of a look forward.

Yes. Awesome.

And if I could slip one last one in. Just -- you've provided a sensitivity on, I guess, realized pricing at various levels of spot pricing historically.

I guess when we're looking forward to FY '27, '28, et cetera, is that a sensitivity analysis that you've provided? Is that still a fair indication of the sensitivity you would expect on, I guess, realized pricing at different spot pricing?

Or I guess, if you're changing your contract book as that contract book matures, would you expect that sensitivity to change?

Yes. Thanks.

Alex here. I think we'll provide an updated realized price sensitivity.

I think generally speaking, we're very pleased with the way our book has performed this quarter and year-to-date. It's running pretty much bang on with that matrix that we provided, realizing just under $70 a pound for year-to-date at an average uranium price of $80.

The next year is, again, without sort of getting into the look forward will be provided in due course. But obviously, the -- we've got 22 million pounds under contract, so you don't -- and that book has remained stable, so you don't expect to see massive shift in that.

But as that opens, volumes open up, we do have more uncontracted and more market-related exposure. So we expect to realize that upside there.

Just a question on the revision to CapEx expenditure, not big numbers, but I just wanted to expand on why that's been done in the context of, I guess, what's going on more broadly, please?

Sorry, Dim, was that in relation to the update of the guidance?

Yes, yes, exactly for the CapEx.

So I think we obviously put the guidance together 12 months ago [Technical Difficulty] has progressed. There's been a reprioritization of those items, the deferral and then also the bringing forward of some other items.

So it's really just a shifting of CapEx. Some of that CapEx will be deferred into FY 2027.

Okay. And then I guess there was a question on reagent use and I understand you guys are alkaline leach.

But can you -- do you guys have any more commentary on read-throughs more broadly? So on your competitors domestically use a lot of sulfur and then the big one.

It does feel like that's -- yes, are you hearing anything either from your customers or the industry more broadly on sulfur shortages?

No. We don't really comment on other people.

As I said earlier in the call between 3 and 10 [Technical Difficulty], that's our area of focus right now is making sure that we have continuity in supply. So we're reasonably confident at least for the next 3 months.

Yes. Sure.

Cool. And then just last one.

How has everything gone on the diesel front? Is that similar?

Or what does that look like?

About -- at least 80% of our diesel and HFO come from West Africa. And so there's a very, very good...

Yes.

Paul, I just wanted to sort of talk a bit more about the guidance change. Obviously, you lifted production guidance by 11%, but you didn't change your cost guidance at all.

And if you just do the mathematics, I mean, 1.2 million pounds production in the final quarter to get to the bottom end of your cost range means costs go up to $54 a pound in the final quarter when they've averaged $40 a pound to date. So you just didn't change your cost guidance?

Or is there something materially going to change in the final quarter to get there?

So, Glyn, there's a couple of things. One, I think, as Paul mentioned, we will be mining for the final quarter.

So there'll be no reliance on the medium-grade stockpile. So we were obviously getting a benefit from that in the prior quarters.

We are starting to see some cost escalation as a result of the conflict in the Middle East. So I think there's some uncertainty around what that will look like.

So I think there's a view that we would rather be conservative on what that may be for the final quarter as well. So I think we've done the analysis on the range, and we're comfortable with the range we've provided at this point.

Okay. It's a big number.

Maybe just staying on that same tack then. So if you look at the spend in the quarter that just gone Langer Heinrich cost, $52 million, the stockpile build $11 million, so $63 million, plus another $7 million for stripping.

If you ignore the stripping, it should -- is that meaning that $63 million steps up a fair bit from a cash perspective in the final quarter then when you just say you'll be full mining for the fleet?

I think, the low-grade stockpile and the stripping, I think we're saying varies quarter-to-quarter. So I probably won't comment on what the forecast outlook for those is.

But as far as the production costs, yes, we do expect them to be higher in the next quarter.

In a dollar millions perspective, higher than the $52 million. Yes.

And then if I could just ask just on the sales as well. I mean you've kept your sales guidance the same.

If you sell what's left to sell to hit the top end of your range selling at the price you're probably going to receive, you're still probably not going to cover all your cash outflow in the quarter. Is there like -- can you sell more?

Or are you choosing not -- so I'm just trying to understand why with the increased volume you're choosing not to cover your cash, it appears with sales, or is it because you're waiting for higher prices or what I'm just trying to...

Glyn, I'll take this one. So our sales, as I said last quarter, we are trending towards the top end of the guidance range for our sales, all things being equal, shipping delays, et cetera, but we're pretty comfortable with that range.

So we've left it unchanged. Obviously, there is a delay between production and sales.

So even if you're producing more, you don't necessarily able to realize those sales in the same period. But we are seeing performance at the top -- towards the top end of that range.

Just first question on future product inventories. Can we expect a bit of an unwind strategy to progress into FY '27?

Obviously, the current number seems a little bit elevated, probably unwind a bit in the fourth quarter, but just interested in your views over the next 6 to 12 months, please?

Yes. Agreed, it is a slightly elevated level.

Our inventories do fluctuate from quarter-to-quarter. Probably on a normalized average basis, we expect about 4 months of production to be our normal average inventory level.

This quarter, that inventory level was impacted by shipping delay. So we had quite a large number of pounds on the water as of 31st of March.

So that was the primary result. But yes, about 4 months of production on an average basis.

That makes sense. And final question from me was just, I guess, critical path given the mine fully ramped up over the next 3 to 6 months.

I guess what's the focus internally and what's something we can be watching for come June-July?

Yes, in terms of the mine, getting into G Pit and developing that, we're about 1.5 bench in currently and already touching ore. So that's going to start making its way to the ROM.

Developing that pit, which is a little bit further away from the ROM than G Pit. So just optimizing the haulage, getting the equipment operating exactly as we wanted to.

All of the equipment is in and operating, and the contract has done a really great job in getting all the people and everything up and running. But as we finish G Pit, move into [ next pit ], getting the blend rate and just really optimizing that through the mill as we see that new ore.

So really, for the mine, the equipment is on site. It's just getting it on at the ROM and seeing how it performs through the mill.

I was just wondering if you could give us a rough guide as to how much diesel makes up the cost of production?

Yes. We typically don't go into that level of detail, Matthew.

Yes. I mean, I think, Matthew, what we can say is the mining contractor obviously has a portion of their costs related to diesel.

There's a small amount of diesel used in the plant. Other than that, I'd say, it's fair to say it's sub 10%, 15% of the total cost of production.

Okay. So with that, you don't expect a big impact from, obviously, the current global sort of diesel issues.

You don't expect a huge impact on your costs?

Well, I think ultimately...

Provided really no guidance on what is happening due to this conflict.

Yes. So look, obviously, we're monitoring that, but the ultimate impact is going to be dependent on what the price outcome is, right?

So I think it's obviously not a significant cost. But to the extent there is a material increase, it will have some impact.

Congrats on another quarter. I'll start with a question on PLS.

What gives you optimism about a successful resolution of the legal issue with MNS?

Thanks for the question. I've met with all of the chiefs and councils of the 4 parties that we're close to.

And we have a really good relationship with them. And I think it's really just a matter of time to continue consultation.

I think that it'd be unsurprising to say that everybody in the communities and in that region, I think would have some benefit of our presence there, and that's not an unreasonable expectation. And of course, the challenge is how do we find -- how do we find a resolution to this in a way that's economically sensible for us as well.

And so we'll continue to consult with them and work through the process. And we've seen other mining companies, other projects in very close proximity to us work through that process and have successful outcomes.

And what we've also seen is the timing of delivery of an MBA is completely independent of the EIS approval process and the CNSC process. So we'll just keep going as long as it takes.

In the meantime, the most important thing for us right now is to consult effectively with them, but also to progress the project through the engineering works and satisfy the requirements of CNSC. So the project is -- the project economics are incredibly strong.

It's a great project, and we have a lot of confidence in the team's ability to work through these issues as they come up.

All right. I'll just follow up on another question that was previously asked about run rates.

If we were to extrapolate from, let's say, production in the month of June when hopefully, the ramp-up is done. Would that lead to, on an annual basis, 6 million pounds of production per annum?

Or what would it lead to?

So we're not going to provide guidance into next year until we get through this year. I think there's a level of uncertainty out there now with respect to what's happening in the Middle East, of course.

And I think it's a difficult time for anybody to predict how that's going to unravel. What we can say though is we have reset our guidance range for the remainder of this year.

I think that number is challenging but achievable. And what we'll do now for the remainder of the year is to continue to go through our budgeting process, assess the performance of Scott's optimization work.

And then at an appropriate point in time, we'll provide guidance to give people an update on the basis of more well-informed view of '27.

Okay. I was just -- my question was, I think, motivated by a peak production rate outlined in the life of mine production plan that was put out earlier.

But I look forward to the actual guidance.

Yes, thanks. I think the peak production really depends on a number of factors and primarily as throughput rates through the mill, overall recovery rates and grade.

And under different price scenarios, we might choose to do something quite different. So in a different new price scenario, we might do something different to what we would do in a high diesel price scenario.

So the plan ultimately depends on how things play out over the coming months in combination with how our performance is over that same period. So it is a bit difficult to give you a more [ certain ] answer.

My final question would be maybe a possible comment from you on something that came up on Bloomberg a few days ago about the U.S. ambassador to Namibia saying that they were expecting to increase imports of uranium from Namibia to the U.S.A.

I was wondering if you've been in discussions with -- of that nature with parties in the U.S.A.

Yes. Look, there has been a lot of interest in the Namibian supply from across the globe.

We were just at the World Nuclear Fuel Cycle Conference last week. There's a lot of interest from the U.S.

utilities. I think generally the mood is getting -- the U.S.

utilities are certainly getting more urgent in their request of supply. And I think they are being prompted by the U.S.

government to secure supplies and secure inventories. We've obviously had direct interactions with the representatives from U.S.

embassies as well. And -- but having said that, it's -- I guess, it's -- there isn't anything sort of concrete at this point in time.

We do see also a very strong demand from other regions, specifically from China. The Chinese utilities continue to be very aggressive in their fuel purchasing driven by the reactor build-out programs, chasing supply across the region as evidenced by the Tango deal that CGN is in the process of completing.

So we are in a very fortunate position in Namibia with that origin being highly sought after both by the Chinese, by the U.S. as well as the European counterparties that have lost some supply from [ Niger ].

And we'll aim to maximize the value of that Niger -- of our Namibian production for the benefit of our shareholders.

Thank you very much. The progress across the portfolio of activities have been really positive.

We continue to build momentum in both production and project progress at PLS. However, we maintain a close watch on the Middle East for any potential impact on our business over the coming months.

Thank you for your questions, and thank you for your ongoing interest in Paladin, and have a good day.