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Uranium Week: Utilities Missing in Action

Weekly Reports | Apr 11 2017

This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN

Spot market demand from utilities remains extremely weak, ensuring a lack of action last week.

By Greg Peel

At the time of its first half earnings result release in February, Australian-listed uranium miner Paladin Energy ((PDN)) was continuing to burn cash despite a rebound in the uranium price, and facing the possibility of default on its debt obligations. It would come down to creditors accepting a debt restructure, brokers warned, or the company risked becoming insolvent.

Last year Paladin sold 25% of its flagship Langer Heinrich mine in Namibia to China’s CNNC Overseas Uranium Holdings in yet another attempt to raise capital and keep the wolf from the door. The deal further involved an option for CNNC to acquire the remaining 75% in the event of default. Last month CNNC attempted to exercise that option, claiming Paladin was as good as in default. Paladin said no it wasn’t.

Paladin’s creditors have come to the rescue, agreeing to defer maturity dates and interest payment obligations. Paladin is also in the process of selling its 30% stake in the Manyingee uranium project in Western Australia to Avira Energy ((AVW)), which was to be completed at the end of March, but has been delayed as Avira was unable to raise the capital by that date.

One bondholder, Nedbank, had agreed to waive Paladin’s obligations until the end of March based on the Manyingee sale. Nedbank has since agreed to extend the waiver.

It appears Paladin will live to fight another day but the spot uranium price is still not doing the company any favours, despite being up 15% this year. Utility demand in the spot market is “extremely weak”, industry consultant TradeTech notes.

This has left intermediaries and speculators to provide the only turnover in the market. Last week found some buying interest at the US$23.00/lb level, but sellers were not too keen to sell down. Four transactions were concluded in the spot market totalling 400,000lbs U3O8 equivalent. TradeTech’s weekly spot price indicator remains unchanged from the prior week at US$23.25/lb.

No deals were reported in term markets last week but this is where we find the utility interest missing from the spot market. Several utilities are currently evaluating offers for mid and long term delivery contracts. Spot traders are reluctant to move until some price direction is provided as these deals are settled.

TradeTech’s term price indicators remain unchanged at US$28.00/lb (mid) and US$35.00/lb (long).

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