PALAF Q2 2025 Earnings Call

Operator: Thank you for standing by, and welcome to the Paladin Energy Limited December 2024 Quarterly Results Call. All participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Hemburrow, COO. Please go ahead.

Paul Hemburrow: Good morning, everybody, and welcome to Paladin Energy's second quarter report for financial year 2025. My name is Paul Hemburrow. I'm the Chief Operating Officer of Paladin. And with me today is Ian Purdy, our Chief Executive Officer; Anna Sudlow, our Chief Financial Officer; and Alex Rybak, our Chief Commercial Officer. We're pleased to be here today to present our quarterly results and discuss a number of positive outcomes that we've achieved during the last quarter. The ramp-up of operations at Langer Heinrich continues, and we're seeing positive progress in the operation, particularly coming out of the shutdown in November. The shutdown was well executed with all of the intended activities completed on time. December 2024 recorded the highest monthly production volume since the restart of commercial production in March 2024. There are a number of notable achievements in the quarter, including the sustained improvement in recovery rates and stabilization of water supply to the plant. Our multi closed out the acquisition of Fission Uranium Corporation on the 24th of December and completed listing on the Toronto Stock Exchange on the 27th of December. This work was well executed and is a significant milestone for the company. I'll now provide an update on the operations, and I'll deep dive a couple of issues. But first, I'll start with our safety performance. On a 12-month rolling basis, the company TRIFR sits at 4.1 per million hour's work, which remains under our target of 5. The health and safety of all of our people no matter where they are or what role they play is incredibly important to us, and we work hard to continuously improve our conditions, systems and processes that drive safer outcomes. In Namibia, production for the quarter was similar to the previous quarter at 639,000 pounds with two-week fewer operating days than quarter one due to the shutdown. In December, we achieved production of 308,000 pounds of drum product, which is a step change coming out of the sharp. So we remain on track to deliver the guidance range of 3 million to 3.6 million pounds of products for FY 2025. In November shutdown was an important factor that led to the results that we saw in December. Some of the work included improvements to the flash unit in the leaching circuit, the new burner installation in steam generation to improve efficiency and some additional pump and pipe work in the CCD to improve our recovery rates. The team has worked very hard to lock in the recovery improvements identified at the end of last quarter. And so we saw an uplift from recovery at 69% in quarter one to 88% this quarter, sustained through the entire quarter. This is a result that I'm a bit pleased with and comes from a lot of good analysis and problem-solving from my team. We've also made great strides in delivering improvements to the water infrastructure and systems that support consistent supply and we've proven the infrastructure and the capacity works as evidenced by the December result, where we had no water-related interruptions. We've seen minor disruptions to our operations in January due to sulfur blooms affecting NAM Water supply. These types of issues are routine events, which we cater for in our guidance. So we solved the infrastructure challenges, and we solved the capacity challenge, and we continue to work with NAM Water to optimize water supply, and we're continuing to make improvements to our water efficiency and water management on site. As many of you may know, we're currently processing previously stockpiled ore and our base case plan is to move to mining high-quality ore from the middle of this year. Now, we continue to experience variability in the grade of that stockpile at all. So we'll continue to assess a range of options to increase ore grade, including blending strategies and bringing mining forward from the planned July start date. My team has been working on the mining phase now for six months with mine planning optimization and scheduling work. We selected a preferred contractor. We've identified the equipment that we need. And as I've previously noted, some of that equipment is on site already constructing the next tailings day and we will continue to identify mechanisms that may enable us to bring mining forward. Restarting a mine and large processing facility has a lot of moving parts, and we're now nine months into what is a 21-month ramp-up process. I'm extremely happy with the work my team has done and the results of their problem-solving efforts. We continue to look at improvements such as recovery, water infrastructure and delivery. And when we deliver the mining phase, I believe it comes together to move us closer towards our target levels of performance. I'd like to hand over now to Ian Purdy for an update on the Fission acquisition.

Ian Purdy: Thanks, Paul, and hi, everyone. Really strong finish to the year across the company, as Paul has said, at Langer Heinrich, some great results. And really importantly for us, we were so pleased to bring the acquisition of Fission Uranium Corp. to a successful completion. It came together really well at the end of the day, once we achieve the Canadian approvals with the full support of the Canadian government. We were able to close the transaction very quickly just before Christmas. And we're extremely pleased to see our ticker up on the TSX before the new year. So we're up, we're running. The transaction is complete in every aspect, successfully completed and actually went to -- came together very, very smoothly at the end of the day. We're underway. We're really in -- got our boots on the ground working with efficient team. A couple of highlights for us and for me, in particular, really pleased that all of the efficient employees have come on board. There is a fantastic team at Fission, culturally very aligned to Paladin. Fission's always had a very can-do attitude and their whole vision and their whole focus, which is evident from the work they've done is delivering this world-class project and they're committed to that task, and they're committed to moving that company and project forward, so really pleased to be working alongside Chris, the CFO; Gary, the VP Project Development and Kanan, the VP Exploration. And Paul and Anna are working very closely with the team on the ground, and the integration's been a strong success. We're acting as one company already. We're very focused on the critical path in moving PLS forward. And everyone is really excited to be working together. So over the next little while, we'll start to outline what our priorities and plans are. But I can say, it's a continuation of the Fission program, which is delivering this world-class project to market as soon as it makes sense. So with Fission, the short-term priority right now is we've approved the winter drilling program. We'd like to see an extension of the resource and the reserves, incredibly prospective area. They've got a fantastic drilling program, which is very well considered. So that will commence with activities expected to commence on the ground this current quarter. And then obviously, with Gary, we're doing a full review of the project plans. We'll be looking to bring internal resources to move the project forward. The environmental approvals are well progressed, and we're working with Gary to see how we can bring that to a conclusion. And we've also had some very constructive discussions with First Nations, and Paul and I will be over in Canada in the next few weeks to move those discussions forward as well. So all systems go, and we'll be providing a lot more information over the next few months. Thanks, Paul.

Paul Hemburrow: Thanks, Ian. Look, I'm really excited about the project and certainly looking forward to heading over to Saskatchewan in a couple of weeks' time. So just a quick recap. Strong operational performance in December, underpinned by improvements in water supply infrastructure and the successful shutdown completed in November on time. Overall, recovery results are exceptional. They are within the target range and was sustained throughout the entire quarter. We sold 0.5 million pounds and delivered those successfully into the converters in Europe and the USA. We completed the acquisition of Fission and listed on the TSX on the 27th of December 2024. So in summary, Paladin Energy had a strong quarter with good progress on the ramp-up of Langer Heinrich Mine and completion of the acquisition of Fission Uranium Corporation. I'd like to now open the floor to questions.

Operator: Thank you. [Operator Instructions] Your first question comes from Daniel Roden with Jefferies. Please go ahead.

Daniel Roden: Good day. Thanks, Anna, Alex and Paul for taking our question. First one, I just wanted to I guess on PECA [ph], it's a good recovery 88% for the quarter. I just wanted to get a gauge on what the exit rate for that was in December? And is that 88% -- was that pretty consistent, like pre and post chart? Or did you see a pretty big improvement post the rectification obviously the plan?

Paul Hemburrow: Thanks for the question. In fact, we saw an uplift in the last month of the first quarter to -- around the 86%. And those results have been sustained between 86% and 89% for the entire quarter. So the work was largely done prior to the shut and sustained throughout the quarter.

Daniel Roden: Okay. And I just wanted to maybe just unpack a little bit more on the, I guess, the open pit ramp-up profile. I think if you look at the balance sheet on the -- definitely wasn't the rationale behind it, but the balance sheet is looking a lot healthier from the Fission kind of closure with the cash and some -- and deposits. So I guess what's stopping the investment in the open pit ramp-up, if it's going to provide a bit more consistency in the feed profile?

Paul Hemburrow: So what we have is a pre-mine stockpile. We started the process with about 6 million tonnes of product on that stockpile. It's located extremely close to the crushing circuit, and it delivers very, very low-cost tonnes into the plant. For the first half of this year, we have been cash positive as a consequence of the low-cost stockpile. We're looking at options to bring the mining forward. We originally planned for that to be in July, and there's a lot of moving parts to make that happen. So we do have some capacity on site building out to TSX, but we just need to make sure that that is going to -- that we can actually bring it forward in a timely manner. So we're looking at methods of doing that. We're looking at how we bring in the drill and blast program. So there's a fair bit of work to do to bring that forward. So we'll continue to look at ways we can do that. But the base case plan is to start mining in July.

Daniel Roden: Okay. And if I could probably elaborate on that a bit further there, but when it's scheduled to come into operation in July, what is the ramp-up profile for that look like?

Paul Hemburrow: So we're not going to provide specific details. So what we have provided is our guidance. We expect to be in the range of 3% to 3.6% for the full financial year. And then we'll work towards achieving our target full production rates later in the year.

Daniel Roden: Thanks. I will hand it over. Thanks, guys.

Operator: Your next question comes from Cameron Tyler with Bank of America. Please go ahead.

Cameron Taylor: Yes. Good morning. Thanks, team. Just a question on the water. So you said you've had good supply from NamWater. Have you had any interruptions in January? And with the storage, water storage tanks, have to draw much on those buffer tanks over the last quarter or so? Or you've been pretty consistent with the NamWater supply?

Paul Hemburrow: Thanks for the question, Cameron. So yes, we have had some minor disruptions as a consequence of sulfur balloons. Through the shut, we were able to maximize our on-site storage facility, and we've been operating very consistently. These sorts of sulfur blooms are fairly routine in that region and we've catered for those software blooms in our guidance.

Cameron Taylor: Okay. Thank you. And just on bringing that mining forward from the open pit, is there any sort of balance between current uranium prices? Like, I mean, clearly, the street is pretty bullish on uranium prices over the next 12 months and thereafter you sort of -- are you happy to punch through that low grade stockpile and then mine the higher grade when you expect your uranium prices to sort of push up a bit? Or does that not really come into play? Are you sort of setting your sights purely on FY 2021 guidance?

Paul Hemburrow: Yes. It doesn't affect our decision-making process, Cameron. We'll continue to move the medium growth stockpile through the plant. It's low-cost tonnes. It's already pre-mined, and we'll look at ways we can pull in the mining at an appropriate point in time.

Cameron Taylor: Okay. Thanks, Paul. Just one for Ian, maybe on the Fission update. So you spoke briefly about the team, but over there in Canada, but Ross McElroy had elected to resign at the last update. Can you give confidence to shareholders that PLS projects should be successful without Ross?

Ian Purdy: Yes, it will be, Cam. Ross chose to step away on the completion, which is understandable as an independent CEO looking at a divisional role. Certainly, I would have been very happy for Ross to stay on, come on the journey. And Ross and I are on very good terms, but that's understandable. I think what's really pleasing for me is that Chris, Gary and Canon, the functional leaders and the guys on the ground are all absolutely committed not only to becoming part of Paladin, but to really driving forward the project and the exploration outcomes. Give an example, Canon, great guy, working very closely with Paul. He's overjoyed that we're fully committed to his winter drilling program because he sees the prospectivity of the region and he's just keen to get the drill rigs running. Gary is a fantastic guy. I used to run very significant underground operations for Cameco. Gary is totally committed to his project and the work he's done has been outstanding. And again, Paul, Gary and I talk couple of times a week, sometimes daily, we're right in there moving forward. So -- and Chris has been fantastic, the CFO. He's carried a lot of the workload for the actual completion of the transaction, which is quite significant. So Fission have a fantastic team. We're looking, as I said, to appoint a President of Canada. That role is going to have a really important part to play, but that's a strategic role. That's about government, First Nations stakeholders, strategy. We're going full steam ahead while we recruit that role. And Paul and Anna are working very closely with the local teams. So we will be successful. It is a world-class project. I'm not sure all of our shareholders fully appreciate what we've achieved by buying that company. I think as I mentioned to people last year, it was a hotly contested process that is a highly sought after project. It's now ours. And I think when you see our plans and the progress we make going forward, I think people will go, wow, that's pretty exciting. So Cameron, we're excited. We're on the right path. We will be successful, and we look forward to showing the market what we can do over the next few years with that asset.

Cameron Tyler: Yes. Wonderful. Thanks, Ian. And just maybe another one quickly potentially for Alex. So with the ICA approval, there is requirements that that they are restricting sales to China just purely to CGN under the existing contract. Does that hinder any upside for PLS volumes and potential pricing given China's appetite for uranium going forward?

Alex Rybak: Thanks, Cameron. Look, one of the -- when we announced the transaction, if you remember, one of the sort of key pillars of the transaction, if you like, was our belief that there's going to be shortage of material in the West. The Chinese utilities have been very quick to the market in contracting available uranium volumes and the Western utilities have been slower. And so we think definitely there's going to be that demand from the Western utilities. So we're very happy to target the Western utilities for the PLS material. And of course, we've got ability to sell Namibian origin material to China as well.

Cameron Tyler: Perfect. Thanks, Alex. I'll pass it on.

Operator: Your next question comes from James Bullen with Canaccord. Please go ahead.

James Bullen: Thanks and thanks Ian and team. And Paul, I guess, this a question for you. Just obviously, NamWater fulfilling their side of the bargain providing more steady water. But what's happening around the tails water recovery? Have you seen an improvement there?

Paul Hemburrow: Thanks, James. Good question. The water management has improved. But what we're seeing is -- as a consequence of the stockpile or quality, we're seeing some, I guess, some water efficiency, some more efficiency work that needs to be optimized. And so we'll continue working on mechanisms to improve our water efficiency and water management on site. So we have made some gains in terms of tailings recovery and will continue over the next quarter to resolve those transitionary issues that are related to stockpile quality. So those issues will be fully resolved once we move into the mining phase. I don't see those continuing at all past that point, James. Q – James Bullen: Okay. Great. Thanks. And just as you go into the mining phase, when we look back at the BFS numbers, I think you're about US$ 48 there. Are you still feeling relatively comfortable around those BFS numbers obviously corrected for inflation for the mining phase.

Paul Hemburrow: Yes. We're seeing the financial results in line with our expectations, there's nothing that's surprising to us at all in that space. Q – James Bullen: That's brilliant. And just around PLS, what are the next major catalysts that the market should be looking for there or announcements?

Ian Purdy: I think, James, the first major catalyst, which I think the market is still interpreting is the fact that we've -- this is now ours, and the fact that we've added this world-class asset to our existing portfolio is really a game changer for us as a company. We've got global scale. We're in production in a world-class asset in Namibia. We're one of the largest producers in the world today for what we're producing today, and we're only nine months into our ramp-up, we've got probably a top two project you running project in the world, which we own, it's ours, and we've got exploration upside in other projects in Canada as well as two major assets in Australia. We sit here today and go well, when we look at what we've got in our company, and we're listed one of the largest resource bases. So there's a huge catalyst we've had over Christmas, which is still coming through. And we think that catalyst will come through strongly as people start to fully appreciate the opportunity we've got to deliver on this amazing set of assets that we've compiled and put together. Secondly, we're well advanced on the environmental approvals. We're well advanced and have very deep relationships between Fission and First Nations. So obviously, we're going to be very, very focused on approvals. And thirdly, the project feasibility work and the detailed engineering is all set up and underway, where the team are working closely with the CNSC. So I think we're going to have a fantastic news flow of bringing this asset forward towards production over the next several years. And we've proven we can deliver a project on time, on budget. The Fission team are really strong, technically focused and very competent in what they're doing. So we think there's going to be fantastic news coming out of PLS, consistently over the next few years. And then you look across to Namibia, we're well on our way to ramping up Langer Heinrich to its target. That will continue. The good news will come out of Langer Heinrich, and there's movement at the station in Australia, and we'll be exploring and moving Michelin forward as well. So James, there are endless catalysts coming, but what we're going to do. We're a company that likes to do the work and then tell the market what we've done rather than promise the world. So let us get into it. It's a start of the new year. We've got a busy year ahead, but I'm expecting some really good news flow out of Paladin this year. Q – James Bullen: That’s great, Ian. I will look forward to your waiting in the ATS going up. Thank you very much.

Ian Purdy: Thanks, James.

Operator: Your next question comes from Andrew Hines with Shaw and Partners. Please go ahead. Q – Andrew Hines: Yes, Thanks and well done, team. That's obviously a much better quarter than where we were in September and all that hard work has started starting to come off. Paul, a quick question for you. That plant recovery number, 88% in the quarter. That's actually surprisingly good at this stage of the ramp-up in commissioning. Do you have any targets in your head around how high you can get the recoveries out of the plant?

Paul Hemburrow: Thanks, Andrew. Good question. Our target range is in the 85% to 90%, so we're well within that range. And we're putting medium-grade stockpile through the plant and delivering on that range. So I'm very pleased with the results we've achieved. I'm more interested in seeing how we can progress mining and increase the grade and then re-optimize the process and drive that even further forward. So I'm cautiously optimistic about delivering better results than that. But I guess we'll see when we move into that phase of the operation.

Andrew Hines: Yes. And I guess with high-grade material and more consistent feedstock, you should be able to tweak it up a little bit. A quick question maybe for Anna on cash flow. It's good to see the operation cash flow positive. I think operating cash flow in the quarter of €43 million of reading the release. How much more CapEx is left to spend? I think it was only a modest amount in that quarter, which I think was related to the tailings storage facility, if I'm correct, Anna. As you go into the mining operations, what's your CapEx bill look like for the next six months?

Anna Sudlow: Thanks, Andrew. Look, we haven't provided guidance on the next six months CapEx, but we expect it to be reasonably aligned to what we said when we put out our original numbers. As we said, the majority of the cost in the next six months will be around DFS 6. So you expect to see some more costs come through for that in the next two quarters.

Andrew Hines: Okay. Thanks. And final one for me. Perhaps for Alex, around the state of the market. I note that you've signed another contract in the quarter, so it takes in 11 offtake agreements. So you've obviously been out there and active. Just it's been a pretty quiet period over the last little period for contracting. And, obviously, despite your own price has also been a little bit on the soft side. Just Alex, your thoughts about what's happening out there, what are the utilities doing? What's your expectations for the market this year?

Alex Rybak: Yeah. Thanks, Andrew. As I said before, we are seeing good activity from utilities. And I think that, that is a reflection of us being a producer. And I think other producers are seeing strong demand. I've seen TradeTech just recently published their Q4 update. And they've actually got 146 million pounds of contracted for the year to November. So not even just for the full year. And that reflects a relatively strong year. I think UX have a smaller number, but TradeTech seems like they're seeing more contracts, and that is reflective of the interest we have, which is, again, is translating into strong pricing and strong term pricing. There's obviously volatility in the spot, but we're very much more concerned with the term market dynamics. But we've seen quite strong last year, and we expect to see even stronger dynamics this year as utilities turn their mind more to the contracting and view 308. Obviously, they've been very concern with making sure they've got enough conversion and enrichment, and that's really been the theme for last year, but we're seeing utilities turn their mind to uranium contracting, and we should see the benefits of that this year.

Andrew Hines: Thanks. Can you give us any color on the nature of that contract that you signed in the quarter? Is it -- I presume it's a market-related contract. Are we still seeing sort of floors and ceiling type contracts, floors, I think they were sort of around 75 earlier in the start of the last quarter up to around 130 ceilings. Are those the same sort of numbers that you're seeing in the market?

Alex Rybak: Yeah. So without commenting on the individual contracts, we're seeing a prevalence of what we call hybrid contracts where you have a component of market-related and component of base escalated. The floors and ceilings, we're still seeing very healthy floors and ceilings. I mean there's some discussions from the utilities every time the spot price moves, utilities expect particularly the ceilings to adjust with that. We tend to resist that level of discussion. The minute the utility wants a corresponding reduction in the ceiling price, we sort of tend to move away from that because longer term, we believe there's just that basic math that you just can't ignore those deficits, growing deficits. So yeah, broadly, levels of floors and ceilings are very attractive. And utilities are pretty much willing to give base escalator and a bit of market to entice the suppliers to contract.

Andrew Hines: That's great. Thanks, Alex. I'll hand it over to someone else. So well done team again on a good quarter and good to see Lan Heinrich performing exceptionally well. So well done.

Alex Rybak: Thank you, Andrew.

Operator: Your next question comes from Dim Ariyasinghe with UBS. Please go ahead.

Dim Ariyasinghe: Thanks, guys. Just a couple of questions to round out. Just finishing up on the water. So it sounds like it was a good quarter that the water issues have been mitigated from now. I just want to confirm, though, you've still got to ramp up the plant more so to get the full plate. I think at capacity, maybe it's like 1.3 million, 1.2 million tonnes through the quarter. Do you -- like hypothetically, if you were at full tilt now, would you have enough water to deal with that sort of throughput?

Paul Hemburrow: Yeah. We've demonstrated the capability of both the NamWater infrastructure and our infrastructure to manage full water flows and on-site storage capacity is more than sufficient. So yes, we do have enough water at full production.

Dim Ariyasinghe: Yeah. Awesome. Okay. Cool. Thanks. And then just on the costs. I don't think anyone is going to fault you too much during a ramp-up. But can you give us any guidance on how you expect that to evolve over the course of the year, noting that it's still -- there's a bit of daylight between where you are now versus your original guidance. This is all on a unit cost base. So am I right in assuming there's just a fixed cost component and that smooths out as you ramp up -- continue to ramp up?

Anna Sudlow: Yeah. Thanks, Tim. It's Anna. I'll take that one. Look, I think what we're seeing on the cost of production is, as you say, predominantly driven by the volumes that are being processed. If we normalize the total production costs, we're seeing costs pretty much in line with our expectations. So we obviously will see an increase in cost as we commence mining, but we're seeing pretty good cost results, honestly, once we remove that volume impact.

Dim Ariyasinghe: Great. Thanks. And maybe just last one, just to talk about the mining restart. Maybe you could just walk me through conceptually what needs to be done before July like from -- have you hired the contractors I guess, yes, what's left to do, I guess, before we start seeing you guys in the mind?

Paul Hemburrow: Yes. Thanks for the question. So we've identified mining contractor. We have identified the fleet requirements. We have an optimized mine plan. We are working through optimization of the schedule. The next thing we need to do is make sure we have the final contracts locked in. We have to mobilize plant and equipment to site that typically in Namibia comes out of South Africa, demonstrated that, that's not a particular challenge for our contractors, mobilize the fleet site. Then you go through the typical process around top soil clearing, preparation for drilling and blast removal of overburden. So it becomes very standard after that. And then at an appropriate point in time, we start moving mined ore into the rumor directly into the crushers. So there is quite a bit of preparation to do. And we'll continue to look at ways we might be able to accelerate that in a cost-effective manner.

Dim Ariyasinghe: Awesome. Okay. Cool. Thanks and congratulations again.

Paul Hemburrow: Thank you, very much.

Operator: Your next question comes from George Ross with Argonaut. Please go ahead.

George Ross: Good morning guys. Congratulations on the quarter and also the Fission deal closing. Just -- most of my questions have been answered. But just in regards to shifting to the institute ore processing, is there any sort of view on if there's going to be any, I guess, impact on recoveries versus the stockpiled ore positive or otherwise?

Paul Hemburrow: Sorry, just to be clear, you mean when we move into the mining phase, are we expecting to see an upward?

George Ross: Yes, yes. Yes, yes, basically. Are there any expectations on whether or not the recoveries will change after you shift from the stockpile of [indiscernible] to the mine or...

Paul Hemburrow: If you increase grade and you have grade stability and material stability, then it does make it easier to optimize your process and improve recoveries. Our recovery rates are actually already within our target range. So there may be some upside potential, I'm cautiously optimistic. But I guess we'll have to see when we start feeding mined ore into the plant. But conceptually, it's possible.

George Ross: Okay. Great. That’s it for me.

Operator: There are no further questions at this time. I'll now hand back to Mr. Paul Hemburrow for closing remarks.

Paul Hemburrow: Thank you for the questions. We're really pleased with the progress on our ramp-up, like I stated earlier, it's 9 months into a 21-month program of work. We're really pleased with the results that we've delivered, particularly in the last quarter post the shutdown. And we're also very excited about bringing Fission into the company. It was a strong quarter, some very notable improvements that we've since locked in, and we're just very happy with the work that's occurred in last quarter. Really appreciate you joining us today, and thank you for your participation.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.