PALAF Q4 2025 Earnings Call

Operator: Thank you for standing by, and welcome to the Paladin Energy Ltd FY 2025 Financial Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Hemburrow, COO. Please go ahead.

Paul Hemburrow: Thank you very much. Welcome to our conference call. With me today are Ian Purdy, our outgoing CEO; Anna Sudlow, CFO; Alex Rybak, Chief Commercial Officer; and Paula Raffo, our Head of Investor Relations. Today, we released our full year financial report as well as significant update on our PLS project in Canada. I'll start with our full year results before moving to our future-focused activities. FY '25 was a transformational year for Paladin with successful completion of our first full year of operational ramp-up at the Langer Heinrich mine and successful acquisition of Fission Uranium Corp. At Langer Heinrich, we have now achieved 5 continuous quarters of quarter-on-quarter improvement in production volumes. I was personally delighted that the year culminated with the highest quarterly crusher circuit throughput in the history of the Langer Heinrich mine in the June 2025 quarter. Our mining operations are now up and running at approximately 50% capacity, and our plant is performing well. For this reason, we fully expect to complete our ramp-up year -- program during FY '26 and full operations expected for FY 2027. I'd like to note some key highlights achieved at Langer Heinrich during the year. We achieved 3 million pounds of uranium production, which ranks us as the fourth largest listed producer of uranium in the world. We achieved sales revenues of approximately USD 178 million off the back of successful deliveries to our global customers. Updated average life of mine cash operating cost estimates at -- sorry. Our realized price is $65.70 per pound and our cost of production of $40.20 were strong outcomes in a ramp-up year. And finally, we're proud of our safety performance and community focus as we work with our employees, contractors and local communities in Namibia and Canada to achieve sustainable benefits for all stakeholders. The successful completion of the Fission Uranium Corp. in December 2024 was a significant milestone for our company, adding the Patterson Lake South Project to our growth portfolio. The PLS project hosts the Triple R deposit, a shallow undeveloped high-quality uranium deposit in the Athabasca Basin region in Saskatchewan, Canada. It's one of the leading undeveloped uranium projects globally. We've made excellent progress since the acquisition with the signing of mutual benefits agreements with 2 First Nations; the granting of the non-resident ownership policy exemption by the Canadian government; acceptance of our final environmental impact statement by the Saskatchewan Ministry of Environment, which is currently undergoing public review; and completion of a comprehensive engineering review, which we are pleased to release the findings today. The key highlights for the project are: unchanged life of mine production of 9.9 million pounds over 10 years, unchanged average annual production of 9.1 million pounds utilizing conventional mining and processing, updated average life of mine cash operating cost estimates of $11.70 per pound, and all-in sustaining cost estimate of USD 15.20 per pound, updated front-end engineering and design stage preproduction capital cost estimate at USD 1.226 million, updated NPV of USD 1.325 million at USD 90 per pound uranium price. Updated first uranium production at the PLS project is targeted to occur in 2031. The strong economics support our unwavering commitment to bringing the PLS project into production by early next decade while continuing to derisk the development through FEED and conducting further exploration to identify future expansion opportunities. Utilities are increasingly seeking western sources of supply with PLS strategically positioned to capture this demand. We're confident that the project will deliver long-term value for all stakeholders while upholding the highest standards of safety, operational efficiency and sustainability. Finally, I'd like to thank our employees around the world for their hard work and commitment to delivering an important year for Paladin. The foundation is now in place for our future success and growth. And also, I'd like to thank all of our shareholders for your continued support. I'd now like to open the call for questions.

Operator: [Operator Instructions] The first question comes from Alistair Rankin with RBC Capital Markets.

Alistair Rankin: Just a couple of questions from me. First one just on PLS. I went through your new CapEx estimates and just compared them against the 2023 feasibility study. Just looking at the 2 biggest CapEx cost increases are in the processing and infrastructure cost buckets, can you just run through what's driven these cost increases?

Paul Hemburrow: Yes. So thanks, Alistair, for your question. In the processing plant, it was primarily driven by an increase in plant footprint and related also to building and infrastructure costs, so for example, the mill, ore handling, CCD, solvent extraction, so minor increases in steelwork, concrete, labor rates and the expansion of that footprint to provide us with a little additional capability.

Alistair Rankin: Just another one on PLS as well. So you noted here some plans for some further drilling in the Saloon East and then some drilling as well to convert [ some of your ] indicated and inferred resource. Are your plans at the moment -- or can you just run through what your plans around time line for this drilling are? And is this something you want to do and get done before FID is taken on the project?

Paul Hemburrow: Sorry, Alistair, it was really difficult to hear, but I think the question was around our exploration plans and activity. Really positive results with the drilling program in Saloon East. There's still a lot of open ground, so over the coming years, we'll continue to undertake our drilling program in and around that Saloon East area but also around the main PLS at the open ends of that ore body as well. So there's a lot of prospective ground in the region, and we plan on continuing to explore primarily at the Saloon East and the PLS Triple R deposit.

Alistair Rankin: And is this drilling something you want to do before you take FID on PLS?

Paul Hemburrow: Not necessarily, no.

Operator: The next question comes from Daniel Roden with Jefferies.

Daniel Roden: Maybe just following up on that. I guess, the upscaled CapEx of $1.2 billion, I guess what's the targeted funding mix of that? Do you still see a good component of, I guess, self-funding? Or do you see -- I guess, if you revised the estimates to include additional, I guess, finance debt and is there the potential that you do a strategic sell-down perhaps to kind of help with the funding mix as well?

Anna Sudlow: Daniel, it's Anna. Look, I think we're still considering that we have a range of options available to us. So we've obviously got LHU cash flows. We feel that the PLS project is really strong economically, so I don't think that access to debt or equity markets is going to be an issue for us. I think you're right in that there is a possibility that we would look to bring in a strategic partner. So I think watch this space, but we've got a range of options that we'll consider as we go forward.

Daniel Roden: Okay. And I guess the FEED test has a -- you're running at USD 90 accounts kind of assumed price to that. When are you looking at, I guess, securing initial term contracts now that you have a bit more visibility over timing of the project? Do you look at kind of structuring that soon? Or is that a bit more back-end decade weighted?

Alexander Rybak: Daniel, I might take that one. Alex Rybak here. So look, definitely, this is a scale of a project that will require long-term contracts to proceed. And we've obviously built a book and have experience from Langer Heinrich. We have the customer relationships. Interestingly, a number of customers have already approached us about contracting at PLS, which, again, underscores our view of the market and the tightness in the market. A lot of the forward-looking utilities are looking quite far into the contracting horizon. We're not contracting PLS yet. But we will have a contracting strategy that will mesh well with the funding strategy, and we will build a contract book ahead of FID for PLS for sure.

Daniel Roden: Okay. And maybe just, I guess, one on the accounts, and I'll be getting into the minutia. But you've kind of -- the average FY '25 cost of production is USD 40.2 a pound. I'm just trying to reconcile that with the reported costs so that if I go into the accounts in Note 10, the cost of production was USD 129 and so if I kind of break that out, I'm still -- I guess what's the bridge to kind of come back to that $42 -- or, sorry, $40 a pound? How do we bridge that from the cost of production in the accounts?

Anna Sudlow: Yes, Daniel, let's take that one off-line. There's probably a level of detail we can discuss one on one.

Daniel Roden: Okay. Sounds good. I'll pass it on.

Operator: The next question comes from Andrew Hines with Shaw and Partners.

Andrew Hines: A couple of questions. First, well, just short-term sort of update, Paul. How is Langer Heinrich going now we're sort of 2 months into this quarter? Is the plant still operating at the recovery rates that we were achieving in that June quarter? Are throughputs still good? How's the mining fleet operating?

Paul Hemburrow: Yes. Thanks, Andrew. Everything is performing absolutely as per our expectations, and we continue to stand behind our full year guidance, so very pleasing results so far.

Andrew Hines: Okay. And a question for Alex. Alex, I presume you're off to London on the weekend to the WNA Symposium, which is, as we know, the big get together with the buyers and the sellers. Just going into that conference, that symposium, just interested in your take on where we're at in the market. Contracting volumes still seem to be relatively low this year. We had that sort of strange RFP from the Koreans recently that seem well out of the market in terms of what they're asking for. What is happening behind the scenes? And what do you expect to see coming out of London next week?

Alexander Rybak: Yes. Good question, Andrew. Thanks for that. Look, I think definitely, WNA is one of the premier events. I think this year has got close to 1,000 delegates registered already, and there's a lot of expectation and discussions. But for me, what's interesting if you take a step back, is what's going on in the contracting from an RFP point of view. As you mentioned, the Koreans are out for 9 million pounds of supply. As you know, they've, 2 years ago, put out an RFP for 6 million pounds, which they didn't fill. They didn't fill anything last year. They've got 25 reactors operating in country, consuming 12 million, 13 million pounds of uranium annually. So those requirements are building up, and they're not being contracted. So we expect them to come out for additional volumes this year. We also see a number of other parties, particularly from Europe, with large unfilled volumes that need to be filled later this year. So from our point of view, whilst the numbers -- the historic numbers aren't coming through with historic level of term contracting over the next 6 months, I see quite large volumes of requirements that need to be filled in the market, particularly with supply in the next -- starting in the next 1 or 2 years, which, in my mind, should translate into some positive movement in the spot market because that material has to come from somewhere, and most of the major producers are quite well contracted. So from a demand point of view, very strong dynamics. Obviously, from a supply point of view, there's supply challenges -- are always out there. And Kazatomprom has recently talked about its production potentially being 10% lower going forward. So the market is quite well set up. I think it's going to be quite an interesting conference, this one, at WNA and we can pick up our dialogue after that.

Operator: The next question comes from James Bullen with CGF.

James Bullen: Just a quick question around PLS and that timing of 2031 for first production. Just curious what you see as being on the critical path. I think we all see compelling economics. The technical complexity looks absolutely manageable. Is it a regulatory thing that would mean it would take out to 2031?

Paul Hemburrow: Thanks, James. Look, you're absolutely spot on. I think the economics are very compelling, very strong economics for the project. In terms of project complexity, you're right. It's nothing completely innovative that's been done before. And the time line is largely dictated by the regulatory process. I met with the Canadian government, both provincially and federally last -- over the last 2 weeks. The CNSC process is a well-trodden path. It's very rigorous. We know the work that we have to do, and that is most likely to remain the critical path for our project. There are 2 stages in that process. Obviously, there's the permitting for construction. And then as we are constructing the project, there's the CNSC permit for operations as well. So they largely dictate the time it takes to bring PLS into production.

James Bullen: And that's not going to get impacted at all by C-5, that couldn't expedite things?

Paul Hemburrow: We had that conversation last week with the federal government. It's unlikely that it will have any significant impact on this project. The government are interested in projects of national importance. There may be a focus on streamlining some of these processes like the CNSC process, but it's unlikely to have any significant effect on our project in particular.

James Bullen: Paul, just if I could just ask one more question. Just thinking about Langer Heinrich in '27 beyond, the nameplate capacity, should we think -- how should we think about that? And do you believe that, that is absolutely still achievable?

Paul Hemburrow: James, I'm really happy with how the ramp-up's going. We're now entering into our final year of ramp-up. We put guidance out for the full year. I stand behind that guidance. I'm really happy with the way we're operating so far. But what I did say when we put the guidance out was we'll provide more of an update on 2027 around July '26. So I think we'll leave it at that for now.

Operator: The next question comes from Milan Tomic with JPMorgan.

Milan Tomic: Just a question on PLS on the permitting situation. And correct if my understanding is incorrect. But is there a third nations group there that also has a say in this? From my understanding, they were quite hesitant on having 2 mills right next to each other. Is that still the case? Or is there still more talks to be had with that third group of First Nations people? Or is that pretty much all sorted at the moment? I'll circle back with the next one.

Paul Hemburrow: Yes. Thanks for your question, Milan. There's actually 4. There are 3 First Nations group and Métis Nation-Saskatchewan. We have 2 MBAs with 2 of those groups, and that's gone really well. We're in conversation with the third group, and we're meeting again with them in a week's time. In fact, as we speak right now, our team is meeting with Métis Nation-Saskatchewan, and we're continuing to work with them. But there's no either regulatory requirement or any requirement under those MBAs for operation of a single mill in the region. And the CNSC are supportive of multiple mills in the region as well. So there's absolutely no issue with regard to that topic.

Milan Tomic: Yes. And just to confirm, do you need to have the sign-off from all 4 groups in order to progress the project ahead? Or is it majority of the 4?

Paul Hemburrow: No. In fact, it's just a matter of practice that we continue to engage collaboratively with the First Nations and Métis. It's ideal to have their support. And we're going to have a long-term working relationship with them, so we would rather have their support for the project than anything else.

Milan Tomic: Yes, makes sense. And then just one on Langer Heinrich just on the stockpiles. When do you expect those stockpiles to be depleted, the ones that were there from the previous operations?

Paul Hemburrow: Yes. Well, that depends. It depends on if we continue to see good growth coming out of the mine and it's progressing well. We may drip feed the stockpile in or we may not process it. As I mentioned in the guidance in the first quarter, we are feeding a lot of the stockpile material in as we strip the G-pits. And at the end of this next quarter, we'll have an update on the actual volume that we put through the process. So it depends on how things go as we progress through FY '26.

Operator: The next question comes from Branko Skocic with E&P.

Branko Skocic: Just a quick one on the Langer Heinrich reserves. It looks like contained uranium is down roughly 5 million pounds for the year versus production of circa 3 million pounds in the period. So I just wanted to understand the revision there. It does look like grade is the big change, but good to understand that, please.

Ian Purdy: It's Ian Purdy. I'll answer that one. Yes, there was 2 what I've considered routine minor changes to our reserves. The first one is depletion for the year with the -- obviously, the material we've processed through the plant and converted into U3O8. And the second one is there was a minor change to our cut-off grade, which did affect the volumes and the grade in a small way. So they are the 2 factors, but really pleased to say that our independent experts stand behind our reserves. They're in good shape, and there's been no significant change. And obviously, the remaining stockpile, we slightly decreased the grade on that as well given the year-to-date performance with the lower grades as you're aware. So all routine 3 minor issues, and yes, we move forward.

Branko Skocic: And then just quickly on Canada, there was some consolidation of the next-gen tenement a couple of weeks ago with Rio Tinto exiting their interest. Just wondering if you can confirm whether you guys had an interest in that tenement when it came up for sale?

Paul Hemburrow: No.

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

Paul Hemburrow: Thank you. So we had pleasing results at Langer Heinrich in the last financial year, and we're now in our final year of ramp-up. The engineering review demonstrates the strong economics at PLS, which underpin our unwavering commitment to bringing PLS into production. We've made good progress since the acquisition of Fission, and we have a really exciting work plan over the next 12 months to unlock value for our shareholders. Thank you for joining us today.

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