What Happened to the Paladin Energy Share Price?
Shares of Paladin Energy [ASX:PDN] fell by 3.95% on Wednesday, closing at 36.5 cents. This was the lowest closing price in nearly 10 years of trading!
Why Did This Happen to the Paladin Energy Share Price?
Paladin Energy Limited is a uranium production and exploration company with projects currently in Australia, Canada, and Africa. The Langer Heinrich mine in Namibia is its flagship project.
Since the Fukushima uranium plant meltdown in 2011, the uranium industry has never been the same. Following this event, the Japanese government turned off all of its 54 uranium power plants.
The uranium spot price is now trading at around US$28.25 per pound, a level not seen since April 2005. Certain estimates now place up to 60% of current annual global production with costs above the current spot price, which is unsustainable.
For years, Paladin experienced financing, production, and profitability issues. And last week it officially temporarily closed its Kayelekera mine in Malawi.
For this plant to restart operations, Paladin wants to see a uranium price between US$70–75 dollars per pound, which implies that the breakeven price for Kayelekera is significantly above the current spot price.
Overall the share price is declining because of a poor uranium environment. Last week, Japan announced that it won’t restart any reactors during 2014 — something that uranium punters were betting on.
What Now For Paladin Energy?
There is positive, long term good news for the uranium environment: Russia and China are building uranium reactors. Nuclear power is central to Beijing’s efforts to reduce unpopular smog while keeping the manufacturing economy humming in its populous eastern cities.
Nonetheless, the majority of these reactors will come on stream between 2020 and 2030.
The key for the uranium price coming back in the short term is Japan restarting its reactors.
So far the Japanese Nuclear Regulatory Authority (NRA) has said no. It requires necessary safety approvals ahead of reactor restarts. Nonetheless, two NRA chiefs are set to leave in September. And it seems like Japanese Prime Minister Abe has chosen two more nuclear power friendly replacements.
It’s hoped that the changeover will speed up the process of restarting the reactors.
Overall, a change of the guards doesn’t necessarily mean Paladin will make a staged comeback. Uranium reactors should take months to restart. And there will be few, at best, which restart any time soon.
Resources Analyst, Diggers and Drillers