Paladin (PDN) – A rocky restart of the Langer Heinrich uranium mine
PDN sold off heavily after releasing their September quarter update. The market punished the stock on lower production/sales volumes, higher costs, and some negative language around the proposed Fission acquisition – in our view the extent of the reaction is unjustified.
Key takeaways from the announcement:
- Production volume of 640,000lbs vs. 520,000 the prior quarter… the market was looking for a number closer to 800k/lbs
- Higher costs than expected of $41.90/lb, largely due to lower production volumes
- National security review of the Fission acquisition proceeding. Both entities have made submissions thus far, with limited progress – in PDN’s words ‘there is no certainty of approval’
Paladin outlined the specific operational issues at play – primarily relating to inefficient processing of stockpiled ore. These issues look to be largely one-off which shouldn’t persist in the medium-long term. As for Fission, we see the risk of government rejection of the proposal as mostly priced in. We will continue to hold the stock in our Active Growth Portfolio & Emerging Companies Portfolio and the news today does not impact our view substantially, though we will monitor our position from a portfolio weighting perspective.
- At current prices, we see this as an attractive entry point to the evolving nuclear thematic. With remembering less than 2 weeks ago the stock jumped 10%+ on news tech giants were beginning to commit to long term nuclear energy plans to support AI and cloud computing power requirements.