Paladin Energy Ltd (PDN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Paladin Energy Limited June 2026 Quarterly Results Call. [Operator Instructions] I would now like to hand the conference over to Paul Hemburrow, CEO. Please go ahead.

Good morning, everybody, and thank you for joining us today. I have Anna Sudlow, our CFO, with me this morning. And on the line we also have Scott Barber, our COO; and Alex Rybak, our Chief Commercial Officer. There are two areas I want to cover today on the call. First, I'll take you through the June quarterly results and the key achievements from FY '26 and then we'll move into the FY '27 guidance for Langer Heinrich, which builds directly from the operating platform we established throughout this last year. At a high level, FY 2026 was about transforming Langer Heinrich from a restart project into a stable operating uranium mine, while laying the foundation through our next phase of growth through Patterson Lake South. I'm pleased to report that we successfully completed the ramp-up of Langer Heinrich Mine during the quarter. This is a commitment we made to shareholders. We've now delivered on that commitment. For the June quarter, production was 1.23 million pounds of U3O8 bringing full year production to 4.82 million pounds, right at the upper end of our revised 2026 production guidance range. Sales were strong. We sold 1.35 million pounds during the quarter and 4.35 million pounds for the full year, exceeding the top end of our guidance range. Operationally, the business continued to improve throughout the year. Total mine material increased steadily and reached 7.45 million tonnes in the quarter, the highest quarterly mining rate since the restart. The full mining fleet is now operational and positioned to support our 2027 objectives. Processing performance remains consistent with plant recovery averaging 90% during the quarter, demonstrating a stable operation and plant performance at the top end of our recovery target. During the quarter, we achieved an average realized price of $70.60 per pound with FY '26 averaging $70 per pound. From a cost perspective, FY 2026 cost of production was $43.30 per pound, outperforming our guidance range of $44 to $48 per pound. While quarterly costs increased to $51.60 per pound as a result of the mine development work and transition to full mining activities and mining lower grade areas in line with our mine plan. The successful completion of ramp-up provides a strong platform as we move into FY 2027. While Langer Heinrich remains our producing asset today, Patterson Lake South represents a significant component of Paladin's future growth strategy. During the quarter, we reached one of the most important permitting milestones since acquiring the project. The Canadian Nuclear Safety Commission confirmed that our construction license applications had achieved sufficiency status. This means the application has met the required completeness and technical standards and can now progress through the formal regulatory assessment process. Subsequent to the quarter end, we signed an administrative protocol with the CNSC, which establishes a targeted pathway aimed at completing construction license hearing by the end of calendar year 2027. This provides greater clarity around the permitting process and represents another important derisking milestone. At the same time, our Canadian team continued progressing the FEED study and advancing engineering activities while maintaining strong engagement with indigenous partners and local communities. We also executed a binding term sheet with Birch Narrows Dene Nation as part of the mutual benefits agreement process, further strengthening our relationship and social license in the region. A highlight during the quarter was the Atlas discovery. Atlas is a new high-grade uranium ore body located approximately 3.5 kilometers south of the Triple R deposit at Patterson Lake South. 7 of 8 exploration holes intersected significant uranium mineralization confirming the existence of an entirely new mineralized system within the broader Saloon trend. Importantly, Atlas remains open along strike and at depth. We believe this discovery reinforces the significant exploration potential across the broader PLS land package and supports our view that there are opportunities to enhance the long-term value and development potential of the project beyond what is currently contemplated. We ended the quarter with cash and investments of USD 265 million and an undrawn $70 million revolving credit facility. This strong financial position provides flexibility to continue advancing Patterson Lake South, support our exploration programs and optimize Langer Heinrich as we enter the next stage of growth. So in summary, the June quarter closed out a year of delivery to Paladin. We successfully completed the ramp-up of Langer Heinrich, met the upper end of guidance range on production and exceeded guidance on sales, costs and cost performance. We advanced Patterson Lake South through major regulatory milestones established a clear pathway towards licensing, strengthened indigenous partnerships and delivered significant exploration discovery at Atlas. That delivery gives us the right platform for 2027. With Langer now through ramp up the focus shifts from restart execution to disciplined operating performance, safe production, cost control, mine and plant optimization and, of course, reliable delivery to customers. I'll now turn to FY '27 guidance for Langer Heinrich. FY '27, we expect Langer Heinrich to produce between 5.1 million and 5.6 million pounds of U3O8 on a 100% basis. Sales volumes are expected to be between 4.8 million to 5.3 million pounds of U3O8. Production will not be evenly weighted across the year. We expect lower production in the first half due to planned maintenance shutdowns as well as lower grades from the mine in September and December quarter. Production is expected to improve in the second half as high ore grade feed to the plant increases. Cost of production is expected to be between USD 44 and USD 48 per pound. We expect cost to trend upwards -- sorry, we expect cost to trend toward the upper end of the range in the first half reflecting lower production volumes and additional cost impact of planned maintenance. It's also important to note that all ore processed in FY 2027 will be sourced from the mine following depletion of the previously mined MG3 stockpile. This means longer haul distances compared with FY '26, whilst ongoing removal of overburden and waste will continue to open up future mining areas. Operationally, our focus remains on mining and plant optimization through FY 2027. Medium and high-grade ore will be delivered to the processing while lower grade material will be stockpiled for future processing. This supports improved grade outcomes and provide operational flexibility over the life of mine. We'll continue to report actual costs associated with capitalized stripping and the building of low-grade ore stockpiles on a quarterly basis. These items are not included in the cost of production guidance. On capital, capital expenditure at Langer Heinrich is expected to be between USD 29 million and USD 35 million for FY 2027. The key areas of expenditure include tailings storage facilities design and construction, process improvement studies in infill drilling as well as the completion of selected capital exploration activities deferred from FY '26. On sales and pricing, Paladin's contract book continues to provide leverage with strengthening uranium market. During FY '27, sales are expected to reflect both customer delivery schedules and our intention to repay part of the current uranium product loan balance. As at 30 June 2026, Paladin had 400,000 pounds of U3O8 in outstanding uranium product lines. Consistent with industry practice, we maintain access to short-term uranium product loan and swap facilities to support operational and delivery flexibility. Realized pricing will vary from quarter-to-quarter depending on customer delivery nominations, contract pricing mix, individual contract terms, shipping schedules and prevailing spot prices. Based on the contract book, as at 1 July 2026, we have updated the realized price sensitivity table. In summary, FY '27 is about disciplined delivery from Langer Heinrich following the successful completion of ramp-up. We have provided clear guidance on production costs, capital and sales while retaining the flexibility to manage quarter-on-quarter movements in production and deliveries. We remain focused on safe operations, reliable production, disciplined cost management and leveraging our contract book as the uranium market continues to strengthen. And with that, I'm happy to take any questions.

[Operator Instructions] Your first question comes from Alistair Rankin with RBC.

Just firstly, on Langer, you mentioned the maintenance work in the first half of FY '27. Can you just confirm what you're actually doing there? Is this something that is just a periodic piece of maintenance you have to do? Or is it something a little bit more structural?

Yes. Thanks, Al. It's really just a periodic planned preventative maintenance work. Typically, in these plants, you have wear and tear on things like the scrubbers, crushing circuit. And we're also updating our furnace in the final packaging and recovery plant. So it's all planned preventative work.

Okay. Understood. That's clear. And then just also on Langer, the pit performance of the J-pit so far. You said you're looking to lift to high-grade ore for the second half of FY '27. So I guess what do you need to do between now and then to sort of achieve that?

Yes. I want to hand over to Scott to answer this Alistair.

Sure. Thanks, Paul. Basically, we've got all of our mining equipment in pit right now and are developing a few different mining fronts. So some of the material is coming out as high grade right now, and the other material is still developing. We've got multiple levels of grade coming out of the pit. The next 6 months will essentially see us stabilize the feed that's going to be going into the mill as more high grade, medium and high grade, whereas for the -- right now in the last quarter, we're still in that upper level of weather and lower grade material. So basically, it's just continuing to mine and develop the J-pit.

Okay. And then I might just sneak in one quick one on PLS. Interesting, you got that agreement with the CNSC, I understand it's not binding, but is this something they've done before? Or is this then the CNSC acknowledging that they want to try to speed up these processes to get these construction licenses through a little bit faster?

Yes, that's a really good question, Alistair. I was in Ottawa recently spoke to a number of government departments and everyone is really keen on advancing uranium projects and CNSC are trying their best to support them as well. So I met with the President of CNSC, and they're very keen to make sure that the right work is done to help us deliver the project according to the schedule that we published. That's really -- it's really a concerted effort by the Canadian government to get these projects up and running as efficiently as possible.

Your next question comes from Hugo Nicolaci with Goldman Sachs.

Thanks for the update today. Look, first one on the missing pieces around CapEx for FY '27 from the guidance. Just firstly, at Langer you spent $56 million on stripping and low-grade stockpiling in FY '26, but you don't guide that on a forward basis, given that your strip ratio is probably flat to slightly higher next year, your plant maintenance, maybe you build a little bit of stockpiles. Is it fair to assume that $56 million is higher in FY '27.

Look, We're obviously not guiding on those numbers. They will be variable quarter to quarter. We will give you actuals on a quarterly basis. I think if you look at our Q4 FY '26 outcomes, that's not an unreasonable representation going forward.

Got it. That's helpful. And then also on CapEx, but on Patterson Lake. How much of the $115 million pre-feed spend that you were planning on spending before the end of calendar '27, do you expect to spend in FY '27.

Yes, again, Hugo, we haven't guided on that number. We've said in our quarterly that we've spent $20 million to date. Of that amount that we disclosed in the use of funds I can say that you can expect those costs to increase over the 18-month period. So it will definitely be weighted into half 1 FY 2028.

Got it. That's helpful. And then just if I can squeeze in a third, just on then pricing sensitivity. I appreciate the updated table there. I just wanted to dig into the comment in the footnotes that the sensitivity table takes into account the flexibility under your contract terms. Does that mean that in that table, you've assumed that you'll sell more volume if prices are higher? And is there a math broadly right that if you're selling roughly 2 million pound under legacy contracts at sort of mid-60s a pound to sort of back solve into that pricing sensitivity?

That's a question to you, Alex.

Thanks, Paul. On the first part, we've assumed -- we've run that sensitivity table on the basis of a midpoint of the sales range, which is 5.05 million pounds. And we're essentially assuming nominal contract volumes, but obviously, some contract volumes do have flexibility and where those contracts are in the money we've assumed that they -- that those flex options will be exercised by the utility. And sorry, could you just clarify the second part of the question?

It was more just sense checking the math that if you're delivering a bit over 2 million pounds under that fixed legacy agreements that, that pricing on those agreements must be sort of in the mid-60s today. Is that what that table assumes?

Yes. Look, I mean, we're obviously not providing the pricing on a price mix basis. But on average, I think if you look at that sensitivity table, you can pretty much -- I think you're on the right track, you can pretty much work out what the base escalated and fixed price contract pricing is implied within that book.

Got it. And then just lastly, if I can, just -- apologies if I've missed it, you put out the cash flow piece separately today, but the $265 million cash and investments, how much of that is actually cash?

Of the $265 million?

Yes.

Yes. It's all cash other than funds held in term deposits.

Your next question comes from Daniel Roden with Jefferies.

I just wanted to start first of all, just following up on the half 1, half 2 production. I know you talked about it, but just wanted to get a better sense on, I guess, the half 2 exit rates. And I guess kind of looking forward into FY '28 and beyond what that implies on what, I guess, the midpoint annual production rate would be over the life of mine? Are you able to kind of articulate and clarify what that would look like, please?

That's a good question, Daniel. What we've done is provided an annual guidance that we did last year. And what will happen in the years to come is that with the 2 plan maintenance shut and development of that J-pit. According to the mine sequence, we have slightly lower grades in that first half and about a week less production on each quarter, plus or minus. It is going to be a game of 2 halves. What we're not going to do is guide on a quarter-by-quarter basis. And -- but what we will do is be absolutely transparent as we have been in the last 12, 18 months on our actual performance at the end of each quarter. But we do expect a fairly significant uplift in the second half of the year. The mine plan does show absolutely solid grade coming through for that second half. So our plan is to stick to the plan, do the shuts properly mine the ore as it comes in sequence, exercise a high level of operating discipline, manage our costs as best we can and deliver on the annual target. So I know I haven't answered your question directly, but we're committed to the guidance range that we have set for production.

No, that makes sense. I appreciate the color there. Just wanted to touch on as well. I know it's not in FY '27 guidance, I guess, thresholds. But in FY '28. If I look back at your restart plan and life of mine plan, you are expecting to do a little pre work on and H-pit and TSF1 relocation kind of at the end of FY '27 and come start of FY '28. Just wanted to get a bit of color and commentary on are you seeing anything in, I guess, the life of mine process that would either accelerate or defer works going into the H-pit and TSF1 relocation and just kind of noting that H-pit is a pretty meaningful step up in strip ratio on the disclosed tables, it goes to 4.1 from J-pit which is 1.8 at the moment. So just I guess you're saying that inflection point still in the same process? Or is there anything that you're seeing that changes that kind of sequencing.

That's one for you Scott.

Yes. Thanks for that. I think the best way I can answer that is that the TSF strategy with our TSF6 lift that we're currently doing right now. And then we will be moving into the H-pit early in next year to start stripping that. That would be the next source once J is depleted. That becomes a long-term tailings facility as well. And so the H-pit will be fully mined out over a few years, and then that becomes our -- one of our tailings ponds. The TSF strategy is constantly being looked at based on volumetrics and what we actually need. We've moved the TSF1 relocation out a little bit. And that's to allow the mining in J and H-pit to progress the best possible and most economic. Does that answer your question?

Just a really quick follow-up and I'm sorry, I probably ask it. But I guess is part of the TSF 1 relocation and I guess, H-pit pre-strip, are they included in the back end of FY '27 guidance? Or is that exclusively an FY '28 item?

It's not in FY '27, it would be in FY '28 and beyond.

Your next question comes from Branko Skocic with JPMorgan.

Plant recoveries were strong again in that 90s range. Is there any reason we shouldn't be assuming recoveries stay in the low to mid-90s moving forward, particularly as grades start to lift.

Yes. Thanks for the question. Our typical target range for recovery is to 90%. And when we have stable conditions I'm actually really happy with anything within that range. Above that range is more difficult to maintain continuous sort of operations. So we -- it's always a balance, too. So we'll continue to operate it as stably as we can. And if we stay at the upper end of our target range, I'll be really happy.

And just a final question from my end, just on the production versus sales weighting. I understand the prepayment coming in into this, But should we expect it to, I guess, closely match moving forward, I'm thinking to '28 onwards? Or are we still expecting a bit of a mismatch medium term here?