Paladin Energy Ltd (PDN) Earnings Call Transcript & Summary

Well, good afternoon, everyone, and thank you for joining us today at Paladin Energy's 2026 Investor Day. Really appreciate you taking your time out of your schedule to join us, and both in person and via our webcast. So today is an opportunity to step back from the normal quarterly cycle and the quarterly updates to spend a bit more time talking about what we're doing at PLS. And what I hope to achieve today is to get everyone across more of the detail of our strategy, of our assets, our people and the growth opportunities for Paladin. You can read that at your leisure. There'll be a few forward-looking statements today. So all the normal disclaimer bits in there. So joining me today, I have to my right, Alex Rybak, our Chief Commercial Officer; Scott Barber, our Chief Operating Officer. We've got Dale, our President, Canada; Andrew, our geoscientist. And online, we've got Anna Sudlow, who is joining us from Perth today. This last 12 months was, I think, a really significant year for us. We successfully completed the ramp-up of Langer Heinrich mine, and we delivered production at the upper end of our revised guidance range. We strengthened our balance sheet, and we continue to advance the PLS project through several important permitting and development milestones. We also made significant exploration discoveries at Atlas. And I think Atlas highlights the potential emerging scale of the PLS district. While Langer remains the foundation of our business, the primary objective of today is to deepen the market's understanding of Patterson Lake and its ability to create substantial long-term shareholder value. We believe PLS is one of the highest quality undeveloped uranium projects globally located in Saskatchewan, one of the world's premier uranium mining jurisdictions. PLS is the cornerstone asset within our portfolio, and it will transform the scale of our production platform. The management team presenting today brings decades of experience across uranium mining, project development, construction, operations, exploration, finance, business development and commercial contracting. Collectively, they've been involved in successfully developing and operating major mining projects globally and more recently, bringing the collective experience to effect at Langer Heinrich, and now we'll bring that to PLS. This afternoon, I'll begin with an overview of Paladin's strategy and how we're positioning the company for long-term growth. Following my remarks, Anna will review the FY 2026 performance and discuss our capital management approach and financial position. Alex will then provide his perspective on the uranium market, including supply and demand fundamentals, customer contracting activity and the broader market outlook. We'll then turn our attention to Langer Heinrich mine, where Scott will discuss the successful completion of the ramp-up and operations and FY 2027 guidance. Following a short Q&A and break, we'll then focus on the PLS project. Scott will be joined by Dale, President, Canada, and they'll discuss the significant progress that we've been made since acquiring Fission at the end of calendar year '24. They'll also outline the path forward as we advance PLS towards development and what we see as a compelling long-term value creation opportunity for our shareholders. We'll then conclude the formal presentations with a Q&A session -- sorry, before that, we'll go into exploration and growth opportunities across the portfolio, particularly in Canada, where we -- where the recent success at Atlas has reinforced our belief that Patterson Lake South has the potential to become much more than a single project development. Andrew will discuss the opportunities we see to expand the resource, make new discoveries and unlock broader district scale potential of the PLS region. And following that, we'll have a Q&A. So when we think about Paladin today, we're a company that has successfully transitioned from development and restart story to an established uranium producer with a significant growth platform. As we look ahead, we believe the combination of world-class asset portfolio and a highly experienced leadership team positions Paladin exceptionally well to execute the next phase of growth. We're proud of the progress that we've made, but we're actually more excited about what lies ahead for us. So with that, let's get started. Today, Paladin is a very different company than it was just a few years ago. We've successfully transformed from a restart story to a growing uranium producer with a clear pathway forward for long-term value creation. The foundation of our strategy is actually very straightforward. We're leveraging a supportive uranium market, delivering sequence production growth and maintaining a disciplined focus on operational and financial performance. What makes Paladin unique is the combination of production today and growth tomorrow. The investment case for uranium continues to strengthen. Around the world, we're seeing increasing recognition that energy security, electrification, decarbonization cannot be achieved without significant expansion of nuclear power. Governments are responding accordingly. We're seeing commitments to expand nuclear generation across the United States, China and India, alongside broader international support through initiatives such as the COP28 pledge to triple nuclear production by 2050. We're seeing -- at the same time, emerging demand drivers, particularly artificial intelligence, data centers and electrification of transportation and industry are increasing for future electricity requirements. Against this backdrop, we continue to see a compelling long-term outlook for uranium demand and increasing recognition that new sources of supply will be required to support that growth. This slide captures what we believe will be one of Paladin's greatest strengths, a diversified and long-duration growth pipeline. Langer Heinrich in Namibia is generating production today. In Canada, Patterson Lake South represents what we believe is one of the premier undeveloped uranium projects globally and a significant future growth opportunity for the company. Importantly, we don't see PLS as simply a single development project. We see it as a foundation for long-term scalable Canadian uranium business. The Atlas discovery reinforces our view that the broader prospectivity of the district, while our exploration portfolio across the Athabasca Basin provides additional opportunities for future growth. Together, these assets create a multi-decade pipeline spanning production, development and exploration. It's interesting to look back on the last 12 months. And I think what we've seen is -- I think to me, what stands out is the breadth of our execution across the business. Operationally, we successfully completed the ramp-up of Langer Heinrich and delivered production at the upper end of our guidance range. We advanced Patterson Lake South through several key milestones, including the provincial EIS, and we achieved regulatory sufficiency status with the CNSC, targeting now a decision by the end of calendar year 2027. Importantly, we strengthened the leadership team with a number of key appointments and bring substantial industry experience across operations, development, finance and project execution. I think these milestones demonstrate our ability to systematically execute a strategy with a high level of operating discipline. Our assets are clearly important, but one of our greatest competitive advantages is our team. As I said earlier, across Paladin, we've assembled experienced team with leaders who have extensive experience in uranium mining, project development, engineering, operations, stakeholder engagement, project financing and commercial management. The successful restart and ramp-up of Langer Heinrich provides a recent demonstration of what Paladin can do. With our expanded organizational capability, we believe that we're well positioned to develop a Tier 1 project. Our strategy is very clear. I think it's focused, and it's very actionable. First, we maximize the value from Langer Heinrich. The ramp-up is complete, and our focus now is on safe, reliable and efficient production while continuing to optimize performance. Secondly is to unlock Patterson Lake South. This remains our most significant organic growth opportunity, and our current focus is on continuing to derisk the project through engineering, permitting and stakeholder engagement activities. Thirdly, to continue advancing our exploration portfolio. We see substantial opportunities to create additional value through near mine and regional exploration, particularly in Canada. Underpinning all of this is a commitment to operational excellence, financial discipline and responsible development. I think in simple terms, our strategy is to generate value from our producing assets today while building the next stage of growth for tomorrow. With that, I'd like to hand over now to Anna Sudlow.

Thanks, Paul, and good afternoon, everyone. Firstly, I'd like to apologize for not being in Sydney in person. Unfortunately, I broke my ankle and I haven't been able to travel, but I can do the slides from my office in Perth. So if we look at FY '26, we had a number of objectives at the beginning of the financial year. And the first was to complete the ramp-up at the Langer Heinrich mine. The second was to strengthen our balance sheet and our liquidity position. And the third was to position for growth. So what my slides are going to focus on today are really around our performance over FY 2026 and how we're positioned for growth. I think what we've demonstrated is meaningful progress across those objectives. And I think the end result at the end of the financial year is pretty evident. We've delivered on the completion of the Langer Heinrich mine ramp-up. We have operating cash flow. We've significantly strengthened our balance sheet, and we've got flexibility on the finance front. As far as FY '26 performance, we had a very strong operational performance in FY '26. As Paul mentioned, over 4.8 million pounds of uranium produced at the upper end of our revised guidance and consequently, significant sales revenues of over $300 million from the sale of the product and also the higher realized price that we achieved over the period. Our cost of production at the lower end of our guidance range and a gross profit principally at the LHU level of over $50 million, closing the year with a strong balance sheet of over $265 million. So that we're really pleased with the operational performance we had in FY '26. What this has translated into is really robust financial performance over the financial year. We did release our full year financial results last week. And if you compare some of the metrics compared to FY '25 to FY '26, you can see some significant shifts. Just calling out a couple of these, particularly, firstly, the average realized price. So you see a significant uplift there, reflecting the strengthening uranium spot market pricing as well as our approach to layering contracts over time. Secondly, revenue, as I mentioned, so increase of over 70% when compared to FY '25, reflecting the higher volumes and the price and then the gross profit outcome. So shifting from a gross loss in FY '25 to a gross profit in FY '26. And then finally, operating cash flows over $30 million. So I think what you can see is that significant operating improvement translating into our financial metrics for FY '26. Safety and sustainability remain a core priority for us, and I think that's reflected in our FY '26 metrics also. So the group TRIF for Paladin Group for the year was 3.2, reflecting the strong safety operating performance during a period of significant activity. Over 99% of our employees in Namibia are Namibian nationals, and that really reflects our commitment to local employment, developing skills and engaging with the community in Namibia. We executed over 55 community programs in Namibia and Canada and some of the particular items included in those programs are around health, education, youth development in Namibia and in cultural and sporting events in Canada and education. And then finally, a key regulatory milestone for us was EIS approval. And I know that Scott and the team will talk at length about what this means for us, but it is a key milestone. It does validate the extensive work that we've done on our environmental program and with stakeholders over the period. So we continue to see safety and sustainability as a core priority. One of our key objectives this year is to ensure that we have the financial capacity to deliver our growth. So we do this through a number of ways. Firstly, through the strong balance sheet. So the $265 million worth of cash, we've got an undrawn revolving credit facility, which we did restructure at the end of last calendar year. And we continue to maintain strong relationships with our existing lenders as well as starting to build new relationships to support us going forward. We appropriately allocate capital, so we ensure that we're continuing to sustain and grow the Langer Heinrich operating asset through investment in improvement capital through a cost focus. We are looking closely at allocation around the PLS project development as a key future growth playing in Paladin strategy. And then we also continue to underpin exploration opportunities, particularly at the PLS project, and you will have seen our exploration release today. And then the key objective being a return to shareholders, so maximizing cash flows from operations. Very pleased to be in the ASX100, and our ASX100 and TSX listing provide us with an opportunity to broaden our investor base and strengthen our marketing in those regions. So we continue to ensure we have the financial capacity to deliver on our strategy. One of the questions I am asked often is how we're going to fund PLS. And the key answer at this time is we've got time, we've got flexibility, and we're not reliant on a single funding pathway. And there's a couple of reasons for this. Firstly, the PLS project economics are really robust. So that puts us in a very strong position. We also have credibility as an operator, and there are a number of counterparties and stakeholders that see that as a key differentiator. We've got a dual listing. We've got existing and new debt relationships, and they all give us considerable flexibility in considering how we fund PLS. The other thing is government support. So Paul touched on this around support from the World Bank, U.S. policy, but there is a lot of global government support for nuclear due to the drive for decarbonization. And what, again, that provides us with is potential opportunities for PLS, whether that be through export credit agency engagement, whether it be through access to grants, whether it be access to infrastructure funding. So they're all potential opportunities for us to consider as we move forward. The other one is around our offtake. So we have, as you're aware, got a number of relationships in place with Tier 1 global utilities. And what we're looking to do is continue to build on those relationships to underpin PLS, and that's both economically, but also potentially on a project financing or alternative structures that could be underpinned by strong offtake outcomes. And then I think another opportunity for us is around a strategic partner. We are happy to develop PLS on our own, but it is a world-class asset. There is quite a lot of interest in PLS. So that, again, is another opportunity for us to consider as we go forward. I think just to sort of summarize where we are now, our immediate focus is on a project financing. And the reason for that is really that, that is the longest lead transaction, and we'd like to retain it as an option. We've got a range of debt financiers we're engaging with on this with the principal purpose at this point, really an understanding of what the appetite is and what the potential offtake requirements are around the project financing. But we'll continue to maintain flexibility as we derisk the PLS project. So in conclusion, I think what we've delivered in FY '26 is very strong operational and financial performance at Langer Heinrich with operating cash flows generated. We've closed the year with a strong balance sheet and liquidity and good relationships in place with new relationships being built, and we're well positioned for growth with flexibility and optionality in how we think about how we fund that. And so on that note, I'll hand over to Alex to talk about funding.

Thanks, Anna, and thanks, everyone, for joining us this afternoon. Today, I'll talk about the uranium market. And in doing so, I'll cover the global and the geopolitical backdrop, expanding on some of the things that Paul said earlier. I'll talk about the drivers, the demand drivers, the structural deficit that we're seeing, how we've built our contracting book and our contracting and shipping and logistics activities. And then I'll finish off with some observations on the uranium prices and outlook. So with that, I think this is really important because it really sets the scene for what we're seeing at the macro level. There is a real disconnect between uranium requirements and uranium supply. Top 3 countries in terms of consumption in 2028 will be U.S., China and France. In fact, China is really making strong inroads and expect it to be the largest consumer of uranium by the end of this decade. So those top 3 countries account for about 60% of uranium consumption annually. Top 3 countries in terms of production are very different, Kazakhstan, Canada and Namibia. So there's that distinct disconnect. And what we've done is we've really positioned our assets in the top uranium producing jurisdictions being Namibia, Canada as well as Australia. And we've targeted from our sales and marketing activities, customers in the U.S., China and Europe. There is a real tug of war at the moment that's happening between the Chinese utilities and the U.S. utilities in terms of the supply that they're chasing. And more recently, as you know, India has entered the mix, and Russia has always been there consuming quite significant volumes of uranium despite not having significant domestic production. And that's really the key point of the uranium market. The countries that need uranium don't have it. Countries like China, Russia, the big U.S., the big consumers of uranium do not have significant domestic production. Kazakhstan has been the linking point amongst all the supplying, both the East and the West. And they're producing, as you know, at full throttle to meet that demand. And if they could produce more, they would probably produce more because the demand that's coming from China and Russia and India more recently at the moment is very significant. But what that means is that uranium that Kazakhstan produces, that marginal pound isn't going to the Western utilities. And there's a real opportunity for producers like Paladin to leverage that. So competition for global supply is intensifying. We're seeing that from our discussions with utilities, and Paladin is really well placed to maximize the value of every pound that we produce. Turning to some of the demand drivers. Really quite simply, it's driven by electricity growth. And electricity growth is, in turn, driven by population growth, electrification, decarbonization and more recently, artificial intelligence and data centers. Electricity production and consumption is expected to double by 2050. And consequently, because nuclear is expected to stay at around 10% of that mix is also expected to double in terms of generation, leading to doubling of uranium demand. So the key point here is that 10% of global mix, and it's quite possible that, that 10% actually is higher than what is currently being baked in into base case forecast. So if nuclear takes a larger share of the pie in terms of, say, AI and data center, demand, we could see an incremental growth in demand for uranium. So the demand story is really strong, and it's really underpinned by the global reactor fleet that's in operation today and is under construction. So we've got about 440 reactors in operation and about 80 reactors -- sorry, yes, 80 reactors under construction. China is really leading the way in terms of reactors under construction. And more recently, as you know, India has announced very significant ambitions. And Russia is also building reactors domestically as well as in its country's sphere of influence. U.S. is the next cab off the rank, and we're seeing already a number of policy initiatives in the U.S. that will support the nuclear build-out in the U.S., like the Trump's executive orders and the plans to quadruple U.S. nuclear generation from 100 to about 400 gigawatts. The U.S. government JV with Westinghouse and Brookfield and $80 billion of associated funding for AP1000 reactors as well as the recent U.S. DOE funding package of $17 billion for 10 AP1000 reactors for Westinghouse. So all those factors will stimulate and will unlock, I believe, the nuclear rollout in the U.S. In our experience, what the utilities are really waiting for is for some more certainty on cost and the cost overrun insurance that they're asking for U.S. government to provide. So that's something that we're watching very closely. And if that happens, we'll see some more large-scale build-outs in the U.S. In the U.S., of course, we've got the SMRs that are already being built and being planned. But what we're really looking for is that large-scale build-out to happen in the U.S. So in terms of the demand, it's really underpinned at the moment by the existing reactor fleet, reactors under construction, and that's the base case. And in terms of the upside, there's AI, data centers and SMRs. So what we're seeing, and this is based on independent forecast by WNA, is a significant structural deficit. This is well publicized. According to WNA, about 180 million pounds of new supply has to come to the market to balance the market in 2035. So if you take all the projects under development and you assume they all happen on time, on budget, you probably get to about 50 million pounds, 60 million pounds. So it's unclear where that's going to come from. And that will certainly need higher uranium prices for that to happen. On the flip side, utilities have been under contracting to date and have got about 800 million pounds of uncovered requirements over the next decade. But interestingly, in our recent discussions with the utilities, we've seen -- we're starting to see a change of approach. And they're looking at the same data that we're looking. So they're seeing the supply-demand deficit. And there's certain things that I would note. First of all, they're contracting much longer tenors. So in 2030s, we're being asked for -- regularly asked for supply now in 2030s. Secondly, they are willing to pay a premium price for base escalator contracts in excess of U.S. GDP IPD escalation. And we've recently secured a contract with that premium escalation in place. And thirdly, they're also asking for equity stakes in the project, which is something quite new. And we've been asked for -- with the utilities for equity stakes in the PLS project. So utilities are moving, what I would say, as I said on the call last week, from just-in-time to just-in-case type contracting, which is very encouraging. So in terms of our contracting activities, as you know, we've built a book to underpin Langer Heinrich production, and we've really positioned it to have leverage to the uranium price fundamentals over the medium to longer term. Over 85% of our production is on a life of mine basis, is either exposed to market prices, spot prices or is uncontracted. We have 14 Tier 1 customers in our book, and they account for over 50% of global uranium consumption. So we've built those relationships, and we're delivering uranium to very high-quality counterparties that really appreciate supply from Namibia. We are realizing prices in excess of our competitors, such as Cameco and Kazatomprom, and we're really well placed to capitalize on the deficit in the 2030s. Touching a little bit on the sales -- on the shipping and logistics activities. We ship uranium to 4 primary destinations around the world. Our Western deliveries go to North America, and that's the Metropolis facility owned by Converdyn-Solstice, the Cameco Port Hope facility in Canada. And then in Europe, it's the Orano Malvési facility. And then, of course, we ship to the Port of Shanghai for our CNNC deliveries. The working capital cycle is a little bit different in each case. With the Western deliveries, we deliver the material. We do a book transfer to our customer account of that conversion facility, and we get paid about between 14 and 30 days after that. With the Chinese deliveries, it's much shorter. We get paid the minute the material is dispatched from the Port of Walvis Bay, and that makes it very attractive for us. But what's interesting is Langer has produced and delivered over 50 million pounds of uranium to customers over the operations over the last 12, 13 years. And it's done so despite the challenges that we've encountered, obviously, with the post-Fukushima period and Langer going into care and maintenance. our ramp-up challenges and then the floods in Namibia. And throughout all those challenges, we met all of our delivery obligations, and we delivered uranium to our customers, and we've built a very solid reputation on the back of that. So as we restarted Langer Heinrich, we rebuilt our sales and marketing capability. We've rebuilt our shipping and logistics capability. We rebuilt our customer relationships. We built a contract book at Langer Heinrich for Langer Heinrich, and we proved that we can supply uranium reliably to our customers despite operational and external challenges. This positions us really well for further contracting at LHM in the longer term and at PLS at the right time. We'll be catching up with our utility customers next week in London at the WNA symposium, and it's going to be really interesting how those discussions go. Despite the industry lull, the Northern Hemisphere summer, we've already had a number of utilities reach out and seeking supply from Langer Heinrich and already asking for supply from PLS. And finally, I'll just talk a little bit about the uranium prices. I think at an event like this, I think it's useful to zoom out a little bit and see what happened historically because history does tend to repeat itself, not always, but sometimes. But I think what you can draw from this is shifts in uranium prices, significant shifts in uranium prices have all been as a result of fundamental nuclear build-out activities. They took some time, but they happened. So in the 1970s, the oil price shocks of the 1970s have resulted in build-out activities led by Japan really building its nuclear reactor fleet, followed by Germany and U.S. and Russia also expanding their nuclear build-out activities. And that led to uranium price going to above $230 a pound in today inflation-adjusted terms. The early 2000s saw China enter the global nuclear world stage, and they really started building reactors and procuring material. And that, in combination with some supply disruptions like the Cigar Lake floods, led to the uranium price going above $200 a pound again in today inflation-adjusted terms. So where to from now? I'm not going to give you a uranium price forecast, but what I'm going to say is that uranium represents less than 10% of utility generation cost. And that compares to 40%, 50%, 60% with things like coal power generation and gas generation. So what that means is that uranium can go 4, 5, 6x higher from here before it is considered expensive for the utilities. So that's a really good setup where not only utilities need supply in the future, but they're not really impacted by much higher prices. So we think we're in a very good market. We're in a good uranium setup. We think we -- it's early in the cycle. The utilities still have a long way to contract. We're starting to see shoots of increased contracting activity, and we'll maximize the value of production from Langer Heinrich and PLS. Thank you. With that, I'll hand over to Scott.

Thanks, Alex. All right. Operations, the fun part. Just reminding everybody, we're partway through the quarter. This isn't an update on the performance quarter-to-date. It's more of an overview of the site, right? So Langer Heinrich. Some of you have been to site. For those that haven't, it's in Namibia, obviously, the west of Southern Africa. We're about 85 kilometers inland from the Walvis Bay port. So when Alex talks about the shipping route, that's where all of the material that comes into the country and goes out of the country via ship lands. 85 kilometers on a really good road network as well. So it's easy to get our product on truck to the port, and then Alex can take it over and deliver it to the customers. As Alex said, Namibia has got -- provides 13% of the world's uranium. I think that's where it's important for us, is that most of our employees come from other mines in the region. And so the metallurgical expertise, they've worked at other uranium mines. They understand the Namibian uranium, and I think that's really important for us. And the ties with the local government, I'll talk about that in a second in the next slide. But the support that we have in Namibia for mining and for industry is absolutely stellar. We've met with the Governor of Erongo. We've met briefly with the President in the recent mining conference. Both knew about LHU or Langer Heinrich uranium, and they were very supportive of the work that we're doing in the region in Namibia. So thinking of the meeting, we hosted the governor of the Erongo region and toured her and her team. And one of the things she said was she really likes the way that LHU supports the community, works with her office and the local stakeholders, we're not just splashing cash around for the sake of it. We want to make sure that we add value to the community that we operate. So whether that's through vocational training, scholarships, small infrastructure projects, health care, it's the things that really matter in Namibia and in the region that we operate that we're trying to support. The important thing there is when we talk about PLS later on, you'll hear a very common theme. We're not just saying that that's what we're going to do or that we're doing that in Saskatchewan. We're already doing that in Namibia. We can show you how we want to operate in Saskatchewan and how we will operate in Saskatchewan. And as Anna mentioned, 99% of our workforce in Namibia are Namibians. We have one expat from Australia and a few people that are from neighboring countries, but the rest of the workforce are actually Namibian citizens. So safety. Graph on the left, as we've been ramping up, you see the black line going upwards. That's the mining fleet, drill and blast starting as we got into actual full mining operation. And with all of the equipment operating on site, we've got more hours of work happening. We're also expanding TSF6, so we've got contractors doing that work. So we've got a lot of hours on site. And the good thing is the injuries and the safety performance has not declined despite the fact that we've got a lot more work going on. I think that's a testament to the leadership and the safety culture on site. We want to be productive. We want to get the pounds and the tons, but we only do it when we can do it safely. And on the right, you've seen those numbers before. As the plant ramped up, we're at full production at the end of the last financial year, and we're continuing that through this quarter. So the mining. Open pit mining is pretty standard. I've run a lot of operations, large and small. My background, I've started a lot of open pit mines, and I've finished a lot of open pit mines. Those are the most complex part, right? That's when the challenges really happen. In the middle is pretty steady state. We've just finished the G pits. We're progressing and we were developing the J pits. So that's the challenge that the team are having right now on site. As J pit gets going, then we get into the heart of that. We then will be moving over to H. And you can see the 4 different operations or the 4 different areas, H pit on the far western side of the site. Once we get through the stripping and we're into the heart of H pit, then we'll move TSF1. A lot of people ask about that. That's kind of right in the middle, and then we can access the F pits. And that's when the mining phase stops. And like most metalliferous mines, that's the way that the operation runs. We mine the high grade, we process the high grade now, we stockpile the lower grade. And at the end of the mine life, we reclaim the low grade through the plant, and that's the end of the mine. So it's not any different. We do contract all of the load and haul and drill and blast, but then everything else is owner-operator, and everything that happens in the plant is done by our team. Processing plant. So over 10 years of successful operation. And like I said, the team over there, they know every pipe, every nut, every bolt. They really know that plant really well. It's a pretty standard layout, crushing, grinding, classification into the leaching circuit. It is an alkaline leach. So a lot of people ask about our sulfuric acid usage and supply. Although we do have a little bit of sulfuric acid in the process, it's supplied locally from a neighboring site. So it's not imported, and it's a very small portion of what we actually use on site, okay? And then the final recovery to U3O8. So that's an upgrade that we did when we put in the kiln as part of the start-up. And so we do produce U3O8 drums. Like I said before, we put it on a truck. The trucks go right to the Port of Walvis Bay. And a couple of notable upgrades, I suppose, is through the ramp-up. Our industrial water comes from NamWater with groundwater coming from the Swaka River. And we've got 2 bladders, large bladders, as well as an EVAP pond that we try to keep full, right? If there is an outage on the water inbound, we've got that to keep the plant running. And we could do that with those bladders and the EVA pond being full, we can operate for a couple of weeks without any inbound water. We did have a desalination plant shutdown at the beginning of June. There's a 5-day shutdown that was planned. We knew about it. We bridged through that. That's no problem. There's another one coming up in October, again, normal maintenance on the -- for NamWater, and we don't see an issue with that either because we've got the supply on site. As for power, we've got a 66 kV line coming into site. We do lose power from time to time. I lived in Kalgoorlie for the last 4 years. Trust me, we lose power in Kalgoorlie all the time. We've got 6 backup generators that if we do lose power, lightning strike, bird hits a transformer or whatever, we can back -- get the site back up and running, and we can operate the entire plant with those generators. And then when the inbound supply is ready to go, we can turn them back off and go back to mains power. And as I mentioned, the boiler burner upgrade to get the kiln up and running. So the FY '27 guidance. The biggest thing that I'll talk to here is the 5.1 million to 5.6 production. We mentioned it before, and I'll reiterate, it is much lower in the first half than it is in the second half. And in fact, first quarter, second quarter, second half. That's just the nature of -- we've had a week-long shutdown that was already done in July. It was successfully completed. But that means that we have a week of no production compared to the quarters prior. We're also still developing the J pit. As the J gets into the higher grade, we get better grade. And in the second half without those large shutdowns, we've got a lot more operating time, higher grade, more tonnes through the mill gives us more pounds at the back end. Conversely, costs higher in the first half, lower in the second half. The denominator makes a big difference there, but also maintenance costs more money than just normal operating. So when you have a shutdown, you get a double whammy. Key capital expenditures, the tailings ponds. So right now, we're doing a lift on TSF6, right? We're currently depositing into TSF6. We're putting a lift on that. After that, we're going to build a new pond called TSF7. We've got a surface pond coming up in a couple of years, TSF8. And the idea there is that we're going to be constantly building tailings ponds until we finish the H pit, and then that's our last big place to deposit tailings. So that does keep going for the next few years. And that's the overview of Langer Heinrich. Q&A.

I'm happy to take any questions so far before we come back and then kick start into PLS. Yes, Andrew.

For Alex and Anna, that's a pretty bullish outlook, Alex, on the uranium market, and I love your little reference is to $200 uranium price, as you know. But if that's right, how do you get the balance right, flexibility between contracting now, locking your prices and you don't want to end up in a Cameco situation with a contract book well out of the money. You don't want to lock yourself into financing PLS with offtake agreements that don't look so good in 10 years' time. How do you get that balance right? And on another similar matter, how do you introduce to the market? It is now a seller's market, not a buyer's market. How do you introduce to the market more transparency on uranium pricing so that investors can get more comfortable with what prices actually are?

Yes. Good questions, Andrew. I might start and then I might get Anna to add. So on the first question, I think the simple answer is you don't overcontract too much too early. So obviously, Anna can talk to funders requirements on offtake. And that's really sort of going to drive our initial contracting activities as well as the need to underpin initial operations. I think, as you said, it is a seller's market. So we are approaching it as such and are discussing and testing some concepts with utilities that are a little bit outside of the standard approach, if you like. And we're not getting significant pushback on that because of the tightness of supply because utilities recognize that we've got supply and we've got experience and we can deliver production into the market. So I don't know, Anna, do you want to add anything else from a financing perspective?

Yes, sure. Thanks, Alex, and thanks, Andrew. Look, I think, Andrew, the approach we've taken historically where we've layered contracts into a rising market will continue to be the case. We are doing that piece of work with our lenders at the moment around what is the offtake requirements look like for a project financing. We are anticipating, though, as part of that process that we'll definitely get credit for uncontracted volumes and market price-related contracts because I think what we've proven through our Langer Heinrich process is that we back ourselves to get those transactions done over time. So I think it will be a balancing act. But we're obviously conscious of retaining upside while also protecting the downside. So we'll continue to work through that.

And on the transparency question, Alex, is there anything -- as one of the major players in the market now, yourselves, Cameco, big Western producers, surely, there's something you can do to get better visibility and less opaqueness in this market.

Yes. One of the things that's happening is the CME is working on an exchange -- uranium exchange-traded contract, the Chicago Mercantile Exchange. So that should be interesting. I think that will give people a lot more visibility as to what's happening in the spot market, and it will increase potentially the liquidity of the spot market. I think with the term market, let's see what happens, but I think you really have to be a participant in the term market at the moment to understand what is really going on. I don't think there is a silver bullet. You have to have in-house marketing, sales and marketing capability, which we do. You can't rely on intermediaries, you can't rely on traders. You've got to deal directly with the customers, which is what we're doing and understanding the market intricately bottom up.

Just on the PLS funding piece, you mentioned the partnerships that are potentially out there. I guess how are you sort of seeing those partnerships -- where are you seeing sort of the opportunities there? You take an operator on as a partner, they can offer operational experience. You take a trading house on as a partner that can help with your marketing. I guess where do you see the biggest sort of opportunities there around the partnership with PLS?

To be perfectly honest, the further we go down this pathway, the less exciting it becomes to me to bring on a partner. I think we have a demonstrated capacity to both develop projects and operate mines. So in order to bring a strategic partner on board, they need to bring something to the table that we don't really have. If we could find an operator with significant Canadian underground experience in that region, then I'm all ears. If we could find a partner that brings potential lower cost financing, I'm definitely all ears. So it really depends on what people can bring to the table. But the closer we get to the point of getting a license to construct, I think I'm more hesitant to give away value to someone else.

Yes. Understood. And then just another really quick one for Alex. We were -- you mentioned there was an opportunity for some creative indexation on the contracts at the moment. Could you sort of explain in a little bit more detail what that is and how that sort of offsets or how that sort of helps out with the contract pricing?

Yes. So in essence, at the moment, the standard contract structure for base escalator contracts is term price in today's dollars, which is what's published by TradeTech and UxC, which sits at around $96, $97 at the moment, escalated at -- typically, it's the U.S. GDP IPD index, which is the U.S. producer price inflation. And what we are seeking is escalation in excess of that. So U.S. GDP IPD plus X. And whatever that X is, we've now secured a contract with an X, and we are certainly going to be increasing that value of X over time.

It's Mark Wiseman from Macquarie. Just had a question on the free cash flow coming off of Langer Heinrich. At the last quarterly, Anna, I think you made the comment over and above the $44 million to $48 million of production costs. You made a comment around the capitalized waste stripping and low-grade ore going to stockpile. I wasn't sure if you were going to provide more detail on that today, just in terms of the next several years and how much free cash flows coming off. Is FY '26 a good guide for the next few years?

Yes, Mark, I'm happy to take that. So look, I think what we said is that we will continue to have stripping costs as part of our ongoing mining. And I think a good proxy for what FY '27 looks like is probably the Q4 FY '26 number. Similarly, for the low-grade stockpile, during the mining phase, we are going to continue to mine the low-grade stockpile to be used in the later phase. And again, I think the good proxy for FY '27 is, again, the Q4 2026. So those costs are going to be ongoing until the end of the mining phase. And every year, we'll give an update on broadly where we think those numbers will be for the year ahead. But I don't think the intent is to provide a 5-year outlook on those.

Paul it's Glyn Lawcock with Barrenjoey. Just maybe one for Scott. Just you talked about a big SKU, obviously, the maintenance, the grade. This business was obviously years ago set up for 6 million pounds. So if you think about the SKU, it looks like we're going to be there in the second half. And can you then think about -- you've got 3 million tonnes of 900 ppm in the J pit, similar in the pit after that, the H pit. Is there an opportunity? Is that how you think about it? Just trying to think about how you want to maximize. Because I mean, obviously, you want to maximize the NPV, as you said, I think, a few times in your presentation. So is that how we should think about this, that we will get to that number that we used to always think about, just the way the math work?

So I guess the 6 million, we got to be careful that, that is a maximum. That was the nameplate, right? So you can't average the maximum. There are periods where we will be able to operate at that level. There are other periods where you've got maintenance or the grade drops or anything like that would happen and you'd be below. But you are pretty spot on. The first half and the second half, the second half, we're going to be pushing very hard to get into that -- the upper end of that range and beyond. The 3 levers around the grade, the recovery and the tonnes, the work that we're doing right now is to get as many tonnes through the plant as we possibly can. That then impacts grade because some of those tonnes may come at a lower grade. That also may come at a recovery cost. So we've got to get that balance just right. In the second half, where the grade is up because the mining is there, we don't have the maintenance, we get the tonnes, we will be close to that maximum.

And just when you think about the pits coming up then, do you open them up and run them in parallel? Because is the 3 million tonnes of 900 ppm in each of the next pits, this one and the next one, is that -- is it concentrated? Is it spread throughout? Like is there a way for you to run this as a very high-grade mine for a couple of years and maximize the NPV?

Yes. Sorry, I'm thinking of the PLS project later on when we talk about high grade.

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Yes, yes, in Namibian terms. So the -- we do need to strip H pit. The stripping in H is a lot higher than G and J. So we will have to get into the H pit before we finished J. That then allows us to get a little bit of a smoother transition than we have had between G and J. I think we mentioned last year, Trollope, the contractor, ramped up really fast and really, really well. So we actually finished G a little bit before the plan. So we had to get into J, and that's where we're still developing now as opposed to having gone in there early. H pit will be in there, probably not this financial year, but the next financial year starting to strip. And absolutely, we'll be blending and trying to maximize the throughput and the grade as much as we possibly can.

The only other thing I'll add to that, Glyn, is one of the challenges we do have -- we've got those 3 key levers that - throughput, grade, and recovery. But one of the big impacts on throughput is the ore handling characteristics as we mine. And often, we have to have a blend strategy that gives us that sort of maximum or optimized handling characteristics, and that can be a bit of a trade-off on grade. And that can sort of set your ceiling on your final production volume.

Branko Skocic, JPMorgan. Just a quick question for Anna. You mentioned on the PLS funding piece before, the possibility for infrastructure funding. I was just wondering if you could unpack that angle a little bit more exactly what you're meaning by that and how progressing discussions there would be.

Look, we're just in initial discussions. There are a couple of counterparties, particularly in Canada, who will step out of, I guess, what commercial banks will do as far as how they look at innovative structures around providing infrastructure. So early days, really just looking at it as one of the opportunities that we could consider at PLS, but still pretty early days on it.

And then the second question there was just on the prospects for utility interest on project equity. I know you mentioned before, there's probably less interest from you guys selling down there. But have you had similar interest for Langer Heinrich? And is that potentially an opportunity to sell down a bit of a stake there as well?

We've actually had -- over the years, we've had a number of, I guess, inquiries and approaches. And we haven't really entertained those beyond an initial discussion. More recently, we've had some interest from U.S. counterparties as U.S. seeks to secure supply. But again, it's not something that Langer Heinrich is a strategic asset for us. If anything, we'd like to buy out CNNC stake 25%. If anything, they'd like to buy out our 75% stake. But beyond that, no, I think it's a strategic asset for us. It's -- we're not really seriously entertaining those offers.

Branko, the only thing I'd add to all of that is I think we're in a really fortunate position being an incumbent producer with existing relationships with contract counterparties. We have every option available to us in financing PLS from project financing probably at its most complicated and long lead time item to all these other arrangements. One of the benefits of a partnership arrangement is it changes the financing complexity to an extent or the degree to which we have to finance ourselves. So there are derisking opportunities in all of that, and all of those are on the table right now. So if you sort of look at the time line, we'll cover this off in more detail later on, we're expecting a hearings and a decision on approval of the permit license to construct by the end of calendar year 2027. That gives us about 18 months to really lock down those financing options. But at this point in time, all options are on the table to us, and we're in a really good position.

Dan Roden, Jefferies. Just wanted to ask on -- there's a bit of a narrative with the Super El Niño kind of potentially developing over the next few years. It sounds like a lot of the water security initiatives you've done at Langer Heinrich have been quite successful, but quite temporary in their scope if we were to see increased droughts and stuff in Namibia from a Super El Niño, like have you started thinking about that? How would that impact the operations? And what are some of the things you're doing to, I guess, protect against that?

So if you look at NamWater's supply, so NamWater has the desal plant, the Erongo desal plant on the coast. And the government is looking at another JV arrangement with another company to produce a second desal plant next door. So there's about 20 gigaliters of capability at the desal plant, and that's actually more than enough to meet the needs of every existing project or every operation and regional authority in and around the Erongo region. So the threat is unlikely and the supply capability is absolutely fine. Only a small proportion of NamWater supply comes from 2 aquifers, one to the north, one to the south. And in addition to that, about 10% to 15% of our own capacity comes from our own aquifer. So I think we're in really good shape and the risk is low.

And just on the, I guess, pit sequencing, I guess, pre-ramp-up, there was a lot of discussion around potential options for expansion and extension of the Langer Heinrich mine. So I guess that's not the theme of the Investor Day today, but beyond the F pit, is there any potential for mine life expansions? How do you think about that like given they're going to be likely lower grade, but does that require plant expansions if you're going down that pathway? If you could talk about that a little bit.

Yes. So the challenge that we have at Langer is that it is a palaeo-channel. So it's not like what we're going to see this afternoon with PLS, where there's lots of prospectivity. What's not in the channel is not mineralized. And so it is a little bit more limited. We will start a drilling program where we are now drilling the lease off to the far West, 172 to see if we can find where that palaeo-channel continues on. But I think the really our focus when it comes to big expansion is going to be the PLS. Second part of your question, though, we are still stockpiling and we do separate out all mineralized material. So even the really ultra-low grade that does have some mineralization in it, it does get stockpiled separately. So as we get into potentially ore sorting or other technologies, we might be able to extend the life with the stockpiles that we have.

So I think we're unlikely to actually do a plant expansion. I think that capital is probably better used at PLS.

And sorry, real quick last one for me, but you said G pits finished. Is that closed or finished? So we're not going back to G pit at all?

It is in -- for the most part, there's a couple of little pods of low grade that we may still go and grab out of the bottom of it, and we will grab. It's just timing on when we actually do that. But for all intents purposes, G is finished.

Okay. I think we're done for questions. I suggest we take a 15-minute break before resuming. Just out of interest, outside in that area, there's actually on the right-hand side, a 3D model, a 3D printed model of PLS. And so you're welcome to have a look at that, and Scott and Dale can sort of talk you through that before coming back into the next presentation. Thank you. [Break]