Why Paladin Energy Ltd shares are climbing today

Since when does ceasing production at a mine mean shares go up?

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Uranium miner, Paladin Energy Ltd (ASX: PDN) has seen its shares crush the market today, rising 4.4% towards the close, while the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up a ‘measly’ 0.5%.

Shares were changing hands at just over 40 cents, not far off 52-week lows of 38 cents, but well below the high of $1.12 reached earlier last year. Paladin announced today that it was officially starting its high cost uranium mine, Kayelekera mine in Malawi, on care & maintenance due to the depressed uranium prices.

The company officially announced that the high cost mine would cease operations back on February 7, but processing ore would continue until reagents and other consumables were run down. That has now officially ended, reducing in a reduction in the global supply of uranium.

Perhaps investors are now hoping uranium prices will rise due to lower levels of supply? Unfortunately, it will take more than one mine closure to do that, but more could be coming. Paladin estimates that more than 60% of current annual production of uranium has costs above the current spot price, around US$28.25 per pound.

Other mines could close

The Ranger uranium mine in Kakadu National Park, owned by Energy Resources of Australia Ltd (ASX: ERA), has been producing for many years, but could be coming towards the end of its life. ERA, which is majority owned by Rio Tinto Limited (ASX: RIO), also owns the Jabiluka uranium project, but that appears unlikely to ever get off the ground.

Unfortunately, demand for uranium has fallen and is unlikely to recover any time soon, with聽uranium miners likely to be disappointed.聽A bet on other commodities appears a much better choice…

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter聽@TMFKinga

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