Uranium miner Paladin Energy Ltd (ASX: PDN) has reported yet another loss, this time of US$59.3 million for the six months to December 2014.
At least it was better than the huge US$255 million loss for the same period last year, but revenues still fell 36%, as uranium prices slumped and the miner placed its Kayelekera Mine on care & maintenance.
Paladin received an average US$34.35 per pound of uranium and sold 3.2 million pounds over the six months. But like many miners seeing their commodity prices crumble, it's their high production costs that remain the only real issue they can control. Paladin says its C1 cash costs in the December quarter were US$30.2 per pound, but once you add on all the additional costs, clearly the miner is unprofitable at these prices.
The company says it is focused on reducing its cash costs below US$26/lb by the end of this year and US$22/lb in 2017 financial year – but there's no guarantee that the company can achieve such large gains in costs (almost a 50% drop in production costs from today to 2017).
Yet again, the company says it is optimistic about uranium prices recovering – but as I wrote in May 2013, "uranium prices could stagnate at current levels for many years", and have done just that.
The other issue for Paladin is its large slab of debt. Paladin has around US$600 million in loans and borrowings, of which US$300 million in convertible bonds are due in November this year. While the company is looking to refinance part through a new issue of bonds, there's no guarantee it will be successful, or that the next capital raising will be either.
Paladin has yet to post a decent profit and give its poor shareholders some sort of return. The chances of that occurring in future are as unlikely as they always have been and as such, Foolish (capital 'F') investors would be wise to steer well clear of this company.
