Paladin Energy Ltd (ASX: PDN) shares are having a tough start to the week.
In morning trade, the uranium producer's shares are down 21% to $9.69.
Why are Paladin Energy shares getting smashed today?
Investors have been scrambling to the exits this morning after Paladin Energy released its first quarter update.
For the three months ended 30 September, production at the Langer Heinrich Mine (LHM) in Namibia continued to ramp up.
Paladin Energy reported production of 0.64Mlb U3O8 during the quarter, which is up 23% from 0.52Mlb U3O8 in the prior quarter.
This allowed for sales of 0.62Mlb of U3O8 during the three months, pulling in cash receipts of US$24.8 million. However, this is much lower than you would expect to receive at current spot uranium prices and is less than the cost of production.
Operational challenges
It wasn't plain sailing for the company during the quarter. Also putting pressure on Paladin Energy shares is news that some short-term operational challenges were encountered, which impacted ore feed, recovery rates and production volumes.
These challenges include variability in the stockpiled ore processed resulting in a lower feed grade than planned for the quarter. In addition, there were delays to the commissioning of the second classification circuit and lower than anticipated tailings water recovery. The latter necessitated adjustments to the water balance within the plant resulting in lower levels of fines rejects and variability in recoveries.
In response, the company has commenced the implementation of operational improvements aimed at addressing these issues. It feels this further de-risks the ramp up of LHM to nameplate production.
Unfortunately, though, this means that Paladin Energy will shut down operations for approximately two weeks in November to allow for further improvement and operational upgrades to be implemented.
Management commentary
Paladin Energy's CEO, Ian Purdy, commented:
The ramp up of production at the LHM continues to de-risk the project and demonstrates the benefits of the plant upgrades delivered during the LHM Restart Project. Whilst production in the second quarter of the ramp up encountered some process recovery and efficiency challenges, the onsite team have commenced the implementation of operational and process design improvements, which delivered improved performance towards the end of the quarter. Our global clean-energy customers have commenced receiving and processing our product, with Paladin now delivering on its mission to resource a carbon-free future.
With a large scale uranium mine back in production, an exceptional operations team, a world-class contract book and a positive outlook for future uranium pricing, Paladin is well positioned to deliver continued shareholder returns.
