PAL to suspend Kayelekera production over fall in uranium oxide prices

10 February 2014 (Last Updated February 10th, 2014 18:30)

Paladin Energy's subsidiary Paladin Africa (PAL) has suspended production at its Kayelekera uranium mine in Malawi, primarily due to the continued fall of uranium oxide prices apart from unsustainable cash demand to maintain the loss-making mine.

Paladin Energy's subsidiary Paladin Africa (PAL) has suspended production at its Kayelekera uranium mine in Malawi, due to the continued fall of uranium oxide prices and an unsustainable cash demand to maintain the loss-making mine.

During the suspension period the mine will be placed under care and maintenance, for the long-term interest of all stakeholders.

Production will only be restarted when uranium prices recover from the fall in March 2011, when a nuclear reactor disaster was caused by the Fukushima earthquake and tsunami.

"We are preserving the remaining value of the ore body until it can be mined profitably to make a positive contribution to the Paladin Group." 

The suspension decision will result in a reduction of staff, but will not affect production at Paladin's Langer Heinrich mine in Namibia.

Paladin managing director and CEO John Borshoff said that the Kayelekera mine has technically performed well, with significant cost reductions and production levels recorded at or near nameplate capacity over the past twelve months.

"By placing Kayelekera on care and maintenance now, we are preserving the remaining value of the ore body until it can be mined profitably to make a positive contribution to the Paladin Group," Borshoff said.

PAL said its spot uranium price has more than halved from its pre-Fukushima level of $72.63 per pound, to a current price of $35.50 per pound.

Despite the suspension of mining activities at Kayelekera uranium mine, the processing of ore will continue during a transitional rundown phase, until reagents and consumables onsite have been depleted and the production circuit has been emptied and cleaned.

Based on a uranium price of $35 per pound, Paladin should inject a further cash of between $20m and $25m for 2015 and 2016, to maintain the mine.

The Government of Malawi holds a 15% stake in PAL and has been notified of the decision.

Energy