Paladin Energy (ASX:PDN) Q1 2027 Earnings Call

0:00 Thank you for standing by and welcome to the Paladin Energy Ltd September 2026 quarterly results call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Paul Hember, MD and CEO. Please go ahead.

0:30 Thank you very much and good morning and thank you for joining us everyone. So this quarter was about steady execution at Langer Heinrich and continued progress across our Canadian portfolio. At Langer Heinrich full mining capability is now in place and at Paterson Lake South our focus remains on de-risking the project and advancing its growth potential. At Langer we produced 1 million pounds of uranium and sold 1.16 million pounds at an average realized price of US 79.40 per pound. The stronger realised price reflects the structure of our contract book and of course the rising uranium market. As we have previously indicated the first half production is expected to be below the second half reflecting the work to open up the J-pit and the planned shutdown activities.

1:15 Operationally the plant shutdown was completed successfully and throughput following the shutdown has been strong. Mining also had a solid quarter with more tonnes moved than the prior quarter as we continue to develop the J-pit. Ore delivered to the plant came largely from the upper benches where the ore characteristics contributed to reduced recovery We also rebuilt in-process inventory after starting the quarter with relatively low inventories which will support consistent production throughout the remainder of the year These factors drove the high cost of production of US $61.60 per pound The team continues implementing improvement actions in the plant while mining pushes towards the lower southern benches and better quality ore We saw improvements through September as mining advanced and plant throughput strengthened.

2:03 This supports our expectation of higher production and lower unit costs in the second half, and we have reassured FY2027 guidance of 5.1 to 5.6 million pounds at a cost of production of 44 to 48 US dollars per pound. In Canada, we continue to advance and de-risk pay from Lake South across a number of fronts. We signed a mutual benefits agreement with Birch Narrows Dene Nation, our third agreement of this kind with Indigenous Nations, and established an administrative protocol with the Canadian Nuclear Safety Commission. Together, these steps provide a targeted regulatory pathway aimed at completing construction licence hearings by the end of calendar year 2027. Exploration drilling also delivered encouraging results at Atlas and Saloon East as well as extensions beyond the current R1515 West Mineral Resource.

2:59 We closed the quarter with US$209 million in cash and investments with customer receipts during the period impacted by working capital cycle and the timing of deliveries. We also maintained an undrawn US$70 million revolving credit facility. Overall, we remain well positioned to execute the Langer Heinrich Operating Plan and progress our Canadian growth portfolio. Thank you very much, and I'll hand over to you for questions. Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you're on a speakerphone, please pick up the handset to ask your question.

3:44 Your first question today comes from Raoul Anand with Morgan Stanley. Please go ahead.

3:51 Hi. Good morning team. Thanks for the call. Just wanted to touch upon the production result mainly because that's the talking point I guess. Previously in terms of the J-PIT grades you talked about reconciliations going fairly well. I just wanted to touch on that a bit perhaps. Is that still the case or are you having any sort of grade misses there? when do you start to hit the southern benches as well? Yeah, thanks for that. Scott here. The grade reconciliation is still in line with the block model. So there's no issue there. The upper benches do have some more handling characteristics. So the feed going into the mill, we have mixed a little bit of low grade from stockpiles.

4:36 which has put the feed grade down a little bit. That's to get crunchier, harder rock into the scrubbers to help liberate some of the finer material. The upper benches in the JFIT are a little bit more weathered. The material is a bit finer, and even as we get a little bit deeper, it's continuing. However, as we go more to the south and even deeper into the ore body, I was there last week, they're starting to mine that material that's a lot more competent, looks a lot more like the G-pit. And as that comes in in Q2 and into H2, we should see the grades increase and the recoveries bounce back.

5:13 Got it. Okay. So I guess the recovery performance, et cetera, is kind of all being driven by the fact that the ore is a bit – there's a bit of oxidation there. Okay. Makes sense. Thanks for that, Scott. So, look, the second one's really about the uplift that you have in the second half that you've got planned. I guess, can you highlight some of the risks there, just given it's a big uplift? I mean, what type of assumptions have you made around the uplift in throughput and recovery to be able to get there, and where do you think the biggest risk lies in being able to achieve that? Yes. The plan is we should be back into the upper range of the recoveries for H2. The grade will increase as well from the 486 that we saw last quarter will be above the 500 ppm mark, which is on plan. And the other thing is without having those shutdowns, we had a week-long shutdown in July, that's a full week of zero production.

6:15 Not having any shutdowns or any big long shutdowns in H2 gives us full rate for the entire six months. And as you've seen, even with that shutdown in Q1, we were almost on par with the times processed in Q4 of FY26. The team have done a really good job on getting throughput through the mill. And with that and the upper grades and the recovery bouncing back, that's how HQ is going to play out.

6:41 That's good. That's clear. Thank you very much. I'll pass it on. Our next question comes from Branko Skokic with JP Morgan. Please go ahead.

6:51 Yeah, morning guys. Just first question on PLS, please. I was just wondering if you can update us on the timing for the feed study. I know it's ongoing at the moment, but if I look at the original timeline, it seemed to suggest it was going to be finished by mid-calendar year 26.

7:08 Yeah Franco, thanks for the question. The fee study is expected to be complete by the end of calendar year, so somewhere around November, December. What we expect after that is some final updated capital numbers probably around March.

7:27 That makes sense. And the other question I had sticking on PLS was just any progress around the funding solution. I know it was a big focus at the Invest Today a couple of months ago, but just any updates you can share there, please. Yeah. Hi, Renko. I'm just reiterating our narrative at the Invest Today. As you're aware, the economics at PLS are really robust. And I think one of the things that differentiates us is our operational experts at Langer and our relationships with existing lenders and off-takers. So we're running the initial phase of the project finance at the moment, really seeking to understand appetite, off-take and debt sizing and which lenders we want to move forward into a phase two.

8:12 So that's the longest lead transaction for us on the financing. So that's our focus at the current time. I would say that our existing lenders are very keen to continue to participate not only at Langer but also at PLS and I think that really goes to our credibility as an operator. So I think we're in a good position with lots of options.

8:38 Can I just reconfirm that a project sell-down is probably lower down your order of preference as you see it at the moment? It's more so a debt equity mix is the way you guys think about the project? Oh, Rick, I think that's still an option for us. I think, you know, we've got the capacity to fund this and operate this ourselves. But, you know, Paul, maybe you want to jump in and comment on that.

9:02 Yeah, I think, as I said, at the Investor Day, somebody would have to bring something to the table that we couldn't bring ourselves. So, look, we're still open to the possibility. It could be someone who brings alternative and low-cost financing options. So we're open to it. But as Anna said, we went into this project on the basis that we would fund and operate it ourselves. But we're open to that possibility.

9:34 That's great. That's all from me. I appreciate it. Thank you. Your next question comes from Kyla Mayer with Baron Joey. Please go ahead.

9:44 Hey, team. Just the first one on recovery. I know it dipped down to 85% versus 90% last quarter. How much of that was the all-time versus the maintenance shutdowns and low circuit retreat? Should we expect it to return up to about that 90% level in the December quarter, or that won't come through until the second half?

10:08 Scott? Yeah. The shutdown didn't have anything to do with the recoveries. That would just be throughput because the plant was shut down for that week when we did the maintenance. Recovery is completely around the ore characteristics. So the finer size, we're seeing a difficulty in liberating some of the finer particles in the classification circuit. And so our beneficiation recovery is what's causing that drop in recovery. Blending in some low-grade to bulk up or get some hard rock into the circuit is helping. We're also doing a lot of work on the water sprays and making sure that the classification circuit is running. really, really well. That is being seen. We saw it at the end of September, and it's been early in October to talk about this quarter, but we are seeing the recovery start to bounce back.

11:01 Okay. And then also, just any updates on your discussions with the Métis nation? Any progress here?

11:09 Yeah. Sorry, carry on. The team in Canada continuing really positive conversations and back and forth and engagements with the Métis Nation. Dale and the team did a community day a few weeks ago, which went really well. Yeah, it's still ongoing. There's nothing definitive to say other than it is really positive and moving forward. Okay, thank you. Your next question comes from Alastair Rankin with RBC Capital Markets. Please go ahead.

11:46 Oh, good morning, team. Just sticking on PLS for a second here. You know, I know you signed the CNSC administrative protocol this quarter. I'm just wondering if there's been any sort of further discussions around this, any colour on how they're approaching that end of year and end of 2027 hearings targets at the moment. So if there's just been any more discussions that you've had with them.

12:12 Alistair, what I would say is that... both the Saskatchewan Provincial Government and the Office of the Prime Minister and Mining Minister have been incredibly supportive and I'm aware that the Mining Minister recently wrote a letter to the CNSC reiterating their desire to make sure that projects progress in a timely manner and that they look at ways of reducing the timeline on approval process. I've met with the presidents of CNSC, incredibly positive and supportive. The administrative protocol is really an important document for us. I know that some of our peers who have gone before us didn't have that sort of document in place, but it does reiterate CNSC's intention to work towards approvals on our timeline, which is really encouraging.

13:11 and we're continuing to see evidence of the way they're working between Dale, his team and CNSC. So I'm feeling quite encouraged about CNSC's performance.

13:26 That's really helpful, Kala. And then maybe just coming back to Langer Heinrich quickly, just wondering about the December quarter shutdown, could you just give us a little bit more detail maybe around the timing when that's going to happen during the quarter, the duration. It sounds like it's going to be about a week. But then I guess what sort of parts of the plant are involved. You mentioned that throughput was really the only thing impacted in this most recent shutdown. But are there any other sort of considerations we should be thinking about for our models for this upcoming shutdown in the December quarter? Yeah, Alistair, the shutdown is scheduled for the back half of November. It's mainly around the kiln, which is used to dry the product before we can drum it.

14:12 So that's the big bit of maintenance that's being done. The rest of the plant will still be operational. So we'll be building inventory during that time. The kiln is in WA and it's going to get shipped either later this week or early next week. So the plan is to get it on site, inspect it, make sure nothing has changed during the transport. do all the testing that we need to do to make sure that it's ready to go and then install it in November. Awesome.

14:42 Very helpful. Thank you. The next question comes from Hugo Nicolese with Goldman Sachs. Please go ahead.

14:51 Morning, guys. Thanks for the update. Look, first one, just Langer and sort of the cost piece. If I look at your indicative cash outflows at Langer, just combining those reported unit costs and capex, actually softened a little bit quarter on quarter, about $80 million cash outflow versus $85 million last quarter on a nominal basis. Can you just walk us through what the cash waterfall is there in terms of the moving pieces? Is that purely just around the lower processing with the lower production? And then on a go-forward sort of basis, is there a pathway to get back to the $60 million to $70 million a quarter nominal spend that you had six to nine months ago or is this $80 million plus sort of the going run rate on a forward basis here? Yeah, Hugo, Scott and I will probably take that together. So as far as the unit cost of production outcome, I mean, that's pretty much solely a function of the production outcome for the quarter, right?

15:43 So, you know, the total costs are pretty in line with the previous quarter. I guess if you look at our cash flow quarter on quarter, what you see is pretty high shifts around the customer receipts. That's the principal movement in the quarter on quarter. So, you know, we had a relatively... I guess low cash receipt outcome from customers vis-a-vis June, where we had like circa $160 million. I think if you look back, you know, this time last year, we were also processing the median rates gold pile. So we were in a low-cost environment. We're now mining. So, you know, it is going to be a higher-cost environment than it was 12 months ago.

16:23 Got it. That's clear. And then if I could ask one on PLS. So with your license hearings not completing until the end of calendar 27 implies that probably getting fully permitted and then making an FID decision in calendar 27 maybe looks increasingly unlikely. I guess what sort of timelines are you now looking to in terms of being able to make an FID decision here just on for that permitting piece and in your view does that potentially extended timeline maybe provide a little bit of a positive and more time to potentially get more favourable off-take and funding agreements in place?

17:01 I think what I will say is the project economics remain incredibly strong and they do so under a range of scenarios. With respect to the hearings you know my expectation is at the back end of calendar year 27 those hearings should be complete and typically what we're seeing is a decision you know within a month so I think you know taking FID late 27 early 28 is probably likely but more importantly maintaining a 2031 first production I think is absolutely possible at this point in time. Alex do you want to comment on on off-takes? Yeah, sure. So look, we are actually already receiving a lot of interest in PLS off-take. Our customers are seeing what we're doing on PLS and really, you know, that supply-demand deficit doesn't go unnoticed on the customer side, so they're approaching credible producers like ourselves to secure production. I guess we're not in a hurry to enter into off-takes too early, and it will be largely driven by our financing structure that we put in place and our FID timing.

18:23 but it's encouraging to see that the market is there. Hugo, as you say, it does give us plenty of time to put those off-takes in place and we'll continue to leverage our relationships with the customers that we've built and put the off-takes at the right time.

18:45 Thanks. If I could just squeeze one more in just on the PLS CapEx. You noted you're updating those estimates by March 27, I guess, to 50%. feed into the updated study at the end of 27. You don't need to revise them again. Then if the FID slips into early 2028, that's still all fine.

18:59 Yeah, I'm not seeing any issues.

19:03 Yep, fantastic. Thanks, guys.

19:06 Thanks, you guys. The next question comes from Daniel Rodden with Jefferies. Please go ahead.

19:13 Good day, guys. Thanks for taking my question. Just one for me, just on, I guess, real-life pricing and around the contract structure. But are you able to tell us how much of this sales book was, I guess, the spot-linked versus the fixed contract sales in the quarter? And probably just noting that FY25, your first half was more spot-linked contract sales versus the second half, which was more, I guess, contract sales. Are you expecting a similar outcome for FY27 as well? Sorry, Daniel, you were cutting out there, but I gather you were asking about the contract mix. Yes, we did have a higher market-related contract mix in the quarter.

20:01 and also high uranium prices, which allowed us to realise, you know, a strong price in the quarter. I think, you know, going forward, we're running largely in line with our realised price sensitivity matrix that we published in July. and I think people should be looking at it on an annual basis rather than on a quarterly basis. There was always going to be movements quarter to quarter as we deliver material and realize sales, which are quite lumpy on our side. But we're very happy with the way the book has performed this quarter. It shows the leverage to the uranium price. It shows that we are delivering our material to our customers, meeting our obligations on time and on schedule.

20:52 Yeah, thanks. And sorry about that call on. Hopefully that's better. Yeah, I was just after if you could clarify out of that £1.16 million, how much of that was sold into the, I guess, the fixed price escalated contracts? You know, was that a material composition? And I guess, you know, I was kind of mentioning like in FY26, half one was more weighted towards the spot-linked CNSC contracts versus half two, expecting a similar outcome for FY27. Yeah, Daniel, we don't really sort of provide that detailed breakdown on a quarter-by-quarter basis. So, you know, we publish our contract metrics, and I think, you know, we're running tracking largely in line with that.

21:39 So, as I said, the two metrics that you've got there is the realized price sensitivity tables and our guidance, which we're very satisfied with the way we're tracking.

21:54 Okay, cool. Thanks, guys. I'll hand it over. Thanks. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Chris Creech with Morgan's Financial. Please go ahead.

22:08 Good morning, guys. Thank you all for your time this morning. This one might be best for you, Scott, and just a quick one on cash costs. You had some headwinds this quarter with your expected lower production. But how sensitive are your costs to the diesel price? I mean, we can see the global diesel price at the moment is somewhat volatile and pretty high. I'm just trying to understand what the sensitivity for your cost is to diesel. Well, the mining cost is about half of the overall spend and diesel is about 10% of the mining cost. So it's not overly sensitive on the totals. In Namibia, the diesel price is actually set by the government, so we're not as affected by the overall market in Namibia, and we haven't seen major swings in the diesel price locally, both the pumps and what's supplied to the mine.

22:59 Not too easy. Thank you so much. Your next question comes from Hugo Nicolese with Goldman Sachs. Please go ahead.

23:07 Hi, guys. Thanks for the follow-up. Just one on your uranium loans. noted you rolled the £200,000 due this quarter. Should we expect a similar sort of outcome for the volumes due in the March and September 27 quarters now, or will that be a little bit governed by sort of where your production ramp-up is sitting, whether you repay those when due or roll them? Yeah, Hugo, that's exactly right. we retain flexibility to either repay or all that loan. So, you know, we haven't made that decision. We'll see how we go. You know, we use loans and swaps to meet our delivery obligations to make the most efficient use of our material and locations where we're delivering. So it's always going to be an ongoing part of our toolbox kit that we utilise and, you know, we'll make that decision close at a time.

24:02 Got it, thanks. And then I can just extrapolate that comment there. I think your original sales guidance factored in the intention to repay part of those loans. How would your sales guidance sort of shift then if those loans aren't getting repaid? Should we see that sort of more in line with production then for the year? Yeah, that's exactly right. We've assumed partial repayment of those loans, but, you know, we'll... As I said, we haven't made that decision. We'll look at that closer to time. There are no further questions at this time. I'll now hand back to Paul Hembrough for closing remarks.

24:43 Thank you very much and thank you everyone for your questions and of course your continued interest in paladins. We'll continue to make steady progress at both Langar and Parrison Lake South. At Langar our focus is clearly on safely executing the operating plan, improving recovery and delivering the strongest second half production profile. Guidance metrics for FY27 remain unchanged. At TLS, we maintain the same disciplined approach as we advance the engineering program, the regulatory pathway, the remaining Indigenous partnership and our exploration program. We believe Paladin is well positioned to deliver long-term value for shareholders as a producer in today's rising new market and as a developer of one of the world's best uranium projects. Thanks once again for joining us.

25:28 That does conclude our conference for today. Thank you for participating you may now disconnect.