Paladin Energy (ASX:PDN): This A$3.5bn uranium developer is set to benefit from the Surge Towards a Nuclear Future

Paladin Energy (ASX: PDN) is one of several uranium stocks that saw an upswing in 2023 – by over 50% – and 2024 has been even better. There is solid momentum gaining pace in the entire uranium industry, at a pace not seen since the GFC, driven by the world’s increasing commitment to clean energy and significant shifts in geopolitical relations. The possibility of Australian embracing nuclear power once again, in the event Peter Dutton wins the next election, is realistic. Paladin has a solid project in its own right, and just unveiled plans to increase its portfolio.

The Uranium Comeback

2023 was an important year for the uranium market, with spot prices reaching heights unseen for 15 years. This surge was not an isolated phenomenon but part of a broader industry-wide revival. Paladin Energy, alongside other key players like Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL), rode this wave of resurgence, reflecting robust market interest in uranium stocks.

A significant contributor to this renewed uranium interest was the US Department of Energy (DoE) which plans to jump-start domestic uranium production. The DoE’s request for proposals for uranium enrichment services signalled a strategic shift towards establishing a reliable domestic supply, primarily for advanced nuclear reactors using high-assay low-enriched uranium (HALEU).

This fuel type, enriched up to 20% compared to traditional uranium fuel, currently relies heavily on Russian imports. With the US House of Representatives passing legislation to ban enriched Russian uranium and the US having only one facility that can enrich Uranium and produce Haleu, a lot of eyes have turned to ASX uranium producers like Paladin Energy.

Closer to home, Opposition Leader Peter Dutton unveiled plans for Australia to embrace nuclear power again. It’ll be a long time before this happens, and there are obstacles to be overcome, not least of which are legislated bans on nuclear. But the mere fact that he was brave enough to unveil these plans is exciting fior many companies and their investors.

Oh and one other thing. Did we mention that many companies had high-quality projects essentially ready to go? We’re not talking about explorers trying to find a uranium deposit, these companies had existing deposits that had been mothballed, waiting for the day when uranium prices would support them again. Well, the day is here and uranium stocks in this position are moving accordingly. Paladin has not been an exemption.

Paladin Energy (ASX:PDN) share price chart, log scale (Source: TradingView)

Paladin Energy’s Road Back to the Good Old Days

Only a few years ago, in 2017/18, it had a stint in voluntary administration. It mothballed the Langer Heinrich mine in Namibia that had been discovered in 1973 and was bought by Paladin in 2002 – ironically due to another uranium bear market.

Paladin owns 75% of it today and restarted it at the end of March 2024. Although short-term operational parameters will only be revealed to shareholders in July of this year, the company previously told investors that it anticipates a 17 year mine life, producing 77Mlb of uranium. Not bad.

The timing of its revival is particularly opportune, aligning seamlessly with the global surge in nuclear energy demand. Furthermore, Paladin Energy has already established a series of offtake agreements, ensuring the mine’s output has a secured market.

Paladin also has up its sleeve the 100%-owned Michelin project in Canada that is at an exploration stage. With only 15% of the tenement area explored, it is a long way from production, but has a lot of potential upside.

The key risk we see with Paladin – other than commodity prices – is sovereign risk in Namibia. Namibia has not had a reputation as having high sovereign risk, although investors were spooked last year by government threats of taking ownership in local projects. This has come to nothing, so far, although investors should be wary.

A big uranium play becoming bigger

The company has unveiled plans to buy Canadian company Fission Uranium. It will pay C$1.1bn in order to do so, and will dual list its shares in Toronto. The new company will be 76% owned by existing shareholders, with the balance held by Fission. Fission’s flagship project is the Patterson Lake South project which is scheduled to be in production in 2029. The existing resource of 93.8Mlb at 1.41%, anda 2023 Feasibility Study iondicated a 10-year mine life with 9.1Mlb produced every year. There are exploration despotits owned by the company too.

The combined company will have the 3rd largest resource globally, totalling 544Mlb uranium – only trailing Cameco and Kazatomprom. The companies believe they are stronger together, offering an enhanced development pipeline, the prospect of better access to institutional shareholders and diversified exposure across multiple jurisdictions.

Source: Company

Paladin Energy’s Stock Performance and Future Prospects

The surge in uranium prices and the burgeoning global interest in nuclear energy have catapulted ASX uranium shares, including Paladin Energy, to new heights. And this was even before the Fission Uranium deal was unveiled.

We anticipate continued growth in uranium demand, coupled with Paladin Energy’s strategic assets and market positioning. As long as the sovereign risk threats remain just threats, and not reality, we think there’s a promising picture for the company’s future.

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