Subiaco, Western Australia Nov 13, 2015 (Thomson StreetEvents) -- Edited Transcript of Paladin Energy Ltd earnings conference call or presentation Thursday, November 12, 2015 at 11:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alex Molyneux Paladin Energy Limited - CEO * Craig Barnes Paladin Energy Limited - CFO ================================================================================ Conference Call Participants ================================================================================ * Mark Andrews Paydirt Media - Media * Amber MacKinnon UBS - Analyst * Simon Tonkin Patersons Securities - Analyst * Michael Evans Curran & Co. - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the September quarter conference call and investor update. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session, at which time, if you'd like to ask a question, you'll need to press star one on your telephone. I'd now like to hand the conference over to your speaker, CEO, Alex Molyneux. Thank you. Please go ahead. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [2] -------------------------------------------------------------------------------- Hi, I'd like to welcome everybody to the conference call to discuss Paladin Energy's three month financials for the quarter to September 30, 2015. With me in the room in have Craig Barnes, the CFO, and Andrew Mirco, our General Manager of Corporate Development and Investor Relations. We're going to do a quick presentation. The slide show is available is available -- was appended to the ASX and is available on our website. There's also a webcast. I think the presentation should take about 20 minutes. Then we will do Q&A after that. So just stepping right into slide 2, Paladin Energy is a global uranium leader. We own Langer Heinrich mine, which is a strategic tier one mine. We have optimisation as a core competency, and we provide the best senior leverage to uranium upside. The -- when -- I remind you, when I say that we are a global uranium leader, this is a sector dominated by state players, and we are the leading independent pure play, with our eight million pounds of invested capacity. Our resources span three continents and if adding Measured plus Indicated with Inferred are almost 400 million pounds. Next slide. We say Langer Heinrich, our main operating asset, is a strategic tier one asset in the uranium space, and I believe the facts laid out on this slide confirm that without dispute. Firstly, Langer Heinrich has recently been independently assessed by UxC as being in the lowest quartile of the global uranium cash cost of production curve. Within that group it's also the lowest cost open pit uranium mine in the world. Secondly, Langer Heinrich is a top 10 pure play uranium mine by annual production, and it's top five if you consider just open pit uranium mines. The production life at Langer Heinrich exceeds 20 years, and we have a long established operating history with almost 33 million pounds of cumulative production from Langer Heinrich. Now I'm going to hand over to Craig, who'll cover the next six slides. Then, after that, I'll do a couple of more slides and we'll go to Q&A. So thanks, Craig. -------------------------------------------------------------------------------- Craig Barnes, Paladin Energy Limited - CFO [3] -------------------------------------------------------------------------------- Thank you, Alex. Good morning, everyone. Slide 5 and 6 highlight some key features of the September quarter. Firstly on slide 5, uranium production of 1.083 million pounds for the quarter decreased by 1% compared to the September 2014 quarter, primarily as a result of lower processed grade and lower plant recoveries. Uranium drummed in the quarter was approximately 1.2 million pounds. The Company's 12 month moving average lost time injury frequency rate was 1.39, as compared to 2.41 last quarter and 4.1 for the three months ended September 30, 2014. The realised uranium sales price for the quarter was $46.12 per pound at 26% premium on the TradeTech average weekly spot price for the quarter of $36.48 per pound. We anticipate sales volumes of approximately 1.5 million to 1.7 million pounds in the upcoming December quarter. C1 cash costs of $27.82 a pound for the quarter decreased by 16% from $33.03 per pound in the September 2014 quarter, and we're within our September quarter guidance of $26 a pound to $30 a pound. The decrease in C1 cash cost was largely driven by a reduction in reagent costs resulting from the Bicarbonate Recovery Plant, as well as the weakening of the Namibian dollar against the US dollar. The reduction in cost of sales for the quarter resulted in the operation achieving a 707% increase in gross profit, to $11.3 million from $1.4 million in 2014. Cash and cash equivalents at September 30, 2015 of $108.4 million was within our previous guidance, adjusted for repurchase of the convertible bonds due in April 2017 of $101.5 million to $111.5 million. The timing of cash receipts from sales in the quarter was the main reason for the drop in our cash balance. The cash proceeds from these sales were received early in October. This was expected and flagged previously, and we are on target to becoming cash neutral, excluding one-offs, by June 30, 2016. Sales revenue for the quarter - on slide 6 - decreased by 5%, from $39 million in 2014 to $36.9 million in 2015, as a result of a 36% decrease in sales volume, which was partially offset by a 47% increase in realised sales price. Underlying EBITDA for the September quarter of $6.4 million was a $21.6 million turnaround from a negative underlying EBITDA of $15.2 million in 2014. The waterfall chart on slide 7 provides a breakdown of the change in cash and cash equivalents for the September quarter. I must just mention that there is an error on this slide. Firstly, that speech bubble on the right hand side which talks about the Carley Bore costs of $1.2 million, that needs to come out because the Carley Bore acquisition costs are shown separately on that slide. Then in the last two red columns for corporate expenditure and exploration expenditure, those change slightly. Corporate expenditure should have been $3 million and exploration $2.5 million. Looking at that chart on slide 7, we can see that in September we repurchased $20 million of the $274 million convertible bonds due in April 2017 for $18 million, excluding accrued interest. This repurchase resulted in savings of approximately $3.9 million. $1.2 million was paid for the acquisition of the Carley Bore uranium deposit which was completed in the quarter. Cash flow optimisation initiatives were implemented during this quarter, which will result in a $14 million decrease in annual corporate exploration and Kayelekera care and maintenance cash expenditure. That's compared to FY15. Those cash flow optimisation initiatives resulted in retrenchment costs relating -- of approximately $4.3 million. $5.7 million interest was paid in September on the convertible bonds. Langer Heinrich's free cash flow for the quarter was an outflow of $37.4 million. That was largely attributable to the timing of the sales receipt, which I mentioned previously, these receipts only being received early in October. In addition, sales were lower in this quarter due to the build up of inventory for a large CNNC shipment early in October of about 690,000 pounds. Kayelekera free cash flow, corporate and exploration expenditure amounted to approximately $8.7 million in total for the quarter, but this expenditure is expected to drop significantly in the coming quarters due to the cash flow optimisation initiatives previously mentioned. In summary, in addition to the lack of sales receipts during the quarter there was a total of $23.5 million of one-off cash outflows in this quarter, including the repurchase of the convertible bonds, the Carley Bore acquisition and restructuring costs. Moving on to slide 8, slide 8 has two waterfall charts which provide a variance analysis of EBITDA, comparing the September 2015 quarter to the previous June 2015 quarter and last year's September 2014 quarter. Firstly, comparing the previous quarter, the chart on the left shows us the large variances caused by the decrease in sales volume from 1.766 million pounds in the June quarter to 800,000 pounds in the September quarter. Due to the size of some sales, and also the timing, this trend will continue from quarter to quarter. You can see that the $8.2 million positive sales price variance was offset by negative sales volume variance and cost of sales performance. Additionally, exploration, administration and Kayelekera care and maintenance cost variances were all positive, resulting in EBITDA of $6.4 million for the September quarter compared to $6.8 million for the June quarter. Comparing to the previous year's September 2014 quarter, the chart on the right, again, illustrates the large variances caused by the decrease in sales volume, from 1.25 million pounds in 2014 to 800,000 pounds in 2015. The positive variances on sales, price and cost of sales performance of $18.7 million and $4.4 million respectively were partially offset by the negative sales volume variance. Once again, exploration, administration and Kayelekera care and maintenance cost variances were all positive, resulting in a positive year-on-year turnaround of $21.5 million of EBITDA. Slide 9 illustrates how all-in cash spending has significant reduced by $17.61 per pound year-on-year, from $63.86 per pound in September 2014 to $46.25 per pound in September 2015. The graph on the left compares all-in cash expenditure for the last five quarters, and shows a trend of decreasing expenditure, with the September quarter's $46.25 per pound significantly below the average for FY 2015 of $50.75 per pound. These unit all-in cash expenditure numbers are sensitive to production volumes, with the June 2015 quarter having had the positive impact of highest production of 1.336 million pounds versus the 1.083 million pounds in this quarter. The all-in cash expenditure is trending towards the $39 per pound to $41 per pound guidance range provided for full year FY 2016. The waterfall chart on the right provides an analysis of the movement in all-in cash expenditure, the biggest impacts, as you can see on that graph, have been the weakening of the Namibian dollar against the US dollar of $7.47 per pound, the impact of the Bicarbonate Recovery Plant and reagent cost of $3.98 per pound and the reduction in CapEx of approximately $3.64 per pound; also the reduction in Kayelekera care and maintenance costs of $3.05 per pound. Moving up to the next slide, slide 10, the table on slide 10 provides a breakdown of Paladin's debt at face value, amounting to $465 million at September 30, 2015. Since June 2012 our debt has been reduced by approximately $450 million, with the $20 million repurchase of the 2017 convertible bonds, and September being the most recent debt reduction. The next debt maturity is the $254 million convertible bonds due in April 2017. There are approximately 18 months remaining until the debt maturity, which provides us with ample time to address the convertible bond. The expected improvement in operating cash flows will also assist in our initiatives to reduce debt and strengthen our balance sheet. Strategic initiatives are currently being progressed with a view to refinance or repay the April 2017 convertible bond. Based on Paladin being cash flow neutral, we are now -- we now see the funding gap required to repay the 2017 convertible bond reduced to between $150 million and $180 million. Thank you. I'll hand back to Alex to complete the presentation. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [4] -------------------------------------------------------------------------------- Thanks, Craig. Now, cash flow optimisation is a core competency for Paladin. At our heart we have a team of specialist metallurgists, chemists and engineers that are constantly moving forward process investments and changes that drive costs lower. As Craig said, the September 30, 2015 C1 cash cost was $5.18 -- or about 16% -- lower than the September 30, 2014. He also highlighted that all-in spending fell by around 28% to $46.25 a pound between those two quarters. The main contributor to the cost reduction is the Bicarbonate Recovery project. We've talked about it before, but we highlight it again because we're still seeing results coming through from that project. The BRP was modified in September and is now running at 200% of the designed outcome for its original configuration. The BRP has reduced cost of reagents -- our single largest line item for processing costs -- by around 35%. BRP cost reductions are sustainable, not temporary. We have to see it as a change that has effectively reset our sustainable C1 cash cost base in the order of $4 a pound to $5 a pound at Langer Heinrich mine. Soon the full impact of BRP will have been recorded in the December quarter, and we expect that to show up in the form of potentially record low C1 cash costs for Langer Heinrich in that quarter. As the BRP becomes old news, we will be able to come forward with a series of projects to implement in the next 18 months to continue the cost reductions, including a BRP-like Carbonate Recovery Project. We've shown this chart before. It was our walk from the FY 2015 all-in expenditure per pound of uranium production to what we expect for FY 2016. We believe that it demonstrates our business is sustainable versus our uranium sales price. We continue to forecast being around $39 a pound to $41 a pound all-in spending on the basis for the full year. And our September quarter outcome was within this guidance that was made around three months ago. Our full year ASP premium to spot average was guided around $4 per pound, and so we remain on track for a breakeven year. I put this slide here to make a point. Uranium equities have been sold off with the energy and commodities complexes, yet our underlying commodity exposure is doing much better. Uranium has averaged around 13% higher this calendar year when compared to the last one. In the very short term we've seen a range bound uranium market. Since May spot has remained in a tight $35 per pound to $38 per pound range, and the long term contract reference price has been unchanged at $44 a pound. However, I genuinely believe an inflection point is upon us. This is our thinking. We had a massive drop in nuclear power generation in 2012 calendar year, then another smaller drop into 2013. 2013 into 2014 was fairly flat, just a 1.5% gain. In this calendar year, we should see around a 2.5% to 3% growth in nuclear power generation, compared to 2014. In that this is really the first year where we see the drop or less than global energy growth expansion for uranium. We can say that we've seen it in the uranium market in it's broadly -- the stock market has broadly stabilised and prices are slightly higher this calendar year than last year. But now it gets interesting. We have Japanese restarts already happening and there will be six to 12 in the next -- in the 2016 calendar year. We now see some big years of growth ahead of us from China and other players. Using our own numbers, we believe that 2016 will see 6% to 8% in nuclear power generation over 2015. 2017 will be a record year for nuclear power generation with even more global nuclear power generation than in 2010, before the Fukushima incident. That would represent 5% to 7% growth over 2016. Longer term news is also very positive. China has announced its 13th five year economic plan, which covers the years of 2016 to 2020. Acceleration in the build-out of their nuclear program is a key plank of that plan. South Africa, UK and Romania have all green lit new investment plans for nuclear power stations in the last quarter. Nuclear will outgrow the energy sector and global growth for the next five to 10 years. Paladin is uniquely leveraged to this with. We are pure play, we're an industry leader and we're relatively exposed to spot prices. Slide 15. This is a review of our current strategy. Number one, we plan to maximise Langer Heinrich cap flows through optimisation, with such optimisation initiatives to preserve the integrity of the long-term life of mine plan. What I mean by that is things like the capital we spend on BRP, the future capital we spend on things like carbonate recovery and other cost reduction initiatives we have in the pipeline are genuine savings in our business. They're not savings gained through high grading and manipulation of the mine plan. Strategy number two. We're going to maintain Kayelekera on occurring maintenance, minimal expenditure basis and do the same for our exploration business, until such time as the uranium market warrants further investment in that portfolio. Number three. We will continue to minimise corporate and administrative costs as much as possible. Number four. We will progress strategic initiatives with respect to partnerships, strategic investment, funding and corporate transactions that will help us improve our balance sheet position, hopefully using initiatives that do so at a premium to the share price. So that brings us to our update on where we're at with our guidance. Firstly, we reiterate our full year guidance that we set out three months on the call we did for the FY2015 results. The key items for our full year guidance are we expect Langer Heinrich production to be in the range of 5 million to 5.4 million pounds. Our average selling price premium for the year will average around $4 per pound. C1 cash costs at Langer Heinrich should be in the range on a full year basis of $25 to $27 a pound. Everything else we spend should be less than $19 million, including Kayelekera care and maintenance, CapEx, exploration and corporate costs. All of this leads to us making the assumption that at current spot uranium price and exchange rates, we will be cash flow neutral when we compare our expected 30 June 2016 cash balance with the cash balance as at 30 June 2015, adjusted for one-off items, i.e., our cash neutral forecast excludes the one-off restructuring costs associated with our cost reduction initiatives and it also excludes the one-off item of the repurchase of our 2017 CBs that we did as well. So what are we saying about the December quarter? We're saying our sales number should be 1.5 million to 1.7 million pounds of uranium from Langer Heinrich. The Langer Heinrich C1 cash cost should be in the range of the full year guidance, so that's between $25 and $27 a pound. Then we expect cash generation in the quarter, which would have us with a cash balance at the end of the quarter in the range of $110 million to $120 million. Now, I also make one proviso that our cash balance could be substantially higher based on the confirmation of timing of delivery and payment for one sale, which occurs at the very, very end of the quarter, which in itself is a single sale that has a value of about $28 million. There is a good chance that the timing of that, we'll have that item included in our year-end cash balance, in which case, that would be additive to this $110 million to $120 million range that we put out for now. So that's it for the presentation part of this call. Operator, I'd like you to run a Q&A process for us now, if you might. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Certainly. So, ladies and gentlemen, we'll now begin the question and answer session. (Operator instructions). Our first question comes from the line of Mark Andrews from Paydirt Media. Please go ahead. -------------------------------------------------------------------------------- Mark Andrews, Paydirt Media - Media [2] -------------------------------------------------------------------------------- Good morning, guys. I just had one question, just in terms of how have you seen the management transition take place this year? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [3] -------------------------------------------------------------------------------- Speaking as someone involved in the transition, I would say that it's happened fairly seamlessly. We haven't -- we've had some redundancies, but otherwise we haven't lost any senior personnel and it's -- everybody has been well aware of the task ahead of Paladin and has got down to business without any major dramas. -------------------------------------------------------------------------------- Mark Andrews, Paydirt Media - Media [4] -------------------------------------------------------------------------------- Yes. Are you expecting any more redundancies? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [5] -------------------------------------------------------------------------------- Not at this time. -------------------------------------------------------------------------------- Mark Andrews, Paydirt Media - Media [6] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- (Operator instructions). Our next question comes from the line of Amber MacKinnon from UBS. Please go ahead. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [8] -------------------------------------------------------------------------------- Hi, Alex, Andrew and team. Just a quick one from me. I was just wondering if you could remind us in terms of the contract you've got scheduled over the remaining quarters, whether the realised pricing is likely to be fairly bumpy or should it be fairly consistent over the subsequent quarters of this year? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [9] -------------------------------------------------------------------------------- Well, I'd say it's -- so it's going to be very bumpy and, of course, as we say, if a single sale moves from one quarter to another, it can have a big impact. So when we say -- we say our ASP will be $4 above market. That's on a full year basis. Obviously the first quarter was around $10 above market, so you have to take that into account when working out your -- let's say, your full year average. But it's going to swing around quite a bit. It could be anywhere between very close to market and right up to well -- $10 above. So I don't think we'll see -- we won't see any more quarters with a premium as high to market as the September quarter. The others will be lower. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [10] -------------------------------------------------------------------------------- All right. Thanks for that, Alex. The other question I was just going to ask, going back to the previous question, obviously I imagine you're looking at candidates pretty closely at the moment in terms of -- given you're in an interim role as the CEO. Are we any closer to identifying when we might be able to announce? I mean, in terms of timing, is it likely we could see a new CEO announced in the first quarter or second quarter of next year, calendar year that is? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [11] -------------------------------------------------------------------------------- I could say that the Board has made very good progress on the CEO recruitment. I can also say that they're -- frankly, just from my personal opinion, there are some excellent candidates out there. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [12] -------------------------------------------------------------------------------- Right. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [13] -------------------------------------------------------------------------------- What I can't say is exactly what the timing of any announcement around that would be because it's subject to matters kind of outside people's control or whatnot, because it also includes timing drivers of personal individuals that you might be hiring-- -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [14] -------------------------------------------------------------------------------- (Multiple speakers) -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [15] -------------------------------------------------------------------------------- --and things like that. So all I can say is it's progressed substantially. We're not changing anything. We're not saying I'm anything other than interim -- we originally said I'd have a tenure of around six months and we're not changing any of that information. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [16] -------------------------------------------------------------------------------- Just one other final question to wrap up. With regards to Bicarbonate Recovery project you mentioned briefly during the call, is that -- I'm assuming that's a separate project to the BLT project. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [17] -------------------------------------------------------------------------------- It is. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [18] -------------------------------------------------------------------------------- Am I correct in understanding that it is something you're planning -- in the planning phase of at the moment? Do you have any -- -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [19] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [20] -------------------------------------------------------------------------------- --idea of cost? (Multiple speakers). -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [21] -------------------------------------------------------------------------------- It's in the design and CapEx estimation phase. It actually uses very similar technology to the technology that we employed for the Bicarbonate Recovery Plant. By the way, we also have -- we're substantially progressed with the award of international patent application for that technology. So it really is something genuinely new. It's been developed in-house with Paladin's expertise and then now we can take the same technology and with different equipment, different reconfiguration, we believe we can apply it to carbonates as well. So it's in the design and CapEx estimation phase at this time. It's not a project that would be implemented this financial year, but it's something we hope to put in place in the 2017 financial year. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [22] -------------------------------------------------------------------------------- Great. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [23] -------------------------------------------------------------------------------- It's one of a number of projects that we're working on that in their own right have a material impact on C1 cash cost. -------------------------------------------------------------------------------- Amber MacKinnon, UBS - Analyst [24] -------------------------------------------------------------------------------- Right. Thanks so much, Alex. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [25] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Our next question comes from the line of Simon Tonkin from Patersons. Please go ahead. -------------------------------------------------------------------------------- Simon Tonkin, Patersons Securities - Analyst [27] -------------------------------------------------------------------------------- Yes. G'day, guys. I think Amber stole by Bicarbonate Recovery question, but I've just got a question on Kayelekera. What sort of uranium price are you guys looking to potentially get that thing up and running again? Also, on the care and maintenance costs, what's been done to reduce those? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [28] -------------------------------------------------------------------------------- Okay. So number one, I mean, I think John had always said previously that Kayelekera requires a uranium price around $70 a pound before it's likely to restart. We've done work internally in a very, let's say -- a draft sense in how a restart would look for Kayelekera. We can say that we would be able to reduce the C1 cash cost of Kayelekera in a restart by spending a bit of capital at the time of a restart. So -- but we're not in a position yet to publish the findings of that study. What I can say is with the $70 a pound price that actually gives you a very, very substantial buffer. We're looking at even at $50 a pound to $55 a pound uranium prices we're looking at scenarios that have IRR returns that would make hedge funds excited. So there are a number of ideas around Kayelekera. We're working on it and it's likely that some time in let's say the first half of the next calendar year we'd be able to publish more of a definitive or feasibility style for Kayelekera restart. Now in terms of our care and maintenance expenditure we -- last year's 2015 care and maintenance expenditure was $16 million. This year will be something less than $10 million. There's been a mixture of initiatives with that. We're reducing the cost of disposing water there by even spending a little bit of CapEx on a nano-filtration unit that was commissioned at the very end of the September financial quarter. There's also been I guess some restructuring of personnel and whatnot there. We believe it's fairly controllable in the sub $10 million range and it may be that we're able to reduce it further next year as well. So I hope that answers your question. -------------------------------------------------------------------------------- Simon Tonkin, Patersons Securities - Analyst [29] -------------------------------------------------------------------------------- Yes, yes thanks. Just one further question. On Manyingee, I think previously under John, that was the next cab off the rank I guess to go into production but I noticed in today's presentation you've got minimum activity planned. Has that changed? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [30] -------------------------------------------------------------------------------- Well we have minimum activity planned on all of our exploration assets. So Manyingee is no different to our other assets in that regard. When you look at a pipeline of development projects you really have to look at it in a horses-for-courses situation. We have mega projects that really have a scale impact and under the right uranium price scenarios create a meaningful transformational increase in the Company's production and cash flow. So they would be projects such as the Michelin project in Canada and the Mt Isa project in Queensland. Manyingee is an interesting project because it has potential to be an in-situ recovery project. It would be smaller in annual pounds but probably also lower CapEx and lower cash cost per pound in the event it has a successful field leach trial and we prove it as an in-situ recovery deposit. So next step for Manyingee is actually to move forward with a field leach trial. We would like to move forward with that, the question is around our cash flows and our what-not. For now our entire exploration businesses is on a care and maintenance minimum exploration basis. Certainly when conditions change we would like to progress Manyingee's work quite aggressively. -------------------------------------------------------------------------------- Simon Tonkin, Patersons Securities - Analyst [31] -------------------------------------------------------------------------------- Okay, thanks a lot. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- The next question comes from the line of Matthew [Shambrie] from Citi. Please go ahead. -------------------------------------------------------------------------------- Unidentified Participant [33] -------------------------------------------------------------------------------- Good morning. Two questions from me. In your estimated $150 million to $180 million shortfall for the repayment of the 2017 CBs, what uranium price do you assume and what cash balance do you assume being left in the business to run the Company? Then the second question is on Kayelekera. Is there a possibility of securing long term contracts that are premium to the current term rates to underpin a restart prior to the spot market rising to that $50 per pound to $55 per pound that you've alluded to? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [34] -------------------------------------------------------------------------------- Okay so your first question the $150 million to $180 million, it's based on using current spot uranium price. So whilst we believe that we are in an inflexion point in the uranium market and we are highly confident of a higher uranium price next year and the year after than we have today, we model our business at current spot uranium prices and even look at things with a little bit of buffer to make sure that our initiatives we take are sustainable. So we use current spot uranium price. The cash buffer we assume we need to keep is around $60 million to $80 million to deal with quarter-to-quarter fluctuations in sales receipts and things like that. So that's how we come up with the $150 million to $180 million shortfall assumption. Okay Kayelekera, you make a very good point there Matthew I have to say in that when we say previously that okay $70 was the price that where Kayelekera could be restarted -- you're right that's really thinking from a sport market mentality. As I said before, we have scenarios internally that we've looked at where Kayelekera has I say I don't want to be exact but I say IRR type figures that would make hedge funds excited at say $55 a pound uranium. So there is a possibility that a Kayelekera restart could actually happen at a lower uranium price but if you did do so at a lower uranium price you would probably want to make sure that you're then not exposed to any downside and effectively make it an annuity. So maybe if term price was in that $55 to $60 range it could be theoretically possible to term out its production. It has a roughly six year mine life on its restart plan which is quite common contracting period. So it's quite feasible that the whole thing could be turned into an annuity through a fixed price contract and restart at a lower price. Quite possible but we don't say whether it's our strategy to do or not do that. We would have to consider it at the time the term market provided those conditions. -------------------------------------------------------------------------------- Unidentified Participant [35] -------------------------------------------------------------------------------- Sure, thanks Alex. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- (Operator instructions) The next question comes from the line of Michael Evans from Curran & Co. Please go ahead. -------------------------------------------------------------------------------- Michael Evans, Curran & Co. - Analyst [37] -------------------------------------------------------------------------------- Good morning Alex, gentlemen. Just a quick one, you mentioned that Kayelekera you hope you might be able to get the holding spots down less than $10 million a year. Can you make a comment on your corporate costs? Obviously they've come down a lot since FY15, $19 million this year. Is that the end or should we be thinking that they can come down a bit more Alex? -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [38] -------------------------------------------------------------------------------- Dear, look our full year running rate for corporate costs is getting into the range of $1.2 million to $1.5 million a quarter by the end of the 2016 financial year. At that level we would actually be an industry leader for a company of our market cap. There are some opportunities but I don't think we're going to find -- once we're running at like a $5 million to $6 million a year level, I don't think there'll be material ability to drive that down further. -------------------------------------------------------------------------------- Michael Evans, Curran & Co. - Analyst [39] -------------------------------------------------------------------------------- That's great. Thanks very much. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- We have no further questions in queue. (Operator instructions) There are no further questions. I might hand it back to yourself, Mr. Molyneux, for closing comments. -------------------------------------------------------------------------------- Alex Molyneux, Paladin Energy Limited - CEO [41] -------------------------------------------------------------------------------- Okay, I just want to thank everybody for your time. Andrew and I are available in the office in case people have additional questions that they haven't thought of and want to give us a call. We look forward to working with everybody and hopefully being able to put out a very position quarterly for the December quarter results, which will be out in around February of next year. We also make the point that Andrew has contacted a number of investors and analysts. We will be doing a site visit in the end of the first week of February, around February 5 actually, and if you haven't been contacted and you are an investor or institutional investor or an analyst and would like to participate in that then please let us know. Thank you. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- Thank you very much ladies and gentlemen, that does conclude our conference for today. Thank you so much for your attendance. You may all disconnect.
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