Credit Suisse says: "Mar-Qtr Production In-line; Cost Controls
Working In Tough Uranium Market."
Event: "PDN announced Mar-Qtr (3Q13) production of 1.992Mln lbs
U3O8 - in-line with our estimate. Uranium sales volumes of 1.92Mln
lbs were below our estimate of 2.20Mln lbs, offset by a higher
realized price of C$55.22/lb vs. our C$47.55/lb estimate. As a
result, Mar-Qtr revenues of C$106Mln were also in-line".
View: "In-line production quarter. Production at Langer Heinrich
) of 1.230Mln lbs was in-line vs. our 1.228Mln lbs, but down 13%
QoQ owing to water constraints and operational issues. We believe
the issues surrounding water limitations are a result of
disruptions due to upgrades to NamWater infrastructure, and
together with interim agreements for additional desalinated water
supply and water conservation measures, should not affect LH
nameplate performance (5.2Mln lbs annual run-rate). Kayelekera
production of 0.762Mln was largely in-line vs. our 0.776Mln lbs.
FY13 production guidance on-track. PDN maintained its FY13
production target of 8-8.5Mln lbs. Through the Mar-Qtr, production
has totaled 6.112Mln lbs, or 74% of the mid-point of the range,
placing PDN in a good position to achieve annual production
Catalysts: "Keys to the PDN story remain strategic initiatives,
deleveraging, and cost optimization. PDN previously announced a
program to realize cost savings of C$60-80Mln over the next two
years. At LH, Mar-Qtr C1 costs remained steady at C$29.60/lb
(in-line) despite water disruptions reducing LH production to 96%
of nameplate. At Kayelekera, Mar-Qtr C1 costs were 8.5% lower QoQ
at C$39.80/lb (vs our C$44/lb). We currently forecast cash cost
improvements of 8% YoY in FY13 (to C$35/lb from C$38/lb). PDN noted
that its previously announced strategic initiatives of debt
reduction is ongoing. PDN has targeted a D/D+E ratio of below 30%
in the medium-term (from 46% at end 2Q13), a level we believe is
mostly achievable through pre-payment cash inflows (EdF contract)
and the sale of a minority stake (20-30%) in its Queensland
(Australia) assets, which could raise proceeds of C$80-100Mln."
Valuation: "Our TP of C$1.80/share is based on 1x our NAVPS of
C$1.79/share, which includes C$1/share in exploration and
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