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Paladin (PDN)

 Closing price  $2.64
 Annual change  -$1.25
 % change  -32.1%

 

Citigroup – BUY

Raymond James – BUY

UBS – BUY

RBS Dominion Securities – BUY

Paladin Energy – a uranium exploration company with projects in Australia and Africa – has been hammered since the disaster in Japan, tumbling from $5.00 in March to a 12-month low of just $2.29 at the end of June. After a tough end to the financial year PDN has jumped in July and is now up 17% over the past four weeks – most of those gains since Citi upgraded it from a hold to a buy.

Although it’s obvious that the meltdown in Japan didn’t exactly help uranium stocks, it was the reported change in policy from the Namibian Government for the stgelopment of minerals that turned the share price slide into a rout. Paladin’s wholly owned Namibian subsidiary company, Langer Heinrich Uranium operates mines integral to PDN’s earnings in Namibia.

One thing’s for sure, the market didn’t listen to Paladin’s MD John Borshoff when he announced to the market on May 11, 2011 that “the proposed changes to Namibian Mineral Policy will not affect Paladin interests,” with the share price tumbling a further 10% over the following three days. However it seems to have sunk in now, with the share price starting to make up some lost ground.

“The Company welcomes the media statement released by the Minister yesterday clarifying the proposed
changes to The Minerals Act. In his statement he advised: ‘The existing exploration and mining licenses will not be affected.’ Importantly Mr Katali also stated that the proposed changes should in no way be construed to indicate that the Government of Namibia intended to nationalise the mining industry,” wrote Borshoff in an ASX release. “Paladin is a significant investor and employer in Namibia and the Company was pivotal in pioneering the renaissance of the Namibian uranium industry. Paladin continues to invest heavily in Namibia, with Stage 3 expansion of Langer Heinrich nearing completion and preliminary planning well advanced for Stage 4, which would double production of LHUPL by 2015. The removal of any doubt over sovereign risk in relation to Paladin’s interests in Namibia is very welcome and paves the way for continued significant investment,” he said.

Although uranium stocks – and the arguments of nuclear power advocates in Australia – have taken a severe hit since the Japan nuclear disaster in March, analysts have counselled against hasty selling. Raymond James mining analyst Bart Jaworski is bullish on the sector and PDN specifically. “We have updated our outlook on uranium supply/demand fundamentals and, after revisiting our reactor model and making adjustments to our projected reactor build-out per region, our outlook beyond 2011, to our surprise, remains fairly bullish,” he says.

Jaworski’s top picks in the sector are Hathor Exploration and Paladin, predicting improved performance in uranium toward the end of the year. “We continue to believe that the uranium industry will again find its legs and that the public perception of nuclear power will shift positively,” Jaworski wrote in a recent report. Adam Schatzker, an analyst at RBC Dominion Securities, also rated Paladin as a top pick.

Meanwhile UBS retains a buy on PDN despite the company missing its production guidance for the 2011 financial year.

Based on Thomson Reuters data, 10 analysts have a buy on PDN, 8 have a hold and 2 have a sell.

 

Chart: Share price over the year to 28/07/2011 versus ASX200 (XJO)

Stock code: PDN

Charts: Paladin Energy Limited

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