Tuesday, December 17, 2013

Seeking Alpha: Can A White Knight Rescue Paladin Energy?

It feels as though every time investors get excited about the possibility of a renaissance for nuclear power and uranium, something happens to undermine that thesis. That has made it difficult for uranium producers like Cameco (CCJ), Denison (DNN), and Paladin Energy (OTCPK:PALAY) (PDN.TO) (PDN.AX).

The Fukushima Daiichi accident has had some profound effects on the nuclear power and uranium industries, prompting several European countries to swear off nuclear power, forcing a re-examination of nuclear power in Japan and the U.S., and sending uranium spot prices plunging from over $70 to $34 a pound. Few uranium producers can operate profitably at these levels, and it has sapped the energy from what was supposed to be a great production growth story for Paladin.

I do believe that Paladin Energy will survive. The company has made progress on cost-cutting and it sounds as though the sale of a minority interest in the Langer Heinrich mine could generate some much-needed cash. The trouble I have, though, is divining the difference between surviving and thriving. While I think logic favors the construction of more nuclear plants, the arguments about nuclear power are never just about logic. What's more, Paladin doesn't have an unlimited amount of time to wait for the market to improve. Uranium/nuclear power bulls may be looking at a bargain here, but that undervaluation carries a lot of risk with it that is beyond management's control.

Please continue here:
Can A White Knight Rescue Paladin Energy?

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