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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