Two years after Fukushima, nuclear energy companies remain troubled, writes Peter Ker.
The first year after the Fukushima disaster was always going to be tough for the uranium sector, but few would have thought the second year would be even worse.
The spot price for uranium hit eight-year lows this week, and now stands 30 per cent lower than a year ago, when the industry was supposedly at its nadir.
Most of the Japanese nuclear power stations that were turned off after the deadly tsunami of March 2011 remain idle, and the prospect of new demand emerging in developing countries such as China has yet to eventuate.
While all uranium stocks have suffered over the past 30 months, few companies epitomise the struggles of the sector more than Paladin Energy, which has almost been decimated since it was fetching $5 a share on the day before the Fukushima tragedy.
The share price closed at 56¢ on Friday, after reporting a net loss of $US420.9 million for the 2013 financial year. That result was dramatically wider than last year's net loss of $US172 million, five times worse than the $US82.3 million loss in 2011, and about nine times worse than the $US45.6 million loss in 2010.
Despite increasing production at its two African mines, and improving revenue flows, the company could not break even on its underlying business, and the die was fully cast once $US335.9 million worth of asset write-downs were included.
Paladin managing director John Borshoff could do little on Friday but launch yet another speech about how unreasonably low the uranium price has been, labelling it "diabolical", "extremely depressed" and "of great concern".
Mr Borshoff argues the uranium price is too low to allow new mines to be built, ensuring the scores of nuclear power plants that are planned to be built in the developing world won't be able to find uranium supply when they start operating. "'We have a situation where uranium price is collapsing and all attempts to build new greenfield uranium mines ... have essentially hit a standstill. This standstill will remain until a price of at least $70 or higher is reached to galvanise some support," he said.
"[That] this is not worrying the hell out of the utilities [who buy the uranium] completely astounds me."
While low uranium prices will make it hard for aspirants such as ASX-listed Toro Energy to get funding for the new uranium mine they are trying to build, the low price has immediate problems for an existing producer like Paladin too.
Mr Borshoff would not rule out closing one of Paladin's two mines - the Kayelekera mine in Malawi specifically - as part of renewed efforts to cut costs across the company. Octa Phillip analyst Andrew Shearer said the mine was unlikely to be profitable at present prices, but the decision was more complex than that. "They would have to weigh up the cost associated with putting it on care and maintenance and whether they have any contractual agreements in terms of uranium sales," he said.
Paladin does not make enough profit at current uranium prices to meet its debt repayments, and in recent months it has sought to sell down a stake in its flagship mine in Namibia to raise some spare cash.
Those efforts have proved fruitless, and earlier this month it was forced to raise $88 million by selling heavily discounted shares just to ensure it had enough money to get through the next 12 months.
Barely four weeks since that $88 million was raised, many analysts already believe it may not be enough to get Paladin through the year. "There is a risk they could have to come back to the market for extra funds or seek alternative funding," Mr Shearer said.
Mr Borshoff will celebrate 20 years in charge of Paladin in November, and the company's parlous state has some whispering about executive renewal.
Paladin's annual report, published this week, stressed that neither he nor long-serving board member and chairman Rick Crabb had any intention of stepping down.
"Both directors retain independence of character and judgment and continue to make outstanding contributions at board level," the company said.
Most investment banks expect uranium prices to be higher by the end of the decade, thanks to the large number of nuclear power plants that are scheduled to be built over that period. Whether the likes of Paladin can survive long enough to take advantage of that bounty remains to be seen.