Paladin
Recommendation
The story of nuclear power’s rebirth can be told in two halves; before Fukushima and after. Pre- Fukushima, nuclear power was a futuristic fuel that promised limitless energy with little pollution. Today, following the Japanese disaster, nuclear has once again become a scary word. Japan has all but shut its nuclear power fleet; TEPCO, the operator at Fukushima and other plants, has had to be nationalised. Switzerland, Germany, Spain and Austria have all banned nuclear power altogether. The US, currently the largest generator, won’t build another plant for decades; cheap gas has seen to that. Even China and India are re-thinking the scale of their nuclear programs.
Spot and contract prices, which traded above US$70 a pound before Fukushima, are today just US$50 a pound. With demand permanently impaired, prices are unlikely to revisit old peaks. This bodes poorly for uranium miners.
Paladin Energy has had its share price pummelled in response to industry changes and production shortfalls. The company’s market capitalisation, more than $3bn just 12 months ago, is now just $1bn. Yet with over $800m in debt, the price fall is no buying opportunity. The company always struggled with operational problems. Today it faces an existential one.
Paladin remains one of the largest pure uranium miners in the world, so takeover interest is possible. But in a world weary of nuclear, pure uranium exposure is a curse, not a blessing. The price has fallen 66% since Bunker down in the uranium sector on 25 Mar 11 (Avoid - $3.71). Unless you’re confident that a turnaround in the nuclear industry is imminent, there is no reason to hold this stock. We’ve CEASED COVERAGE.