Tuesday, June 27, 2017

Paladin Energy - The Road to Zero

Paladin Energy is (or was?) one of the world's largest uranium producers. Now the company is generally non-existent - most recently Paladin shares have been withdrawn from exchanges.

Below I present a few charts showing the Paladin's road to zero.

Uranium prices:

source: stockcharts.com

Uranium prices topped in 2007, ahead of a big financial crisis. Then, in 2011, the Fukushima disaster set the downward trend in uranium prices. For many years...

Poor prices = poor investment and impairment charges

When uranium prices  go down, a uranium producer generates lower cash flow from operations:

source: Simple Digressions

Poor prices have a negative impact on the value of assets. Hence, impairment charges:

source: Simple Digressions

Then, when there is no cash, a company has to borrow money to keep operations going:

Negative cash flow from operations + debt service + impairment charges are a poisonous mixture. As a result, a company's equity goes to zero...or even lower:

source: Simple Digressions

End of story

Oh, is it? Not really - now Paladin tries to restructure its debt and...sell its best asset (the Langer Heinrich mine)

No comments:

Post a Comment