Disconnect, page-30

Hi Berger and Guys,

I agree with your view in terms of a CR.

PDN have finished closing down LHM, including all of the lay off costs and one-off costs associated with putting the mine into C&M which led to the higher cash burn for Q3.

PDN have guided that in Q4 they will sell their final obligation of yellowcake for a gross revenue of c. US$14-15m and, based on their guidance that cash & equivalents will rise from US$30m to US$40m by the end of Q4, this will add c. US$10m to the coffers.

Translated into AUD, PDN should have c. AUD$56m in the bank by the end of the year.

PDN have guided that costs p.a. will total c. $14m exclusive of the restart study and, of course the cost associated with bringing LHM back into production.

I think that it is safe to say that PDN has enough of a cash buffer to ride out this bottoming process in U and still be around when utilities come back to negotiate LT contracts at sustainable prices.

As a previous poster has commented, however, the Board composition of PDN now suggests that there may be another outcome in store for PDN instead of returning to operation - that being a TO.

Given that Chinese interests are in the process of buying Rossing off RIO it is possible, and have a large presence in Namibia, it is possible that PDN is also a buyout candidate. I know that people have pointed out that the Chinese entities that own Hasub, buying RIO and have a JV in LHM are different ... however, I would argue that it doesn't matter as it all feeds back to "China Inc." and these players will work in concert for the benefit of Chinese uranium supply security at the direction of the Government.

I think that it is worth watching what Chinese nuclear exports are doing. To me, it appears that they are wanting to replicate Russia's "turn-key" model whereby they will:

(1) Finance the nuclear reactor
(2) Build the nuclear reactor
(3) Operate the nuclear reactor
(4) Supply the uranium fuel
(5) Decommission the nuclear reactor

... in an EM nation all for a set price.

Under this model, they need to secure uranium fuel. It is unlikely that the Russian's will want China getting into Kazakhstan. The only other alternative is the Athabasca Basin (for large supplies). CGN already has a large stake in FCU and a HK/ Chinese group own a large chunk of NXE. However, the permitting process for these development projects (and DNN) is likely c. 10 years.

PDN represents a rare opportunity to buy a fully permitted, fully operational mine (or two) that can start production in a very short timeline. The location of these mines is also likely to be viewed favourably by the Chinese when considering alternatives (Canada, Australia) who are more likely to acquiesce to US foreign policy.

I am very comfortable holding PDN as they have enough cash at present to avoid another CR at very low prices and the NTA is so much higher than PDN's EV that unless uranium is banned globally, their assets will be attractive to a buyer, likely Chinese. And that is all before you consider the time-value that PDN provides relative to other large scale development plays (NXE, FCU, DNN) all of which are c. a decade from production.

Patience.

Cheers
John