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ANNUAL REPORT 2010

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Chairman's Letter

Chairman's Image

Dear Fellow Shareholders

Although it is now four years since Paladin commenced the production of uranium oxide, the Company is still very much in “development” mode. This will continue for many years. Such is the nature of the renaissance of the nuclear power industry, the substance of Paladin’s many projects around the world, the depth of the Company’s expertise and the passion of its CEO, its directors and employees.

During the past financial year, the Paladin team has principally been focused on achieving production targets at the Langer Heinrich and Kayelekera mines. Early problems and delays with the production ramp-up at Kayelekera were systematically overcome and the mine is now positioned to confirm nameplate production in the September quarter. The Langer Heinrich Mine continued its strong performance at Stage 2 nameplate capacity, whilst construction of Stage 3 progressed and Stage 4 feasibility commenced.

The achievements of Paladin management, employees and contractors in building, expanding and operating two new mines to modern international standards in Africa, with quite different geographical locations, ore body types and process flow-sheets cannot be under estimated. The intellectual property accumulated by the Paladin Group over the past 15 years since embarking on its uranium strategy, lays the foundation for the Company to achieve its long held goal to become a major global uranium mining house.

With this goal in mind, the Board and senior management continue to focus on improvements to health & safety, environmental management, corporate governance and career path training.

The Company recognises the important role it has to play within the communities in which it operates. I urge you to read with interest and pride the section of this Annual Report summarising the contribution to communities in Namibia and Malawi made by the Company, as well as privately by its employees. This positive attitude to community support is also reflected in the Company’s Australian exploration projects.

This past reporting period has seen continued fluctuation in Paladin’s share price, from A$3.37 to A$5.18. However, despite some continued global market uncertainty, the outlook for both spot and long-term uranium prices is positive and, coupled with Paladin’s consolidation as a reliable producer with growth potential, I am confident that shareholders will be rewarded for their support.

I again thank John Borshoff and all employees for their ongoing dedication and hard work. I acknowledge the mutual decision by John and his technical General Managers (supported by the Board) to not be considered for any annual bonuses due to safety incidents and a disappointing ramp-up at the Kayelekera Mine. Clearly it is in the interests of all stakeholders that executive bonuses be aligned to overall Company performance, as well as personal performance.

I welcome our new Non-executive Director Peter Donkin, whose significant banking experience in the resources sector has further strengthened the governance capacity of the Board.

Welcome also to Non-executive Director Philip Bailey, who will join the Board on 1 October. His extensive experience as a metallurgist in senior management roles, particularly in the uranium sector, will be invaluable to the Board’s oversight of operations.

At the forthcoming Annual General Meeting we will farewell Ian Noble as a director. Ian joined the Board in June 2005 and, with his strong uranium technical background, made an enormous contribution to the Board and the Company as a whole, during the last five highly active years.

Yours faithfully

Chairman's Image

RICK CRABB

Chairman