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Operations OverviewMalawi

Namibia

Namibia

LANGER HEINRICH MINE (LHM)

LHM in Namibia is owned 100% by Paladin through its wholly owned Namibian subsidiary Langer Heinrich Uranium (Pty) Ltd (LHUPL). Paladin purchased the Langer Heinrich project in August 2002 and, following development and construction, commenced producing from the open pit mine with production of 2.7Mlb of U3O8 achieved in 2008/2009. Soon afterwards, the Stage 2 expansion increased production to 3.7Mlb pa in the 2010 financial year. Construction of the Stage 3 expansion is nearing completion and is expected to further increase production to 5.2Mlb pa. Construction is expected to be completed in the September quarter 2011 with ramp up to nameplate late 2011/early 2012.

Langer Heinrich is a surficial, calcrete type uranium deposit containing a Mineral Resource of 74,415t U3O8 at a grade of 0.06% U3O8 (250ppm U3O8 cut-off grade) in seven mineralised zones designated Detail 1 to 7, within the 15km length of a contiguous paleodrainage system. The deposit is located in the Namib Desert, 80km from the major seaport of Walvis Bay. The Detail 1 to 7 figure shows the location of the uranium mineralisation along the length of the Langer Heinrich valley.

Operations

Production totalled 3.525Mlb, up 5% from 3.352Mlb the previous year. The project operated successfully at near Stage 2 nameplate rates of 3.7Mlb pa for most of the year and fell short only as a result of an unprecedented wet period between January and April 2011.

The 174Mlb deposit allows for a minimum 20 year project life based upon proposed Stage 3 production rates. During the year 5,812,821t of ore was mined at an average grade of 773ppm. Additional low-grade material totalling 1,745,172t at 308ppm was mined and stockpiled for future down-blending and potential heap-leach. The average strip ratio for the year was 0.57:1 with an overall recovery of 80% achieved.

Construction and commissioning of the Stage 3 expansion is well advanced which will bring the nameplate production design from the current 3.7Mlb to 5.2Mlb pa. Delays have been experienced in completing the expansion and conclusion of construction is expected in October 2011. Staged commissioning is underway. The second crushing system, with a much larger scrubbing unit, was operational and contributing to production at the end of the 2011 financial year with improved plant availability and increased scrubbing efficiencies already apparent.

The Stage 4 expansion feasibility study is progressing well in regards to process design and capability estimation. The current target is to produce 8.7Mlb pa by conventional ore processing and a further 1.3Mlb pa from the treatment of low grade material. Efforts to date have focused largely on the conventional ore treatment plant, plus optimisation of the mining sequence. The study completion is expected by the December quarter of 2011.

Following completion of drilling for the Stage 4 Mineral Resource update, a new Ore Reserve using Stage 4 processing parameters is expected during the second half of 2011. The Mineral Resource is detailed below at a cut-off grade of 250ppm U3O8.

Mineral Resource estimate (depleted for mining at end of June 2011) for Details 1 to 7:-

250ppm Cut-offMtGrade % t U3O8Mlb U3O8
Measured Resources34.10.05518,33740.42
Indicated Resources76.20.05542,20893.05
Measured + Indicated110.30.05560,545133.48
Stockpiles15.60.057,44516.41
Inferred Resources18.60.0610,99024.2

(Figures may not add due to rounding and are quoted inclusive of any Ore Reserves. Due to a software issue the previous resource was understated by 2.7Mlb)

Ore Reserve

Economic analysis on this resource has indicated a break-even cut-off grade of 250ppm.

Ore Reserve Estimate (250ppm U3O8 cut-off)

250ppm Cut-offMtGrade % t U3O8Mlb U3O8
Proved Ore Reserve28.50.05515,43134.02
Probable Ore Reserve65.00.05536,84281.22
Stockpiles15.60.057,44516.41
Total Ore Reserve109.20.05559,718131.7

Ore Reserve has been depleted for mining to the end of June 2011

Compared to the previous ore reserve of 65.8Mlb announced in 2008, the 2010 Ore Reserve estimate represented a 104% increase in contained U3O8 when announced. The Ore Reserve has been estimated from the Measured and Indicated Mineral Resource of 139.3Mt at a grade of 0.055% U3O8. The Mineral Resource estimate is based on Multi Indicator Kriging and incorporates a specific adjustment based on expected mining parameters. As a result additional dilution and mining recovery are not included in the Ore Reserve estimation.

The cost parameters used in the reserve estimation are now well established and as such their inclusion can reasonably be justified. The revenue rate used in the estimate was US$60 per lb and is regarded as appropriate when compared to the blend of UxC spot price and existing term contracts.

These reserves form the basis of the detailed mine planning for the Project. The revised mine model will allow a project life in excess of 20 years, based on the expansion of processing capability to 5.2Mlb pa.

Exploration (EPL3500)

EPL3500 abuts the Langer Heinrich Mining Lease to the west and includes the sediment covered western extension of the mineralised Langer Heinrich palaeochannel.

Following on from initial exploration drilling and a follow-up airborne EM survey, a more extensive exploration and resource definition drilling programme was completed by mid 2010. All the data was validated and compiled into the Langer Heinrich resource dataset and was used as input into the current Mineral Resource estimation. Some areas close to the mining lease remain open and a drilling programme to test these areas was completed in August 2011.

© 2011Paladin Energy Ltd
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