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PALADIN ENERGY LTD

ACN 061 681 098

30 July 2015
Company Announcements Office
Australian Securities Exchange Limited
20 Bridge Street
SYDNEY NSW 2000
Dear Sir/Madam

Progress Update: Material Reduction in Costs in FY16

Paladin is pleased to advise of a material reduction in its forecast FY16 cash flow break-even level through a sustainable reduction in its forward all-in cash costs (including capital expenditure, corporate costs and debt servicing). These measures (outlined below) will reduce Paladin's total cash costs by more than US$33M (compared to FY15). Further measures that will be implemented within the Dec
2015 quarter are expected to bring the Company's overall cash flow to a break-even level that is sustainable even if the current low uranium price environment continues.
Paladin still firmly believes the uranium market is near an inflection point, after which materially higher prices are expected. The cost reduction initiatives outlined today, in conjunction with the pending measures, are intended to make the Company cash flow positive during FY16, enhancing shareholder leverage to any future uranium price upturn.
Key elements of the Company's cost reduction initiatives include:

Langer Heinrich Mine- Revised forecast forward C1 cash cost of approximately US$26/lb for FY16 based on 5.2Mlb of production reducing from US$29.07/lb in FY15. This will result in a significant decrease in total cash cost (including royalties, transport, logistics and capital expenditure) reducing from US$36.44/lb in FY15 to US$30.74/lb and represents a reduction of almost US$6/lb including a deferment of US$10M capital expenditure into FY17. Key elements of the reduction include renegotiation of terms with the mining contractor, reduced reagent consumption linked to further optimisation of the Bicarbonate Recovery Plant and deferment of some planned capital expenditure.

Corporate and exploration- 35% cut in corporate costs to US$9.7M and exploration rationalised for FY16 focussed on essential exploration, including a small amount of potentially high impact drilling. Total corporate and exploration costs are reduced to approximately US$16M.

Kayelekera care and maintenance- US$5M saving resulting in Kayelekera care and maintenance costs of approximately US$11M for FY16.

Level 4, 502 Hay Street, Subiaco, Western Australia 6008 Postal: PO Box 201, Subiaco, Western Australia 6904

Tel: +61 (8) 9381 4366 Fax: +61 (8) 9381 4978 Email: paladin@paladinenergy.com.au Website: www.paladinenergy.com.au

Ref: 395916

This US$33M cash cost saving is a key step for Paladin to achieve sustainability in the current low uranium price environment. Paladin expects, as a minimum, to be cash flow neutral by the end of calendar year 2015. The further cost reductions undergoing review in the next three months will be implemented once verified and are aimed at lowering total all-in cash costs to achieve the cash flow neutral position. Alongside the cost reductions, a revised Life of Mine plan for Langer Heinrich is well advanced and Paladin expects its completion to result in further operational improvements.
The costs and efficiency gains announced in this release are part of a focussed effort to put Paladin in a sustainable position and preserve shareholder value. Continued cost reduction, combined with the positive outlook for uranium and the globally competitive position of our flagship Langer Heinrich Project, means Paladin will have greater leverage to an improving uranium market with its established projects, an extensive project pipeline and industry-leading IP as it continues its optimisation initiatives.
Further information regarding Langer Heinrich's cost guidance and details of salary reductions to
Management, Directors and staff are appended to this announcement.
Yours sincerely

Paladin Energy Ltd

JOHN BORSHOFF Managing Director/CEO

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APPENDIX

Langer Heinrich Cost Guidance

In early FY15, Paladin provided future C1 cost guidance to the market. This guidance was provided in FY14 terms. The following table updates that guidance after allowing for annual cost escalation of 3% and the cost reduction program, including the current deferment of capital.

Table: Updated Cost Guidance (US$/lb)

Period

Original Guidance

Revised Guidance

FY2014

Terms

Escalated to

Actual Year*

End FY15

24.5

25.2

Benefit of BRP realised in June quarter, 26.03 achieved in June quarter (24.72 in June)

End FY16

23.0

24.4

Now 26.0 anticipated due to optimisation delay due to

capex deferral to FY17

End FY17

22.0

24.0

24.5 anticipated

*Assumes 3% annual cost escalation from FY14 and provides real dollar cost estimate for each year.

Reduction in Payments to Management, Directors and Staff

As part of the 35% reduction in corporate costs, Paladin's management and staff will take a 10% salary cut (in addition to the previous 10% salary cut affecting senior management) and the Board will further reduce fees payable to the Non-Executive Chairman and Non-Executive Directors by 20%. In addition, the Managing Director has offered, and the Board has accepted, a further 20% salary reduction. Previously to this, the salary of the Managing Director had been reduced by 35% and Board fees reduced by 10%.

Ref: 395916

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