Mr. John Borshoff reports

PALADIN ENERGY LTD STRATEGIC AND OPERATIONAL UPDATE

On Aug. 1 Paladin Energy Ltd. terminated negotiations with the lead party, and all other parties, for the sale of a minority interest in the Langer Heinrich mine. In the view of the board, the current depressed uranium price has meant that it is unlikely that a price that appropriately reflects the strategic value of the asset will be achieved and accordingly proceeding at this time would be detrimental to long-term shareholder value.

Although there remains interest in the asset, Paladin believes that the current weakness in the spot uranium price ($34.50 (U.S.) per pound) should not overly influence the valuation of a flagship asset such as Langer Heinrich. Specifically, Langer Heinrich:

• Has 20 plus years of mine life;
• Is a modern technologically advanced operation;
• Is operating in a country that is politically stable;
• Is currently operating above nameplate capacity with further expansion capacity.

Paladin strongly believes it can generate greater value to its shareholders through postponing the sales process for Langer Heinrich until there is a more a favourable uranium price environment.

More generally, Paladin believes that the current low uranium price compromises the capacity for supply to reach clearly stated global demand growth targets. It is generally recognized in the industry that the process for recovery of supply growth can only reasonably start when a sustainable threshold of $70 (U.S.) per pound for uranium is reached and Paladin supports this long-term price expectation.

In this context, the Langer Heinrich mine remains a highly valuable and strategically important operation for Paladin.

Operational update

Sales for the June, 2013, quarter were 2,325,000 pounds U3O8 generating revenue of $107.4-million (U.S.), representing an average sales price of $46.22 (U.S.) per pound U3O8 (average Ux spot price for the quarter was $40.57 (U.S.) per pound U3O8). Sales for fiscal 2013 were a record 8,253,131 pounds U3O8 (up 23 per cent on fiscal 2012) with revenue of $408.4-million (U.S.) (up 14 per cent on fiscal 2012), generating an average price of $49.48 (U.S.) per pound U3O8 (average Ux spot price for fiscal 2013 was $43.86 (U.S.) per pound U3O8).

Production for fiscal 2013 was a record 8,255,000 pounds (3,745 tonnes) U3O8, up 20 per cent on the previous year. This was within Paladin's stated guidance of between eight million and 8.5 million pounds. Production at both the Langer Heinrich and Kayelekera mines for June, 2013, quarter was solid with combined production of 2,143,000 pounds (972 tonnes) U3O8, up 8 per cent on the March quarter. Over all, June, 2013, quarter production was at 101 per cent of combined nameplate.

Paladin's production guidance for fiscal 2014 is 8.4 million to 8.7 million pounds U3O8. Production at both mines remained strong during the month of July, 2013.

The C1 cost of production at both mines continued to fall quarter by quarter.

• Langer Heinrich C1 cost of production for the June, 2013, quarter decreased 1.3 per cent to $29.4 (U.S.) per pound compared with the March quarter and has decreased 8 per cent since the June, 2012, quarter.
• Kayelekera C1 cost of production for the June, 2013, quarter decreased 1.5 per cent to $39.2 (U.S.) per pound U3O8 compared with the March quarter and has decreased 24 per cent since the June, 2012, quarter.

Impairments

Paladin expects to recognize a further non-cash impairment charge of approximately $180-million (U.S.) before tax for the financial year ended June 30, 2013. This impairment estimate is subject to both board sign-off and auditor review as part of finalizing the financial statements for the year ended June 30, 2013. The impairment charge relates to a combination of impairment of the Kayelekera mine, the Niger exploration portfolio and other smaller items.

We seek Safe Harbor.