HIGHLIGHTS

- September quarter overall production of 744,188lb - slight increase from last quarter.

-- Langer Heinrich to achieve Stage 2 production of 3.7Mlb pa for Dec 09 quarter.

-- Kayelekera ramp-up behind schedule, however, design production of 3.3Mlb pa still on target for March 2010 quarter.

- Financial Year 2010 guidance revised to a range of 5.6Mlb to 6.1Mlb due to slower production ramp-up at Langer Heinrich and Kayelekera.

- Sales of 703,000lb at an average price of US$54.5/lb for revenue of US$38.3M for quarter.

- Major new production expansion plans for Africa (increasing from 8.5Mlb pa to 13.8Mlb pa) to clearly establish Paladin as a Tier 1 producer.

-- Stage 4 Langer Heinrich expansion targeting 10Mlb pa (includes 1Mlb heap leach) with nameplate production by mid 2014.

-- Kayelekera optimisation to 3.8Mlb pa by mid 2013.

- US$374M private placement completed.

OVERALL SAFETY

The Kayelekera Mine suffered two fatalities in August and early October both related to mobile equipment/vehicles. The second fatality involved a bus overturning with 20 employees on board, which resulted in several additional injuries.

Paladin management has taken immediate actions to audit and, where necessary, improve safety throughout the organisation. Both Kayelekera and Langer Heinrich will initiate the National Occupational Safety Association (NOSA) system by mid November. NOSA, which combined with the strengthening safety culture at Langer Heinrich, is expected to consolidate the necessary improvements in safety performance.

Evidence clearly points to vehicle traffic as a major safety risk for both operations and Paladin Senior Management is committed to developing an appropriate safety regime also focussing on the Company's global transportation requirements.

LANGER HEINRICH MINE, Namibia

Production

For the quarter, Langer Heinrich produced 654,516lb U3O8 (Stage 1 nameplate capacity), which was less than that of the previous quarter, due to numerous interruptions from Stage 2 integration (plant tie-ins and equipment commissioning) and low equipment availability on the front end of the plant. At quarter end, all major Stage 2 integration had been completed and ramp-up to the Stage 2 production level was in progress. Although significant improvements to the scrubber units on the plant front end have been completed in the past, the 40% increase in tonnage necessitated adjustments to their operation and maintenance schedules, particularly for the liners. Additionally, the two new leach tanks in the second leach circuit required a replacement of faulty agitators.

Recent production figures indicate that Stage 2 levels are now almost being realised with the October production forecast to be approximately 275,000lb U3O8 (90% of Stage 2 nameplate design).

Sales

Sales for the quarter were 703,000lb U3O8 at a value of US$38.3M, representing an average sales price of US$54.48/lb U3O8.

Mining

Mining has continued in both Pit A and Pit D. A new pit, Pit F, which lays adjacent to the temporary tailings facility, will be prepared for mining early in 2010 to facilitate the planned tailings management systems and to provide an optimal blend of feed material to the plant.

The plant ore feed during the quarter was as follows:

                                             -------------------------------
                                                July     Aug    Sept   Total
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Crushed tonnes,
 dry                                         130,436 141,434 151,086 422,956
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Feed Grade, ppm                                  896     939     917     918
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Process Plant

Process efficiencies were affected by the stopping and starting of the plant as Stage 2 equipment was brought on line and the processes fine-tuned. Despite these disruptions, an overall efficiency of 78.5% was achieved for the quarter. Scrub efficiency dropped from previous high levels but is expected to improve by mid October once the remaining upgrades to the screens are completed. Leach efficiency for the quarter was excellent (93.2%) despite the issues with the new agitators. Iron exchange (IX) efficiency was briefly affected by the carryover of solids from prepared reagent solutions that were not completely dissolved.

Tailings

Current emphasis is on the design and construction of extensions to the berm walls of the existing temporary tailings facility. The design of the first in-pit new tailings facility to the west of the plant is in progress with construction expected to commence in early 2010.

Preparation for the establishment of Pit F, adjacent to the temporary tailings facility, commenced during the quarter. Once mined out, this pit will be utilised for flood water control and rain water harvesting, thereby releasing Pit A and Pit B for tailings storage much earlier than previously planned.

Stage 2 Upgrade Progress

Despite some initial problems with scrubber availability, screen efficiency and leach agitators, the plant feed tonnage was increased during the quarter, particularly in the last half of September. Daily tonnages of over 6,000t per day have been achieved for 60% of this time (Stage 2 design is 6,453tpd) reaching close to 7,000t on occasions.

All outstanding items for Stage 2 commissioning have now been brought online, with the exception of a second dryer, which has no significance to current plant production. Difficulties experienced during the commissioning period included delays to front end installation, dust controls and pumping and piping issues from the new counter current decantation (CCD) thickeners.

All these issues have been addressed and resolved during the quarter and the Stage 2 production target is now expected to be achieved for this current December quarter.

Stage 3 Upgrade

In accordance with previously released information, the final design parameters have been set for a Stage 3 expansion on the following basis:

- Nominal production to increase to 5.2Mlb pa U3O8 (an increase of 1.5Mlb pa or 40% from the nominal Stage 2 level of 3.7Mlb pa)

- Target completion date set for the December quarter 2010

- Capital cost estimated at US$71M

- No significant additional infrastructure

The flowsheet will involve a number of significant upgrades across the processing plant, particularly a second crushing & scrubbing feed line with increases to the existing screening plant, an additional leach tank (with heat exchangers etc), two additional CCD thickeners and expansion of the ion exchange circuit.

The Stage 2 expansion has already incorporated capacity for the Stage 3 expansion in the pre-leach thickening, precipitation, product drying and some reagent dosing facilities.

No upgrade to the water supply, nor expansion of the power supply facilities are necessary with ample grid and generator capacities already available.

Exploration Activity EPL3500

Exploration drilling on EPL3500, west of the Langer Heinrich Mining Lease, was undertaken during the quarter. A total of 27 RC holes, for 2,199m were drilled. All holes were downhole gamma logged and equivalent U3O8 grade values have been calculated.

The drilling succeeded in extending the Langer Heinrich mineralised palaeochannel by approximately 300m further west and the mineralisation appears to be still open in this direction. Better intersections included:

-----------------------------------------------------------------------
-----
Hole                  Depth From  Depth To  Intersection  Grade  (ppm eU3O8)
----------------------------------------------------------------------------
EPL3                          58        81            23                278
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EPL4                          54        62             8                738
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EPL6                          68        74             7                334
----------------------------------------------------------------------------
EPL7                          66        75             7                258
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EPL10                         51        60             9                614
----------------------------------------------------------------------------

The intersections shown above were calculated using a cut off grade of 100ppm and a maximum width of internal waste of 1m. All holes were drilled on a nominal 100m x 50m grid.

KAYELEKERA URANIUM PROJECT, Malawi

Production

Kayelekera production of 89,672lb for the quarter was hampered by a slower than expected ramp-up in July and August, however September results were improved and this upward trend should continue towards the anticipated nameplate production rates in the March 2010 quarter. Most significantly, the entire Resin-In-Pulp (RIP) circuit has now proven to be effective and with a number of mechanical availability issues rectified, the ramp-up should continue on-track.

The first shipment of product was trucked from Kayelekera to the Walvis Bay port (Namibia) in August, with a second shipment of two containers leaving site on 12 October. Sulphuric acid continues to be trucked to site as commissioning of the acid plant has been delayed (acid production is expected to commence in late October). Project Development

Construction of the sulphuric acid plant was completed during the quarter. Acid production is expected to commence by the end of October after some initial commissioning delays.

The construction workforce has been progressively demobilised with only a small workforce retained to complete work on the Tailings Storage Facility (TSF) and acid plant completion.

The Malawi Government's road building contractor continues to work on two bridges and some culverts/drains in the first 13km section of the M26 public road that was recently sealed. Work is on schedule to be completed in the next quarter. Major roadworks on the final 19km section to the mine access road have commenced.

Operations - Commissioning and Ramp-up

Ramp-up over the past quarter has been slower than anticipated due to mechanical availability of certain equipment (numerous pumps) and pipe work, which have been identified and are in the process of being replaced.

At quarter end, the Kayelekera employee workforce totaled 234 of which 71% were Malawian. The contractor workforce totaled 641 persons with the mining contractor, the largest single group, having 191 people.

Mining

A total of 246,400t of ore grading 1,364ppm U3O8 and 264,800t of waste were removed from the pit in this quarter. Currently there is about 700,000t of ore either on the Run of Mine (ROM) pad or exposed in the pit. The mining fleet, not required for open pit mining, has been mobilised to assist with the construction of the outstanding TSF wall.

Process Plant

The front end of the plant is still in the process of ramp-up with a temporary semi-mobile jaw crusher planned for installation to augment crushing requirements.