Uranium Week: Reassessing Uranium Prices

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Brokers have queued up to lift their longer-term uranium price forecasts just as the spot price sees its first weekly drop since November.

-Spot uranium price dips
-Longer-term price forecasts seeing widespread upgrades
-Australian-listed uranium stocks in the spotlight

By Greg Peel

Uranium buyers were dealt a reprieve last week when the spot price actually fell back for the first time since November. While prices heading into January were surging, reaching US$106/lb the week before last on industry consultant TradeTech’s weekly spot price indicator, actual transactions were few.

Sellers kept backing off their prices and buyers became reluctant to chase. The impetus for most recent price strength had been the passage of a bill through the US House banning imports of Russian enriched uranium (with caveats), which was expected to then sail through the Senate.

It didn’t, having been blocked by a Republican senator from Texas, so last week sellers moved swiftly to lower prices.

While the effect was a -US$6.00 drop in TradeTech’s price indicator to US$100.00/lb, suddenly there was volume changing hands. A total of eight transactions were concluded in the week.

Meanwhile, the impact of the Red Sea conflict has extended to the uranium market. Australia’s BHP Group ((BHP)) is now diverting nearly all of its shipments to Europe away from the Red Sea, with the long route around Africa adding nine days to the journey.

Time to Panic

The recent rise in the spot uranium price, along with the announcement by Kazatomprom it expects to adjust its production target, have caused sellers to consider how these developments may impact the long-term uranium price going forward, TradeTech reports.

Recent term offers are higher than those submitted only a few weeks ago, indicating the long-term price is experiencing upward price pressure.

Last week Australian stockbroker Shaw & Partners noted the recent spot price rise, through US$100/lb, has been larger and earlier than expected, although at this stage the market remains orderly, and the price increases do not appear to be driven by panic buying.

That may change, Shaw warns, if utilities believe they will have difficulty covering their fuel demands later this decade. Panic buying could drive the uranium price materially higher. There is a great saying in markets that “he who panics first, panics best”, hence Shaw recommends uranium sector investors get ahead of potential panic buying.

Shaw is now assuming a multi-year price spike to US$150/lb in 2025-27. The forecast implies the previous all-time high of US$136-138/lb will be superceded. Thereafter the broker sees the price settling back to a long-term US$76/lb in 2030, in 2024 real dollar terms.

Shaw has also changed its approach to valuing undeveloped uranium resources by introducing different in-ground valuations for different quality of resources. The net effect is material upgrades to price targets and earnings forecasts within the Australian-listed uranium space.

Citi has also raised its uranium price forecasts, suggesting an average of US$101/lb in 2024 and US$110/lb in 2025, while Citi’s long-term forecast is raised to US$115/lb from US$87/lb.

The rush is on. Australian stockbroker Bell Potter has lifted its short and mid-term uranium price forecasts, anticipating a peak of US$130/lb, while a more circumspect Macquarie has lifted its peak uranium price forecast to US$100/lb in 2025.

TradeTech’s term price indicators (not forecasts) remain at US$93/lb (mid-term) and US$68/lb (long).

Ready, Steady, Go

This week and last have seen Australian-listed uranium companies providing quarterly updates.

Paladin Energy’s ((PDN)) restart project at its Langer Heinrich mine in Namibia is now 93% complete, with restart still expected this quarter. This news, although not unexpected, combined with above uranium price forecast upgrades, has both Citi and Bell Potter upgrading Paladin to Buy ratings.

Macquarie, Citi, Shaw and Partners and Bell Potter are the four brokers monitored daily by FNArena that cover Paladin, and all now have Buy or equivalent ratings. Their consensus share price target has risen to $1.51 from 1.28.

Boss Energy ((BOE)) announced the restart of the Honeymoon project in South Australia is 96% complete, with first uranium also expected in the March quarter.

Macquarie retains an Outperform rating on Boss Energy, while Bell Potter, despite being positive on the stock, has pulled back to Hold on a too-high valuation. Shaw’s uranium price upgrades last week led to a rating upgrade to Hold from Sell for Boss, equally with a too-expensive assessment.

The consensus target among these three covering brokers has risen to $5.72 from $5.15.

Among the brokers aforementioned, Shaw and Partners has the widest spread of Australian-listed uranium stocks in its coverage.

Bannerman Energy’s ((BMN)) huge, but low grade, resource in Namibia is becoming increasingly more valuable as the uranium price increases, leading Shaw to lift its target to $7.04 from $3.20.

Peninsula Energy ((PEN)) is restarting production from the Lance project in the US and is likely to be a major beneficiary of US government support. Shaw’s target has risen to 34c from 25c.

Lotus Energy ((LOT)) is close to a final investment decision on the Kayelekera project in Malawi and has growth options at Letlhakane in Botswana. Shaw’s target has risen to 72c from 53c.

Moving slightly off-piste, Shaw believes Silex Systems’ ((SLX)) third generation uranium enrichment technology will revolutionise the uranium enrichment industry. Target rises to $7.60 from $5.80.

All of the above stocks draw a Buy rating from Shaw and Partners, with the exception of Boss Energy, as noted.

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	29/01/2024	0.1400	0.00%	$0.18	$0.05
AGE	29/01/2024	0.0700	– 5.48%	$0.08	$0.03		$0.100	42.9%
BKY	29/01/2024	0.3200	8.47%	$0.80	$0.26
BMN	29/01/2024	3.5100	– 2.02%	$3.77	$1.19		$7.040	100.6%
BOE	29/01/2024	5.4600	– 1.30%	$5.67	$2.02	187.9	$5.720	4.8%
DYL	29/01/2024	1.4000	– 3.60%	$1.59	$0.48		$1.640	17.1%
EL8	29/01/2024	0.5400	1.89%	$0.61	$0.27
ERA	29/01/2024	0.0600	9.09%	$0.28	$0.03
LOT	29/01/2024	0.3500	9.84%	$0.35	$0.15		$0.720	105.7%
NXG	29/01/2024	11.3500	– 3.34%	$12.35	$5.11
PDN	29/01/2024	1.2400	0.41%	$1.33	$0.52	480.2	$1.513	22.0%
PEN	29/01/2024	0.1200	– 4.35%	$0.20	$0.08		$0.340	183.3%
SLX	29/01/2024	4.9600	5.30%	$5.39	$2.92		$7.600	53.2%

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