Weekly Reports | Jun 12 2024
This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN
Morgan Stanley forecasts nuclear energy production to double globally by 2050. Spot U3O8 weakened last week. Bell Potter reports back from Namibia.
-Nuclear industry celebrates a 50-year milestone
-Morgan Stanley runs with the nuclear energy bulls
-Bell Potter's Namibian site visit updates
By Danielle Ecuyer
U3O8 spot market adjusts to the softer utility demand
It seems apposite the uranium industry celebrated the 50th anniversary of the World Nuclear Fuel Market (WNFM) conference last weekend, at a time when the industry is undergoing many challenges or as the agenda suggested “Building the Jigsaw Puzzle”.
Industry consultant TradeTech outlined the topics covered, including the nuclear fuel market supply and demand issues, challenges to production capacity, production costs, and supply chain constraints.
The most important aspect for utilities and other attendees remained the conditions, as outlined from the US Department of Energy (DOE), on what would qualify as a ‘waiver’ between now and January 1, 2028, when the full Russian nuclear importation ban comes into being.
The consensus view concluded ‘waivers’ would not be as hard to secure as expected, or withheld easily.
The U3O8 price declined to US$84.25/lb as traders entered the market post the conference, levels not seen since mid-March this year.
Traders remained the most active in the spot market with utilities concentrating on waiver applications, reports TradeTech, and looking to their enrichment portfolios to ensure there are no supply disruptions.
TradeTech’s weekly U3O8 price ended the week down -US$5.00 to US$85/lb.
The spot price has declined -8% year-to-date, but remains up 53% on the same time last year, with the average 2024 spot price at US$93.57/lb, 39% above the 2023 average spot price.
TradeTech's Mid-Term U3O8 price indicator stands at US$93.50/lb and Long-Term U3O8 at US$80/lb.
Tremendous upside growth in demand for nuclear power
A “Nuclear Renaissance Is Coming” according to Morgan Stanley, whereby the broker outlines why the industry can grow to be worth an estimated US$1.5trn in value by 2050.
The bullish take assumes 383.5GW of new nuclear capacity will be added globally versus the current capacity of 390GW.
China is expected to add the most, around 168GW, the US circa 50GW, and Europe some US$197bn in new investment.
Maintenance is forecast to run at some US$128bn annually.
Demand for nuclear power generation will be driven by net zero emission targets as well as the GenAi development, alongside the potential location of data centres next to reactors.
Financing the investment spend is expected via green bonds, which are anticipated to become more common place and accepted by the finance industry, although nuclear is currently excluded.
Morgan Stanley highlights challenges regarding costs, construction times, uranium supplies and labour issues, which remain “key risks”. Both small modular reactors and nuclear fusion could be game changers.
The broker has an Overweight rating on Paladin Energy ((PDN)) with a $17.45 target price, preferring Paladin over Boss Energy ((BOE)), with the ramp up of Langer Heinrich considered less risky than Boss Energy's Honeymoon project.
Paladin Energy also looks cheap relative to uranium peers. Boss Energy carries an Equal-weight rating with a $4.60 target price.
Namibian road trip cements an upbeat view on Aussie uranium stocks
Bell Potter recently took part in a Namibian site tour of Aussie uranium miners and visited Paladin Energy's Langer Heinrich mine. The broker came away with a generally positive view.
The ramp up of the mine could create an increase in the revenue and costs risks above the broker's current forecasts. Operating expenses depend largely on mining contractor rates and with an expected doubling of the contractor staff for the mining phase, Bell Potter points to upside risks above current estimates.
The report does suggest the recent run-up in the share price suggests the stock is currently fully valued.
Longer term growth for Paladin Energy could be generated via acquisitions or increased exploration to offset the decline in lower-grade feeds in about ten years, according to the broker.
Paladin Energy shares carry a Hold rating with a $15.70 target price.
Bell Potter prefers Boss Energy attaching a $6.35 target price and a Buy rating.
The stock is seen trading at a -40% discount to the broker's valuation.
Boss Energy is expected to bring Alta Mesa into production while the ramp up of Honeymoon is going well.
Post the visit to Deep Yellow's ((DYL)) site in Namibia, Bell Potter has a Speculative Buy rating alongside a $1.90 target price on this stock.
The analyst is looking forward to a production off-take agreement in the second half of 2024; the debt financing in the September quarter, with a final investment decision in the December quarter for Deep Yellow and the Tumas project.
More reading:
https://fnarena.com/index.php/2024/06/04/uranium-week-preparing-for-the-nuclear-age/
https://fnarena.com/index.php/2024/05/28/uranium-week-soft-us-import-waivers/
https://fnarena.com/index.php/2024/05/14/uranium-week-us-boycott-enthusiasm-fades/
and uranium company broker updates
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 10/06/2024 | 0.0800 |  -11.11% |
$0.19 | $0.05 | |||
| AGE | 10/06/2024 | 0.0600 | – 3.39% |
$0.08 | $0.03 | $0.100 |  66.7% |
|
| BKY | 10/06/2024 | 0.3900 | 0.00% | $0.80 | $0.26 | |||
| BMN | 10/06/2024 | 4.0400 | – 1.43% |
$4.87 | $1.44 | $7.400 | 83.2% |
|
| BOE | 10/06/2024 | 4.3500 | – 0.88% |
$6.12 | $2.83 | 44.4 | $5.425 | 24.7% |
| DYL | 10/06/2024 | 1.5500 | – 4.57% |
$1.83 | $0.65 | $1.770 | 14.2% |
|
| EL8 | 10/06/2024 | 0.4600 | – 5.88% |
$0.68 | $0.29 | |||
| ERA | 10/06/2024 | 0.0400 | – 6.67% |
$0.08 | $0.03 | |||
| LOT | 10/06/2024 | 0.4000 | – 7.95% |
$0.49 | $0.17 | $0.660 | 65.0% |
|
| NXG | 10/06/2024 | 10.6900 | – 3.71% |
$13.66 | $6.50 | $17.500 | 63.7% |
|
| PDN | 10/06/2024 | 14.7300 | – 1.67% |
$17.98 | $6.70 | -294.5 | $16.310 | 10.7% |
| PEN | 10/06/2024 | 0.1000 | 0.00% | $0.20 | $0.08 | $0.260 | 160.0% |
|
| SLX | 10/06/2024 | 5.5500 | – 2.21% |
$6.74 | $2.92 | $7.600 | 36.9% |
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CHARTS
For more info SHARE ANALYSIS: BOE - BOSS ENERGY LIMITED
For more info SHARE ANALYSIS: DYL - DEEP YELLOW LIMITED
For more info SHARE ANALYSIS: PDN - PALADIN ENERGY LIMITED