Uranium Week: Momentum Is Building

This story features LOTUS RESOURCES LIMITED, and other companies. For more info SHARE ANALYSIS: LOT

Will the market increasingly look to the disconnect between U308 spot versus contract term prices as a buy signal for sold down uranium equities?

-Utilities active in the term uranium market
-World Nuclear Symposium attracts record attendees
-Petra beats the uranium stock drum (again)

By Danielle Ecuyer

Spot market not telling the whole picture

Petra Capital homes in on the prominent divergence between the term price for U308 which the broker notes rose in August, again, bringing the year-to-date increase to 19% against the Sprott Uranium Miners ETF, (URNM:NYSE) which is down -16% since May.

The analyst highlights contract volumes around 42mlbs, which are relatively low alongside the 19% term price increase.

By comparison, TradeTech’s U308 spot price indicator rose US$1.50 to US$80.50 last week, with the price up 30% since 2024 but down -13% since the start of the year.

A casual observer might assess uranium equities are following the U308 spot price down, and the market has turned a blind eye to the more resilient and robust term price.

Industry consultant TradeTech also notes increased interest in the term uranium market with utilities “mirroring” the buying activity of previous weeks as they seek to capitalise on the lower “forward price curve” due to the recent spot price falls.

Expectations of lower interest rates have raised the possibility of the ‘carry trade’.  TradeTech states it was employed extensively in the 2010s when the spot market was oversupplied and interest rates were at historic lows.

Utilities were most active in the midterm market, picking up one-off’ deals. TradeTech’s Mid-Term U308 price indicator stood at US$86/lb and the Long-Term U308 price indicator at US$82lb.

Nuclear energy knowledge in demand

Petra Capital expects contract volumes to increase into the end of 2024 as longer-term demand and supply dynamics were reinforced at last week’s World Nuclear Symposium in London.

Notably, TradeTech reports there were a record number of attendees (800 delegates) at the symposium including new participants from the financial community and energy end users, as well as representatives from the data and Gen AI industries.

The conference theme says it all “Turning Momentum into Energy” with the nuclear industry at a crossroads of translating policy momentum into nuclear energy production.

Al Hammadi, Chairman of the World Nuclear Association, which hosted the event, stated at his opening speech “The demand is serious, it’s huge, and coming very, very fast” in relation to the demand for electricity generation, particularly from data centres and AI.

To capitalise on the opportunities, Al Hammadi added “build bridges to enable lawyers, the banks, the technology players, the utilities, and the politicians to understand this narrative of what we can do”.

The conference touched on many aspects of the industry, including geopolitical tensions as well as the advancement of new technologies to support both large-scale and small modular reactors.

Interestingly, the inclusion of nuclear in the clean energy/ESG community has opened a new audience. UBS Global Head of ESG and Sustainability Research stated, “The quality of one unit of nuclear versus one unit of anything else is far superior.”

Lotus Resources moves forward

Petra Capital continues to beat the drum for uranium stocks which the broker believes are offering a very attractive risk/reward investment proposition due to high levels of short interest combined with the inability for incumbent producers to increase supply quickly and easily.

The evidence of contract pricing was reflected in the Lotus Resources ((LOT)) announcement last week. The company secured a first of two expected multiple off-take agreements. Curzon Uranium has a 0.700mlb binding agreement with a further 0.2mlb based on the long-term contract price (US$80lb) with an escalation from first delivery (around 3% p.a. forecast over four years). A US$15m debt facility was also offered.

North American utility PSEG nuclear has agreed to a non-binding term sheet for 0.8mlb of uranium, conditional on the execution of a full-form document in the next four months with the decision to restart Kayelekera.

Petra estimates the 1.5mlb of contracted supply equates to around 20% of estimated production between 2026-2029.

Four broker including non-daily monitored ones Petra Capital and Canaccord Genuity have a Buy equivalent rating on Lotus Resources post the market update. The highest price target at 70c comes from Bell Potter with Petra offering the lowest at 37c.

Petra’s preferred exposure in the uranium sector, all Buy rated, are Bannerman Energy ((BMN)), $4.51 target price; Aura Energy ((AEE), target price 45c; Alligator Energy ((AGE)), target price $10c as well as Devex Resources ((DEV)).

Short interests reported in the FNArena Short Report as of Sept 2 are 9.5% for Boss Energy ((BOE)); 8.36% for Deep Yellow ((DYL)); 7.17% for Lotus Resources ((LOT)) and 7.84% for Paladin Energy ((PDN)).

FNArena’s The Short Report: https://fnarena.com/index.php/analysis-data/the-short-report/

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	06/09/2024	0.0400	-20.00%	$0.19	$0.04
AEE	06/09/2024	0.1100	-11.54%	$0.36	$0.11
AGE	06/09/2024	0.0400	– 7.14%	$0.08	$0.03		$0.100	150.0%
AKN	06/09/2024	0.0100	0.00%	$0.07	$0.01
ASN	06/09/2024	0.0900	– 5.10%	$0.20	$0.07
BKY	06/09/2024	0.3550	0.00%	$0.45	$0.26
BMN	06/09/2024	1.9500	-13.17%	$4.87	$1.90		$7.400	279.5%
BOE	06/09/2024	2.4400	-10.26%	$6.12	$2.38	20.2	$4.863	99.3%
BSN	06/09/2024	0.0300	– 3.13%	$0.21	$0.02
C29	06/09/2024	0.0700	0.00%	$0.12	$0.06
CXO	06/09/2024	0.0800	– 9.78%	$0.45	$0.08		$0.093	16.7%
CXU	06/09/2024	0.0100	0.00%	$0.06	$0.01
DEV	06/09/2024	0.1400	-23.08%	$0.45	$0.14
DYL	06/09/2024	0.9400	-13.36%	$1.83	$0.91	-66.4	$1.770	88.3%
EL8	06/09/2024	0.2800	-11.11%	$0.68	$0.26
ERA	06/09/2024	0.0100	20.00%	$0.08	$0.00
GLA	06/09/2024	0.0100	0.00%	$0.04	$0.01
GTR	06/09/2024	0.0030	33.33%	$0.02	$0.00
GUE	06/09/2024	0.0500	-16.67%	$0.18	$0.05
HAR	06/09/2024	0.0400	-20.00%	$0.28	$0.03
I88	06/09/2024	0.4500	-14.29%	$1.03	$0.14
KOB	06/09/2024	0.1300	0.00%	$0.18	$0.06
LAM	06/09/2024	0.7400	5.71%	$1.04	$0.56
LOT	06/09/2024	0.2100	– 8.70%	$0.49	$0.20		$0.710	238.1%
MEU	06/09/2024	0.0400	– 7.50%	$0.06	$0.03
NXG	06/09/2024	7.9300	– 8.92%	$13.66	$7.89		$16.200	104.3%
ORP	06/09/2024	0.0700	40.00%	$0.12	$0.04
PDN	06/09/2024	8.3700	-13.23%	$17.98	$8.15	13.9	$16.088	92.2%
PEN	06/09/2024	0.0700	-10.26%	$0.15	$0.07	23.3	$0.260	271.4%
PNX	06/09/2024	0.0040	-25.00%	$0.01	$0.00
SLX	06/09/2024	3.5400	– 8.29%	$6.74	$2.93		$7.200	103.4%
TOE	06/09/2024	0.2000	0.00%	$0.70	$0.01
WCN	06/09/2024	0.0200	33.33%	$0.02	$0.01

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms