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Uranium Week: Consolidation

Weekly Reports | Oct 17 2023

This story features BOSS ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BOE

After falling sharply the week before, the uranium spot price saw some consolidation last week.

-Spot uranium price steadies
-Another speculator moves in
-Bad news for 2050
-Downgrades for Australian miners

By Greg Peel

After a sharp pullback the week before, the spot uranium price consolidated last week, fluctuating during the week for transactions both on-market and off-market in the period just outside spot, industry consultant TradeTech reports.

In the wash-up, TradeTech’s weekly spot price indicator closed at US$69.50/lb, up US30c.

While the spot uranium price fluctuates, term uranium demand remains strong with additional demand emerging and transactions concluded last week. Several utilities are awaiting or evaluating offers.

TradeTech’s term price indicators remain at US$73.50/lb (mid) and US$62.00/lb (long).

Join the Club

Another speculator entered the market last week, joining the likes of the Sprott Physical Uranium Trust and Yellow Cake Plc.

Canada-based Uranium Royalty Corp announced it had entered into a US$30m agreement with a syndicate of underwriters, indicating that proceeds of the offering would be used primarily to fund future purchases of physical uranium, implement its growth strategy through future acquisitions of royalties, physical uranium, and similar interests.

Following the announcement, URC issued a formal Request for Offers seeking up to 300,000lbs U3O8.

Not Enough

The US Energy Information Agency issued a report last week suggesting the growth in non-fossil fuel energy generation, including renewables and nuclear, will not be enough to counter global population growth and increased living standards.

Carbon emissions will thus increase by 2050, despite global goals for net-zero emissions by that time.

The International Atomic Energy Agency has issued a report suggesting in a “high case scenario”, nuclear installed capacity is estimated to more than double by 2050.

Australian Miners

Boss Energy ((BOE)) has commenced mining activities at its Honeymoon Uranium Project in South Australia, with the first wellfield being pre-conditioned in the lead up to in-situ recovery feeding the processing plant with extracted uranium during the December quarter this year.

Completion of milestones ensures Honeymoon remains on track for first production in the quarter, Boss said in a statement, adding project development remains on budget.

Mining operations at the Honeymoon Project were suspended in 2013 by previous owner Uranium One due to weak uranium market prices. Since acquiring the project in December 2015, Boss has embarked on a series of technical optimisation studies to improve Honeymoon’s position as a "globally competitive mining operation in a Tier 1 location”.

Boss Energy is one of the two Australian-listed uranium miners most favoured by analysts, being close to production restart. Paladin Energy ((PDN)) is on track to restart operations at its Langer Heinrich mine in Namibia early next year.

However, while Buy ratings have been prevalent for both stocks for the best part of this year, the rapid rise in spot uranium prices and subsequent share price rises has led to analysts believing it’s time everyone calmed down a bit.

Ahead of the restart, Australian broker Bell Potter updated its valuation on Paladin Energy, arguing operations like Langer Heinrich should trade at a premium in the current market, given relatively low risk versus greenfield developments and increased liquidity versus smaller cap peers. But there is a limit.

Bell Potter downgraded its rating to Hold from Buy.

Yesterday Citi initiated coverage of Paladin with a Sell rating.

Paladin is a play on rising uranium demand due to the projected global supply deficit and nuclear energy’s role in the global energy transition, Citi noted. The broker anticipates spot price stabilisation in the December quarter, following the surge to over US$70/lb, with an average price of US$65/lb.

While Citi remains optimistic about long-term demand/supply dynamics, the broker believes the market is pricing Paladin beyond perfection and highlights valuation uncertainty surrounding the company’s undeveloped resources in Canada.

Macquarie, Shaw and Partners, and Canaccord Genuity otherwise retain Buy ratings on Paladin for now.

Canaccord also has a Buy on Boss Energy, but elsewhere Citi’s view is being echoed, particularly given Boss is yet to announce any sales agreements for Honeymoon.

Recently, Macquarie downgraded Boss to Hold and last week Shaw and Partners downgraded to Sell. Bell Potter has a Hold rating.

Uranium companies listed on the ASX:

1AE 13/10/2023 0.1000 -23.08% $0.24 $0.05
AGE 13/10/2023 0.0500 2.04% $0.07 $0.03 $0.080 60.0%
BKY 13/10/2023 0.3300 1.54% $0.80 $0.26
BMN 13/10/2023 2.5400 – 0.76% $3.05 $1.19 $3.200 26.0%
BOE 13/10/2023 4.2600 – 3.96% $4.98 $1.97 47.2 $4.543 6.7%
DYL 13/10/2023 1.2500 1.96% $1.40 $0.48 $1.840 47.2%
EL8 13/10/2023 0.4100 -14.29% $0.59 $0.27
ERA 13/10/2023 0.0300 -11.76% $0.30 $0.03
LOT 13/10/2023 0.2100 – 8.33% $0.29 $0.15 $0.530 152.4%
NXG 13/10/2023 8.8700 – 2.00% $10.40 $0.00
PDN 13/10/2023 0.9600 – 2.94% $1.15 $0.52 116.1 $1.253 30.6%
PEN 13/10/2023 0.1200 0.00% $0.20 $0.09 $0.270 125.0%
SLX 13/10/2023 3.1400 3.83% $5.32 $2.56 $5.800 84.7%

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