Uranium Week: June Closes With A Gain

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

The month of June was relatively stable for U308 prices in light of the longer term Russian importation fuel ban and the US Department of Energy near term waiver exemptions.

-U3O8 spot price rises in the last week of June
-Utilities navigating supply uncertainty
-Paladin Energy’s guidance update underwrites brokers’ positive views
-Lot, stock and barrel: Lotus Resources considered too cheap

By Danielle Ecuyer

June ends with a whimper

The uranium spot price and nuclear energy sector have been marked by significant regulatory changes in the last two months, with the Biden Administration reducing US reliance on Russian nuclear fuel imports and strengthening the domestic nuclear industry.

President Biden signed into law, H.R. 1042 on May 13 which bans the importation of Russian nuclear fuel, alongside the US Department of Energy announcing guidelines for purchase waivers until the final deadline on January 1, 2028.

As per industry consultant TradeTech, the spot uranium price moved in a tight range over the course of June, between US$82.50/lb and US$90/lb, with most of the 25 transactions executed in the mid US$80/lb range.

The weekly U308 spot price rose US$1.75 to US$85/lb over the last week of June, down -US$5/lb since May 31, with the Mid-Term U308 price at US$93.50/lb and the Long-Term price at US$80/lb.

Over the final week of June, TradeTech reports the market traded steadily even as the Department of Energy released its Request for Proposals for offers of low-enriched uranium from domestic sources or allies on June 27. This is intended to assist in the transition away from Russian nuclear fuel imports.

In the medium-term market, TradeTech states the transactions undertaken by utilities suggest it remains a sellers’ market, with considerable uncertainty around how the Department of Energy will interpret the Russian import waivers, particularly in 2026 and 2027.

Equally, the market is unsure how the Russians will respond to the US bans and the recent wide reaching European Commission’s 14^th package of sanctions against Russia, which were adopted in the final week of June.

These sanctions include the prohibition of all future investments in and exports to, LNG projects under construction and, after a nine-month period, the use of EU ports for the trans-shipment of Russian LNG.

A further 27 specified vessels were also banned, which are deemed by the EU to be involved in attacks on Ukraine.

TradeTech points to utilities globally looking to secure uranium supplies in the term markets and ensure diversification of supply with US utilities looking to prepare waiver documents.

Creating further uncertainty is the upcoming 60-day deadline by Russian supplier, Tenex. On May 14, Tenex announced it would be seeking confirmation from buyers they would pay for any material prepared in the event they receive a waiver.

Failure to agree to the condition, results in Tenex suspending deliveries.

TradeTech highlights the 60-day deadline is approaching with the H.R.1042 law banning the importation of Russian fuel after August 11, in the absence of an exemption waiver from the Department of Energy.

Global news

-India aims to increase its nuclear power generation by around 70% over the next five years, which equates to a rise in the installed capacity to 13.08GW by 2029 from 7.48GW including seven new reactors, according to the Minister of State for Science and Technology.

-South Korea is planning a small modular reactor complex valued at US$217m aiming to make South Korea a leader in the technology. South Korean President Yoon also announced support for a hydrogen fuel cell development with a nuclear hydrogen national industrial complex.

Companies and broker updates

Analysts updated earnings, and target prices for Paladin Energy ((PDN)) over the week past. 

Macquarie is under research restriction but highlighted the FY25 guidance upgrade due to a stronger ramp up of Langer Heinrich production and a speedier than expected sales conversion.

Company management’s FY25 guidance at 4.0-4.4mlb of U308 is around 12%-26% above the broker’s previous estimates. Sales guidance for FY25 was 62%-75% higher than Macquarie’s previous forecast.

Shaw and Partners retains a Buy rating and a $16.80 target price after adjusting for 26% improvement in FY25 earnings, highlighting Paladin remains its preferred exposure in the uranium sector. The analyst envisages the company could produce 15mlbs of U308 p.a. and generate over US$1bn in revenues with the Fission Uranium Corporation deal.

Citi retains a Buy rating and adjusts the target price to $16 from $17 on the back of the sales and cost guidance update which didn’t meet the broker’s expectations.

In contrast, Morgan Stanley viewed the guidance was broadly in line with expectations and retains an Overweight with a $16.65 target.

Bell Potter upgraded the stock to Buy from Hold due to recent share price weakness, and lowered the target price to $15.70 from $16.10.

Lotus Resources ((LOT)) completed its first 55 holes of a 180-hole drill program at Letlhakane in Botswana, the first drilling program on the asset since it was acquired in 2023.

Canaccord Genuity highlighted the resource is estimated at 34.4Mlbs. The broker believes Lotus  is trading at an enterprise value/resource of US$2.4/lb which makes the stock look very attractive at current levels. Canaccord genuity retains a Speculative Buy rating.

For more reading, check out the latest Uranium Week updates:

https://fnarena.com/index.php/2024/06/25/uranium-week-spot-goes-drop-dead-quiet/

https://fnarena.com/index.php/2024/06/20/all-aboard-for-the-nuclear-renaissance/

https://fnarena.com/index.php/2024/06/18/uranium-week-spot-price-hits-pause/

https://fnarena.com/index.php/2024/06/12/uranium-week-namibia-in-focus/

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	28/06/2024	0.0700	0.00%	$0.19	$0.06
AGE	28/06/2024	0.0500	6.00%	$0.08	$0.03		$0.100	100.0%
BKY	28/06/2024	0.3400	– 1.45%	$0.80	$0.26
BMN	28/06/2024	3.1900	– 6.03%	$4.87	$1.44		$7.400	132.0%
BOE	28/06/2024	3.9400	4.56%	$6.12	$2.83	39.9	$5.438	38.0%
DYL	28/06/2024	1.3000	– 1.83%	$1.83	$0.65	-91.4	$1.770	36.2%
EL8	28/06/2024	0.4000	– 2.44%	$0.68	$0.29
ERA	28/06/2024	0.0300	0.00%	$0.08	$0.03
LOT	28/06/2024	0.3300	3.03%	$0.49	$0.18		$0.660	100.0%
NXG	28/06/2024	10.4300	7.61%	$13.66	$6.56		$17.500	67.8%
PDN	28/06/2024	12.2700	– 5.74%	$17.98	$7.05	-218.5	$16.287	32.7%
PEN	28/06/2024	0.1000	5.00%	$0.19	$0.08		$0.260	160.0%
SLX	28/06/2024	5.0800	2.90%	$6.74	$2.92		$7.600	49.6%

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