Uranium Week: Focus On Kazatomprom (Aug 1)

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

The world’s largest uranium producer, Kazatomprom, takes centre stage while the Biden Administration drives a nuclear reactor reform agenda.

-U308 price higher
-Kazatomprom hit by new taxes
-Aussie uranium stocks look attractive

By Danielle Ecuyer

A quiet spot market belies big macro changes

The U308 spot market was relatively quiet last week. Only one transaction was reported by industry consultant TradeTech at a price of US$86lb, a US$1 increase on the previous week.

On the corporate news front it was quite the contrary as Kazatomprom, the world’s largest uranium producer, announced changes to the Mineral Extraction Tax for its Kazakhstan mining operations.

The tax change from the Kazakh government is reported by TradeTech as part of “broader economic reforms” to balance the budget and provide greater economic equality.

The new rate would move to 9% from 6% starting in 2025 and remain stable for one year before changing to a differentiated rate and would be based on production volumes and uranium prices annually at the start of 2026.

The spot uranium market has taken leave of activity as participants, such as utilities, continue to assess and prepare application waivers for the Russian import ban.

Next week will be marked by the Nuclear Energy Institute’s Nuclear Fuel Supply forum in Washington on June 27, where TradeTech expects attending parties will be seeking clarification on important industry issues, including the Department of Energy’s Request for Proposals seeking delivery offers of low-enriched uranium.

President Biden also signed a bill on July 9 which incorporates the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy Act. TradeTech states the bill aims to “accelerate the timeline for licensing new nuclear reactors” which includes a reduction in fees companies are required to pay.

The bill is designed to enhance new build reactors at a pace not seen since the 1970s as:

 “Energy demand is expected to grow over the next decade as data centers, electric vehicles, and industrial processes all search for a clean and reliable source of power. Nuclear will be part of that solution, which is why the United States has already committed to tripling our nuclear capacity and is making moves to help secure our clean energy future,” the Department of Energy stated.

Turning to U308 prices trends, TradeTech emphasises although the spot price has retraced -7% in 2024 and is off -20% from the 2024 high of US$107lb, it remains 54% above the price a year ago.

The U308 Mid-Term price indicator is US$93/lb and the Long-Term price is US$80lb.

Corporate news in focus

Australian brokers also had Kazatomprom in focus this week.

UBS hosted a call with the company, which is due to report earnings on August 1 and provide updated 2025 production guidance.

The market remains concerned around the sulfuric acid shortages, a key input resource and a reason for the 2024 production guidance downgrade by -14% to around 21.8kt.

Lingering concerns over supply remain for 2025, particularly as management has been unwilling to lift production guidance from its stated 30.5kt 31.5kt or 100% of its 2025 subsoil contract levels, the broker highlights.

UBS views the guidance update as a potential catalyst for more support, underwriting the uranium price.

Bell Potter also commented on the upcoming results and views the possibility of a 2025 guidance downgrade as “highly likely”. This broker also envisages ongoing production cost increases. This may result in higher pricing pressures to levels which could incentivise greenfield production.

Turning to stocks, the Bell Potter analyst believes the recent price weakness for Paladin Energy ((PDN)) and Boss Energy ((BOE)) due to respectively the Fission Uranium transaction and the downward revision in production guidance to around 1.2mlbs as overdone.

The broker has reiterated a Buy rating on Boss with a $5.90 target price.

Paladin is also Buy rated with a $15.70 target and Bell Potter is positive on the growth options that will be forthcoming from the Fission Uranium transaction.

Canaccord Genuity also jumps on the proposed acquisition as a win-win for both Paladin and Fission Uranium, with the combined group underwriting the third-largest uranium resource globally (for listed companies).

The broker estimates costs will decline as much as -27% to US$31lb from US$42lb, and the production potential shifts to 13.6mlbs, at a time when Canaccord forecasts a -36mlb supply deficit in 2030. 

Fission brings forth Patterson Lake South, a resource of 130mlbs of U308 and “bridges the gap between Langer Heinrich and a potential mine development at Michelin” states the analyst.

The target price is raised to $16.50 from $15.90 with an unchanged Buy rating.

Reactor Update

Bell Potter also observed 60 reactors were under construction globally at the end of May, with China representing 26 of those.

In China, two reactors have been connected since the last update and over 2023 four in Slovakia, China, the USA, and Germany were connected to the grids.

In Japan two suspended reactors have restarted.

Bell Potter continues to be positive on nuclear reactor installations across the globe, including in China with a further 154 reactors and 28 in India.

Uranium companies listed on the ASX:

ASX CODE	DATE	LAST PRICE	WEEKLY % MOVE	52WK HIGH	52WK LOW	P/E	CONSENSUS TARGET	UPSIDE/DOWNSIDE
1AE	12/07/2024	0.0800	33.33%	$0.19	$0.06
AGE	12/07/2024	0.0500	4.00%	$0.08	$0.03
BKY	12/07/2024	0.3600	– 9.33%	$0.70	$0.26
BMN	12/07/2024	3.1300	1.91%	$4.87	$1.44		$7.400	136.4%
BOE	12/07/2024	3.9700	6.58%	$6.12	$2.83	39.7	$5.050	27.2%
DYL	12/07/2024	1.4600	6.34%	$1.83	$0.65	-105.0	$1.770	21.2%
EL8	12/07/2024	0.4100	6.41%	$0.68	$0.29
ERA	12/07/2024	0.0400	2.70%	$0.08	$0.03
LOT	12/07/2024	0.3500	12.31%	$0.49	$0.19		$0.660	88.6%
NXG	12/07/2024	10.9000	6.24%	$13.66	$6.82		$17.500	60.6%
PDN	12/07/2024	13.7000	8.11%	$17.98	$7.25	-155.2	$16.287	18.9%
PEN	12/07/2024	0.1200	9.52%	$0.18	$0.08	40.0	$0.260	116.7%
SLX	12/07/2024	5.1600	2.17%	$6.74	$2.92		$7.600	47.3%

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