Weekly Reports | Nov 12 2024
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U308 spot price rebooted after the US election, while Cameco and commodities expert Bob Brackett offer positive views on nuclear energy and uranium.
-Uranium spot price drifts lower in a quiet week
-Cameco sees positive momentum for nuclear energy
-Petra Capital’s tactical ASX uranium stocks to buy
-OddLots podcast speaks with Bob Brackett, commodities guru
By Danielle Ecuyer
US election stalls market activity
The uranium spot market was not immune to temporary US election paralysis last week. Industry consultants TradeTech explained activity in the spot market “stalled” until Thursday, Nov 7. Five transactions were conducted for 400,000 lbs of U308, including two transactions after market hours for purchases beyond the 90-day spot delivery window.
TradeTech notes the other three transactions included a purchase by the Sprott Physical Uranium Trust, a producer, and a trader, with spot prices ranging from US$76.50/lb to US$77.50/lb.
Friday last week saw a trade for January delivery between two trading entities at US$77/lb. This represented a decline in the TradeTech weekly spot price of -US$1.50, though unchanged from the previous day’s spot price.
The consultants remind us the spot price remains up 5% year-on-year and 54% higher than two years ago, despite a retracement from a 16-year high of US$107/lb in February. TradeTech’s Mid-Term U308 price indicator stood at US$84/lb, and the Long-Term U308 price indicator at US$82/lb.
Cameco reports Sept quarter results
Cameco announced September quarter results. CEO and President Tim Gitzel was quoted by TradeTech, stating, “there is a clear underlying trend of improving operational performance and cash flow generation, backed by stable and rising market prices.”
“From a marketing perspective, we have contracts in both our uranium and fuel services segments with deliveries spanning more than a decade. In a market where we are seeing sustained, positive momentum for nuclear energy, we are continuing to be selective in committing our unencumbered, tier-one, in-ground uranium inventory and UF6 conversion capacity under long-term contracts, to capture greater upside for many years to come.”
ASX listed uranium stocks offer tactical upside
Petra Capital detailed the recent Global Uranium Conference, held in Adelaide in late October, noting record attendance of 225 attendees. The analyst points to a presentation from data centre developer and operator, NextDC ((NXT)), which emphasised the benefits of artificial intelligence for the nuclear industry.
Northamerican companies, including Cameco, Orano, NexGen Energy, and Energy Fuels, were also in attendance. The broker describes NextDC’s presentation as “upbeat”. While not directly discussing nuclear power, the focus was on AI benefits, stating, “by the way, this will require nuclear energy. I want green electrons. I want low-cost electrons. I need reliable electrons.”
Petra believes this is a more positive message, potentially more resonant than traditional industry messaging.
Observing the ASX uranium sector, Petra’s analyst sees a near-term buying opportunity, with ASX uranium stocks lagging international peers. The broker’s tactical preference is for Bannerman Energy ((BMN)) and NexGen Energy ((NXG)). Bannerman is described as showing high “valuation” leverage, offering approximately 65% potential upside to its 2024 highs, and continuing to offer better value than Namibian developer peer, Deep Yellow ((DYL)). It is Buy-rated with a $4.51 target price.
Petra is also optimistic about NexGen Energy. Management is awaiting Federal approval for the Rook1 project, expected in the March quarter of 2025 following Provincial approval in Nov 2023. Capex for the project has increased to -CA$2.2bn from -CA$1.3bn, with Petra forecasting -CA$2.8bn for this large project, which is anticipated to produce 29m lbs, starting in 2028. Petra believes NexGen is among the few listed companies with sufficient liquidity to absorb “generalist capital inflows.” It is Buy-rated with a target price of $12.15.
Other Buy-rated uranium stocks include Lotus Resources ((LOT)), with a 36c target price; Aura Energy ((AEE)), 33c target price; and Alligator Energy ((AGE)), with a 10c target price.
Canaccord Genuity highlighted the successful completion of a $130m capital raising for Lotus with first U308 production from Kayelekera targeted for the September quarter of 2025. Management had already announced a slower ramp-up with FY26 production guidance decreased to around 610klbs and FY26 EBITDA of circa $0.7m.
Canaccord rates Lotus as a Speculative Buy with a 42c target, down from 54c.
Commodities expert Bob Brackett shares uranium insights
Bloomberg Odd Lots’ podcasters Joe Weisenthal and Tracy Alloway spoke with “commodities guru” Bob Brackett, head of Americas energy and transition at Bernstein Research, on uranium and other commodities.
Brackett described the uranium market as “small,” noting its size of 200m pounds. While “million” may sound significant, Brackett illustrates by comparing the uranium industry’s size to the world’s largest copper mine, Escondida, which could fit 10 times the entire uranium industry within one single copper mine.
Brackett emphasises, compared to the billions required to construct a nuclear power plant, the cost of uranium is “a rounding error.” He also explains uranium’s density, noting it requires only thousands of tons for a nuclear plant compared to millions of tons of coal for a coal-fired plant.
Brackett details how uranium as a commodity is hard to short, with historical price corrections typically following nuclear accidents, such as Fukushima or Three Mile Island.
Demand growth for uranium stems from new power plant construction and the reactivation of decommissioned plants. Brackett highlights the involvement of big tech companies like Microsoft, and the possibility of restarting Three Mile Island. Major tech companies are now associated with nuclear investment as they seek reliable electricity to meet unknowable future demand.
Whether through funding small modular reactors or restarting decommissioned plants, Brackett views this shift as an “inflection point” for the industry. He anticipates nuclear energy will comprise less than 10% of the total energy supply, as constructing enough reactors rapidly to dominate the energy mix remains unlikely.
Nuclear power will remain available as part of the energy mix. The current investment by big tech in research and development is considered a potential catalyst for growth, possibly accelerating the deployment of small modular reactors.
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 08/11/2024 | 0.0500 |  25.00% |
$0.19 | $0.03 | |||
| AEE | 08/11/2024 | 0.1400 | 3.45% |
$0.33 | $0.11 | |||
| AGE | 08/11/2024 | 0.0400 | 2.27% |
$0.08 | $0.03 | $0.100 | 150.0% |
|
| AKN | 08/11/2024 | 0.0100 | 0.00% | $0.07 | $0.01 | |||
| ASN | 08/11/2024 | 0.0700 |  – 1.43% |
$0.18 | $0.07 | |||
| BKY | 08/11/2024 | 0.3600 | – 1.41% |
$0.45 | $0.26 | |||
| BMN | 08/11/2024 | 2.8700 | 3.51% |
$4.87 | $1.90 | $7.400 | 157.8% |
|
| BOE | 08/11/2024 | 3.1600 | 0.94% |
$6.12 | $2.38 | 20.6 | $4.200 | 32.9% |
| BSN | 08/11/2024 | 0.0300 | – 6.25% |
$0.21 | $0.02 | |||
| C29 | 08/11/2024 | 0.0800 | 0.00% | $0.12 | $0.06 | |||
| CXO | 08/11/2024 | 0.1000 | 0.00% | $0.39 | $0.08 | $0.090 | – 10.0% |
|
| CXU | 08/11/2024 | 0.0200 | 100.00% |
$0.06 | $0.01 | |||
| DEV | 08/11/2024 | 0.1200 | – 4.00% |
$0.45 | $0.11 | |||
| DYL | 08/11/2024 | 1.3100 | – 0.38% |
$1.83 | $0.91 | -72.2 | $1.900 | 45.0% |
| EL8 | 08/11/2024 | 0.3000 | – 3.13% |
$0.68 | $0.26 | |||
| ERA | 08/11/2024 | 0.0020 | 0.00% | $0.08 | $0.00 | |||
| GLA | 08/11/2024 | 0.0100 | 0.00% | $0.04 | $0.01 | |||
| GTR | 08/11/2024 | 0.0040 | 0.00% | $0.02 | $0.00 | |||
| GUE | 08/11/2024 | 0.0700 | -12.50% |
$0.18 | $0.05 | |||
| HAR | 08/11/2024 | 0.0600 | 0.00% | $0.28 | $0.03 | |||
| I88 | 08/11/2024 | 0.5000 | 0.00% | $1.03 | $0.14 | |||
| KOB | 08/11/2024 | 0.0800 | -11.11% |
$0.18 | $0.07 | |||
| LAM | 08/11/2024 | 0.8500 | 1.19% |
$1.04 | $0.48 | |||
| LOT | 08/11/2024 | 0.2400 | 4.08% |
$0.49 | $0.20 | $0.547 | 127.8% |
|
| MEU | 08/11/2024 | 0.0360 | – 5.26% |
$0.06 | $0.04 | |||
| NXG | 08/11/2024 | 11.1500 | 0.63% |
$13.66 | $7.89 | $16.200 | 45.3% |
|
| ORP | 08/11/2024 | 0.0300 | -25.00% |
$0.12 | $0.03 | |||
| PDN | 08/11/2024 | 9.7000 | – 1.12% |
$17.98 | $8.15 | 26.0 | $14.325 | 47.7% |
| PEN | 08/11/2024 | 0.0900 | – 1.11% |
$0.15 | $0.07 | $0.260 | 188.9% |
|
| SLX | 08/11/2024 | 5.7000 | 7.21% |
$6.74 | $3.01 | $7.200 | 26.3% |
|
| TOE | 08/11/2024 | 0.2800 | -16.67% |
$0.70 | $0.01 | |||
| WCN | 08/11/2024 | 0.0200 | 0.00% | $0.03 | $0.01 |
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For more info SHARE ANALYSIS: AEE - AURA ENERGY LIMITED
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