Boss Energy On The Beat

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Uranium miner Boss Energy pre-released March quarter numbers indicating beats to forecasts for production and realised prices.

-Boss Energy pre-releases March quarter numbers
-Production and price beat forecasts
-Guidance retained, but a beat is assumed
-Outlook uranium positive in contrast to market sentiment

By Greg Peel

Shaw and Partners hosted its seventh Uranium Conference on March 27th. A key conclusion from the conference is that when cautious fuel buyers return to the market, pent up demand is likely to see a surge in contracting and a much higher uranium price.

Despite the performance of uranium equities in the past twelve months, the supply/demand fundamentals of the global uranium industry have never looked better in Shaw’s view.

Shaw recommends an overweight position to the uranium sector in equity portfolios. Paladin Energy ((PDN)), NexGen Energy ((NXG)), Silex Systems ((SLX)), Bannerman Energy ((BMN)) and Boss Energy ((BOE)) are Shaw’s preferred exposures.

Boss Energy last week pre-released its March quarter production numbers. The full report is due on April 29, which will include cost details.

On Track for a Beat

Boss Energy produced 247klbs U3O8 in the March quarter but drummed 296klbs, some 10% ahead of consensus forecasts.

U3O8 drummed exceeded IX (ion exchange) production as a portion of the inventory accumulated in previous quarters was processed through the drying and packaging stage. Morgan Stanley assumed more time would be needed to get to a point to be able to work through this inventory.

Guidance for 850klbs of production in FY25 has been maintained, along with cost guidance of $37-41/lb. Assuming a US$0.6320 exchange rate at the time of writing, that’s US$23-26/lb compared to the latest U3O8 spot price indicator of US$65/lb.

With IX column 3 and wellfield 3 now both online adding to flow rates, Ord Minnett considers Honeymoon well-positioned to meet or beat FY25 guidance of 850klb. Macquarie agrees, forecasting 912klbs in FY25, while Canaccord Genuity is assuming 883klbs.

Kiln 2 was also commissioned and became operational during the quarter.

Management noted some kiln (drying) and baghouse (packing) commissioning challenges remained but this has not impacted on production guidance.

Sales from the Honeymoon mine (South Australia), which Boss Energy acquired and restarted after a long period of post-Fukushima shutdown, sold 150klbs U3O8 in the quarter, well below consensus, but this was simply a timing issue.

Pricing

Honeymoon’s average realised price of US$84/lb was well ahead of the market. This was attributable to a 118klb loan repayment from enCore Energy (US) on uranium borrowed from Boss Energy at a price of US$101/lb. Contractual sales realised US$70/lb, suggesting Boss’ market-linked contract is closely tracking spot prices, Ord Minnett notes.

Boss received US$11.9m in cash in relation to enCore loaned material, representing 100klbs plus 9% interest on total loaned material of 200klbs. Remaining loaned material of 100klbs plus 9% interest is to be repaid in June this year.

Honeymoon has just 3.5mlbs contracted up to 2033, constituting 16% production coverage on Ord Minnett’s estimates. This may be sufficient during ramp-up, the broker suggests, but additional contracts will need to be added as production expands.

Ord Minnett models Honeymoon increasing its term exposure to 60-70% of total production by the March quarter FY26, locking in estimated term prices of around US$80/lb over the next few quarters.

In the interim, the broker models spot sales and delivery into existing contracts of 150klb and 130klb per quarter respectively. With production outpacing sales in its model, Ord Minnett expects inventory to rise.

Looking Ahead

IX column 3 at Honeymoon is ramping up. Columns 1 and 2 are operating at nameplate capacity. Kiln 2 was also commissioned during the quarter. Management suggested IX columns 4 and 5 are on track for commissioning by the September quarter.

Column 6 was not mentioned, Morgan Stanley notes, but was previously expected to be commissioned by the September quarter, with columns 5/6 to become operational in the December quarter.

Boss Energy’s Alta Mesa (Texas) project is performing well, with enCore’s corrective action delivering some early results. 50klbs was produced across the last 26 days of March (equating to a 700klb/year run rate from two IX circuits).

A third IX circuit is set to commence in 2026. enCore has accelerated its overall contract deliveries, given improved Alta Mesa production.

Analysts’ views and considerations

Morgan Stanley has only to date provided a recap of the numbers from Boss Energy’s March quarter pre-release, without qualifying its Equal-weight rating and low-end $2.45 price target.

UBS has lowered its target -3% to $3.10 and downgraded to Neutral from Buy. The uranium price is down -12% year to date yet Boss Energy shares have risen 8%, and while liking Boss’ long-term production potential, UBS thinks the shares are fully valued at current price and with macro sentiment fading.

Of the seven brokers monitored daily by FNArena covering Boss Energy, five retain Buy or equivalent ratings. The current consensus target is $3.69, with high marker Bell Potter on $4.65, but Bell Potter has not updated for the March quarter report as yet. Excluding Morgan Stanley, the consensus target is $3.90.

Ord Minnett estimates Boss Energy will have the highest margins within its uranium coverage due to lower costs and higher contracted prices. Its smooth ramp-up relative to peers further increases the appeal.

Boss offers strong leverage to a recovery in uranium spot prices and improving term price structures, Macquarie suggests. Honeymoon operations are performing strongly and more clarity on Alta Mesa’s strong performance appears to be emerging.

Canaccord Genuity (not among daily-monitored brokers) saw the March quarter result as incrementally positive news, noting a beat versus consensus across production, sales and averaged realised prices.

Canaccord retains a Speculative Buy rating, with a target of $5.35.

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