Commodities: Uranium
I’ve been a bit surprised by some negative/neutral talk from analysts about the potential for uranium stocks. I know that you’re bullish and as I write this URA is making daily gains and, despite the recent run, I still believe that equities have quite a bit of catching up to do. What are your thoughts? Will they still overtake the peaks seen earlier this year?
Is Market Matters concerned that PDN is the fourth most shorted stock on the ASX and with the coming November election in Namibia? What is the reason that the stock is so heavily shorted?
PDN has bounced ~35% in the last few weeks; shame about its prior 3-4 month decline. The recent strength came after America’s Three Mile Island energy plant, the site of the worst nuclear accident in US history, is preparing to reopen as Microsoft (MSFT US) looks for ways to satisfy its growing AI energy needs
It’s no surprise that Putin’s comments shook up uranium stocks on Thursday, as Russia is the world’s fourth-largest uranium producer and has about 44% of global uranium enrichment capacity. However, the reaction on overseas bourses wasn’t as dramatic as witnessed on the ASX on Friday, probably due to the large shorts being held in prominent names such as Paladin (PDN).
The URNM ETF closed up +1.6% overnight, a solid 14% above last week’s low. However, the muted move overnight suggests another strong session by ASX uranium names is unlikely unless the shorts continue to cover in earnest. Still, we believe buying will resurface into any dips after the price action over the last week. The aggressive decline from Mays high appears over, and the shorts should be nervous.
CCJ closed up +1.9% overnight, a fairly muted move compared to the local names, but it did at least close well above its opening – we added to our CCJ position on open (Alert). Cameco is our go-to for overseas uranium exposure. Its latest quarter was good from the Canadian operations, and production is tracking to guidance, but it’s not been immune to weakness across the sector on a global level.
PDN has surged over +20% from this week’s low, but we shouldn’t get carried away; it’s still substantially below this year’s high. PDN is our preferred pick among the ASX uranium names for a couple of reasons:
DYL bounced +13.5% on Thursday, taking it up ~30% from its weekly low. It’s undoubtedly the high Beta play of the leading ASX uranium stocks. This relatively new $1.1bn member of the ASX200 has entered advanced-stage uranium exploration at its core Namibian projects.
BOE has underperformed as it commissions the Honeymoon project. That is not a significant surprise, and BOE has been our least preferred company in the sector for most of the past year. It is still not cheap relative to peers, and we would prefer Peninsula Energy (PEN), at the speculative end of the curve, which provides a similar exposure for a fraction of the price.
Last Friday, Silex reported a FY24 net loss of A$23m, which was to be expected. As a refresher, Silex, in conjunction with Cameco (CCJ US), is developing a laser technology to enrich uranium at a facility in Kentucky, US. The primary commercial application of the technology is the production of different grades of fuel for the nuclear power industry, which is licensed exclusively to Global Laser Enrichment (GLE), a joint venture comprising Silex (51%) and Cameco (49%).
