Commodities: Uranium
Uranium company DYL is a new stock in the ASX200 after the sector’s strong rally over the last few years, i.e. DYL now has a market cap of $1.4bn. The company humbly describes itself as “Deep Yellow is the best-positioned uranium mid-cap company globally”, but it certainly is in the right place at the right time.
MM has been targeting the $4 area for BOE for weeks, and yesterday’s 5.2% sell-off took the stock back to the psychological level. The CEO’s recent aggressive sell-down of 70% of his holding along with softening Spot Uranium prices brought the move to fruition. Importantly, the 35% retracement in the stock should remind investors of the volatility of the stock/sector; hence, we take smaller positions when we go long these sorts of companies.
The CEO and others took their “skin in the game” off the table. Since then the share price has been dropping.
Uranium, the fuel used for nuclear fission, has sprung to the forefront of investor conversation over recent years, sparked by a mammoth 300% appreciation, which began back in 2021. As would be expected, the related stocks have surged accordingly. Interestingly, so far in 2024, when uranium (chemical symbol U) has corrected over 10%, most of the related stocks have kept going. For example, year-to-date Paladin (PDN) is +62%, and Boss Energy (BOE), the “poorer” cousin, is +16%, pretty good returns when the ASX200 is up less than 2%.
Hi MM,
The questions ran hot yesterday around Boss Energy (BOE), even after we touched on the leading ASX uranium stocks on Tuesday following the news that the company CEO had sold over 70% of his shares in the uranium miner. Also, for good measure, the Chairman and another director also sold smaller parcels of stock. We can see the logic in taking some $$ off the table after the stock/sector’s great run in recent years, but all things being equal, they clearly don’t believe it’s going to double again anytime soon.
The ban on Russian material is positive for SLX which has developed a new technology that promises to revolutionise the nuclear supply chain. It uses lasers to excite uranium atoms and then separate the U-235 and U-238. SLX successfully operated the technology at prototype scale (approx. 10% full scale) in 2013 at GLE’s Test Loop facility
Recent years have witnessed some huge moves in cyclical commodities such as coal, lithium, and copper. Uranium is another one that can be added to the list, although it’s a touch less tangible in Australia. We obviously cannot touch the stuff, and there is no nuclear power on our shores. US President Joe Biden has just signed the bill to ban the import of Russian-sourced enriched uranium into the US. We remain very bullish on the outlook for uranium in the next few years, seeing no hurdles to the upside, although Donald Trump may reverse this particular bill if he wins in November’s US election. We could easily see uranium another 50% higher in the coming years.
BOE has been one of the market’s favourite investments in the uranium sector over the past three years and is now a member of the ASX200. We like it, particularly given their mine is in Australia, however, we struggle to justify the current share price just on the company’s Honeymoon project, believing this ship has largely sailed – we would be interested closer to $4.
