Commodities: Uranium
Uranium developer BOE has recently entered the ASX200 after enjoying a stellar year, this month saw the company raise $215mn at $3.95 to purchase the Texas-based Alta Mesa mine; the move appears to have marked the end of the stock’s ~25% pullback from its September high.
BOE has been a stellar performer over recent years, treading a similar path to PDN, but there are a couple of points leading to us reconsidering our preference between the two, although note we like both. Firstly, since BOE’s recent capital raise, it may follow EVN’s path and trade below the $3.95 raise price
MM remains a fan of the uranium sector into 2024. Still, we won’t be afraid to take profits if PDN or any other of our positions reach our objectives, especially when considering increasing cash levels.
We have made no secret of our bullish stance on Uranium at Market Matters, with holdings in Paladin Energy (PDN), Cameco (CCJ US) & Silex Systems (SLX) across various portfolios. We see nuclear energy as a key aspect of the energy transition as a cheap and reliable source of power. The price of uranium has recently traded over US$80/lb for the first time in more than a decade, up ~300% from 2008 levels as buyers, mostly utility companies, struggle to get their hands on supply. As yellow cake prices have been climbing, more and more companies are looking at bringing production online and Peninsular was expected to be selling into the market this year before issues with their mining contractor came to a head.
The uranium market has enjoyed a bullish, if not volatile, 2023. If we are correct, it’s likely to enjoy another leg higher before a more prolonged consolidation period – it’s followed our roadmap so far, so we’re not arguing!
The uranium sector enjoyed a strong 24 hours after Cameco (CCJ US) reported earnings ahead of expectations. Plus, they discussed the strong supply/demand backdrop, which should drive the ongoing strength in the sector.
Cameco reported quarterly earnings that were ahead of expectations overnight and talked to a strong backdrop for ongoing strength in the global Uranium market – shares rose 8.06%. Q3 adjusted earnings per share (EPS) of $0.32 compared to $0.03 at the same time last year, driven by higher production (+50%), which has met an environment of higher prices, prompting an upgrade to their full-year revenue forecasts.
The journey of uranium and its related stock continues to be a volatile one, and in the short term, we may have been better placed to have taken some profits into last month’s explosive move. However, we are bullish over the medium; hence, we are likely to remain fussy on the sell side unless we see a fundamental reason to change our view on nuclear energy and the shortage of uranium over the years ahead.
Uranium producer CCJ has been in the financial press a fair bit of late as the price of the nuclear material has surged over recent months. However, it has corrected sharply over the last fortnight, more so than ASX listed Paladin (PDN), delivering a good buying opportunity for the active investor.
The company which is developing enrichment technology for uranium and silicon has whipsawed between $3 – $4 a share over the last few months, currently trading nearer to the low end of the range following a 10% drop in the last week. While listed as a technology company, Silex is included in the Solactive Global Uranium & Nuclear Components Index which is the benchmark index for some ETFs such as the Global X Uranium ETF (URA US). Being in an index and/or ETF is a natural provider of liquidity, and when new units of the ETF are issued the ETF providers buy the underlying shares which has helped to prop up Silex.
