Weekly Reports | Sep 07 2021
This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN
After the largest three week rise on record for the uranium price, brokers lift their long-term uranium price forecasts and raise price targets for shares.
-Largest spot market volumes since 1966
-Long-term uranium forecast price of US$60
-The long-term uranium price is trading -2% below the mid-term price
-Uranium spot price rises over 15% for the week
By Mark Woodruff
After trending upward since May, the uranium price has climbed the most on record for a three-week period.
Over the last week, TradeTech's Weekly Spot Price Indicator jumped by US$5.20 to US$39.00/lb. More than 3.7mlbs U3O8 involving 21 transactions occurred in the final three days of last week.
The total spot market volume for August was 13.2mlbs from 55 transactions. This is the largest transaction volume total recorded in a single month in the uranium spot market since 1996.
A significant contributing factor in the price rise has been the mid-August launch of the Sprott Uranium Physical Trust (SPUT), notes industry consultant TradeTech. Brokerage firm Canaccord Genuity agrees and points out spot prices have risen 22% since August 17, the day SPUT launched its US$300m at-the-market (ATM) facility.
Not only has SPUT accounted for a significant portion of purchases since then, but also the launch of the fund has attracted a number of new parties to the uranium market, explains TradeTech.
Canaccord Genuity believes this cycle has a long way to go, and as spot prices rise the broker thinks utilities will likely feel increased pressure to contract supply.
With covid's impacts slowly passing and increasing political certainty aiding the outlook for nuclear energy, the broker can't help but feel that activity in the term market will ramp-up.
Shaw and Partners upgrades its long-term uranium price forecast to US$60/lb by 2028, up from US$52/lb. An incentive price environment for re-investment to occur is assumed and a multi-year price spike to US$85/lb is forecast, before settling back to the US60/lb level.
The broker remains positive on the sector on a multi-year thematic, and its investment thesis is based on a decade of underinvestment and longer-term demand supported by increased electrification and decarbonisation.
As equities trade ahead of valuation support in a multi-year commodity price up-cycle, Shaw upgrades its price targets for all ASX-listed uranium companies under its research coverage.
The preferred exposure to an improving uranium market is Paladin Energy ((PDN)) and the broker raises its price target to $1.00 from $0.56. The company is considered the premium and most liquid name in the sector.
The broker also has Buy ratings for Vimy Resources ((VMY)) and Peninsula Energy ((PEN)) and lifts its respective price targets to $0.27 (from $0.25) and $0.30 (from $0.17).
The rating for Boss Energy ((BOE)) is raised to Buy from Hold and the analyst’s price target climbs to $0.30 from $0.17.
Finally, Shaw maintains its Hold ratings for both Lotus Resources ((LOT)) and Bannerman Energy ((BMN)). The target for the former rises to $0.29 from $0.16, while the broker doubles its target for Bannerman Energy to $0.28 from $0.14.
Uranium pricing during the month
TradeTech's monthly spot price rose US$2.25 to close out August at US$34.75, the highest level in nearly six years.
TradeTech's mid-term price indicator for August 31 is US$35.75 /lb, up US$2.25/lb from last month, while the long-term price indicator remains unchanged at US$35.00/lb.
In a situation not seen since 2011, the Long-Term Price Indicator is -2% below the Mid-Term Price Indicator. This is indicative of both more demand for delivery in the spot and mid-term periods, as well as an expectation on the part of some suppliers today that more supply will be available by mid-decade.
The desire of sellers to rebuild their portfolios at a time when the spot price is on the rise, and intense competition among producers vying for utility term contracts, creates a difficult choice for sellers, notes TradeTech. This is because current term prices are already less than sufficient to cover many producers' full production costs.
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For more info SHARE ANALYSIS: BMN - BANNERMAN ENERGY LIMITED
For more info SHARE ANALYSIS: BOE - BOSS ENERGY LIMITED
For more info SHARE ANALYSIS: LOT - LOTUS RESOURCES LIMITED
For more info SHARE ANALYSIS: PDN - PALADIN ENERGY LIMITED
For more info SHARE ANALYSIS: PEN - PENINSULA ENERGY LIMITED
For more info SHARE ANALYSIS: VMY - VIMY RESOURCES LIMITED