ASX uranium stocks soar as world's top producer cuts 2025 production target

Investors are piling into uranium miners on Monday after the world's largest producer, Kazatomprom, downgraded its full-year production outlook.

Kazakhstan's state-owned uranium miner said last Friday that it expects to produce 25,000 to 26,500 tonnes of uranium in 2025, down from its previous guidance of 30,500 to 31,500 tonnes. The new guidance reflects a 17% downgrade at the midpoint but still 12% higher than 2024.

"The uncertainty around the sulphuric acid supplies for 2025 needs and delays in the construction works at the newly developed deposits resulted in a need to re-evaluate our 2025 plans," said CEO Meirzhan Yussupov.

Morgan Stanley's take

The downgrade might have triggered a knee-jerk reaction, according to Morgan Stanley.

"The new guidance is in line with our 2025 estimate of 25,200 tonnes but above Visible Alpha consensus of 23,000 tonnes," the analysts said in a note on Friday.

"Our supply-demand balance still shows the uranium market in a deficit in 2025, but this is a lot smaller than deficits seen in previous years, and Kazatomprom has also said it remains committed to its 2025 contractual obligations and will use its "comfortable level of inventories" to meet these."

The analysts believe there's limited downside to current prices but choose to stay on the sidelines due to "very weak contracting activity" from the utility sector (down 71% year-on-year in the first half of 2024) and uncertainty on the US ban on Russian uranium.

"However, we acknowledge that there is room for utility contracting activity to pick up from a very low 1H, with uncertainty on future supplies and the US ban on Russian uranium now in place, but this will likely still take time to come through," the analysts said.

Uranium prices have settled around the mid-to-low US$80/lb level for the past couple of months, down from year-to-date highs of US$105/lb.

Sea of green

Local uranium stocks gapped up at Monday's market open and continued to trend higher throughout the morning. Paladin Energy, for instance, opened 8.9% higher and extended its gains to 12.3% by 11:30 am AEST.

Despite Monday's strength, most uranium names are still down around 30-50% from May highs.

Note the short interest

Short sellers have been aggressively targeting the uranium sector over the past couple of months. The short thesis may revolve around a few factors including:

• Recent uranium price weakness

• High near-term valuations

• Capital requirements to get projects online

• Dilution and debt risks to fund projects

As of 20 August 2024, Paladin Energy is the eighth most shorted stock on the ASX, with 10.01% short interest. A few more names of interest include:

• #11 Boss Energy 9.32%

• #13 Deep Yellow 8.15%

• #28 Lotus Resources 5.96%

• #47 Silex Systems 4.24%

The significant short interest in uranium stocks may be contributing to today's intraday strength, as short sellers potentially rush to cover their positions.