Is Boss Energy or Paladin Energy the better ASX uranium stock? This broker says buy both

2024 was a rocky road for the uranium market and ASX listed uranium stocks. Despite regular seemingly bullish announcements of cutbacks in production from some of the world's biggest producers, as well as simmering geopolitical tensions that saw Russia and the US implement retaliatory punitive sanctions against each other over Russian uranium exports, the uranium price ebbed lower for most of the year.

Uranium Futures (Front month, back-adjusted) COMEX. Source: TradingView

Stay the course is the message from local broker Bell Potter, who has just released new research reports on the two biggest uranium pure-plays on the ASX in Boss Energy (ASX: BOE) and Paladin Energy (ASX: PDN). The broker has retained its previous BUY recommendations on both stocks, it also increased its price target on PDN. Here’s a quick summary of Bell Potter's BOE and PDN research reports.

December quarter previews

For BOE’s quarterly report due on 29 January, Bell Potter tips:

• Honeymoon mine drummed production of 150klbs U3O8 for the quarter, up 67% on the previous quarter

• IX column 1 operated at capacity vs column 2 at 29% average capacity over the quarter

• Leach solution grades to fall to 60mg U3O8/l from 71mg U3O8/l in the previous quarter and recoveries to 95% from 97%

• Assuming the above, total production should be 166klbs for the quarter (a delay to the drying and packaging circuit should result in roughly 90% of production drummed hence the 150klbs drummed production estimate from above)

• C1 costs will be A$69.71/lb (US$45/lb) (Note: Bell Potter believes C1 costs should “trend lower” in the first half of 2025 to A$62/lb (US$42/lb) as column 2 and column 3 are ramped up)

For PDN’s quarterly report due on 22 January, Bell Potter tips:

• Langer Heinrich production of 0.54Mlbs, up 15% from the previous quarter

• Upgrades to infrastructure since November should have helped alleviate previously stated production issues (lower stockpile grades and water availability)

• 0.87Mt throughput in the quarter at an average grade of 412ppm U3O8 with recoveries of 70%

• Updated FY25 outlook including 2.9Mlbs production vs 2.8Mlbs sales (PDN’s current guidance is for production of 3.0-3.6Mlbs) and C1 costs of US $47/lb

Uranium – overbought or oversold?

This is the $64 million question that Aussie uranium investors want answered! Good news ASX uranium bulls, Bell Potter believes that the fundamentals of the uranium market continue to “suggest higher prices across the entire nuclear fuel chain over the coming years”. The broker does acknowledge what they call “increased downside volatility” in the spot market, however.

If anything, the recent dip in the uranium price will only help sow the seeds for the next spike, suggests Bell Potter. This is because the lower uranium price has already delayed final investment decisions at new projects (e.g. Deep Yellow’s go ahead at its flagship Tumas Project in Namibia), and is likely to continue to do so.

“This further perpetuates the primary shortage in supply, and increases the risks of near-term price spikes on changes to production”, states the broker.

Investment theses

Bell Potter's view on BOE

• “We continue to view BOE as being attractively priced (FY25 Forward EV/EBITDA 6.6x) vs peers, which could warrant a re-rate post the 2QFY25 result, should production and costs track in-line with our expectations”

• The broker retains its BUY rating and its $4.70 price target is unchanged. At Friday’s closing price of $2.59, this suggests as much as 73.7% upside in BOE’s share price.

Boss Energy (ASX: BOE) share price last 12 months

Bell Potter's view on PDN:

• “Management has the task of stabilising production at Langer over the coming periods to rebuild investor support. The closure of the Fission transaction in December should have eased some concerns, however the road to redemption will take some time.”

• The broker retains its BUY rating on the stock and increases its price target to $10.50 from $9.70. At Friday’s closing price of $7.91, this suggests as much as 32.7% upside in PDN’s share price.

Paladin Energy (ASX: PDN) share price last 12 months