Peninsula Energy wins US gov’t contract for uranium supply ahead of Wyoming mine restart

ASX-listed Peninsula Energy (ASX:PEN) has today won a contract to supply the US government with 300,000 pounds of uranium, for which it will pay above spot market prices.

Peninsula will produce uranium concentrate for inclusion into the US Department of Energy’s (DOE) strategic uranium reserve. 

Shares in Peninsula Energy climbed 6.2% today to 12.8c as at 2PM AEST, but a look at recent performance ought to be considered: 

• One week performance down -1.92% 

• One month performance down -25.0% 

• YTD performance down -36.25% 

Regardless, Market Index’s breakdown of broker consensus on Peninsula Energy shows 7 brokers say buy.

This remains the quo even as Peninsula Energy will recommence mining in Wyoming in the first quarter of next year after a soft mothball since 2019. 

Highly competitive offer 

After uranium prices hit a record high of US$63/lb on the New York Mercantile Exchange (NYMEX) in April this year, the price has since reverted back to US$48/lb. 

Further, a power plant in Wyoming has been delayed by up to two years this week as supply chain constraints borne from Russian sanctions leave the asset without fuel to use. 

That news is recent, however, and has not been instrumental in Peninsula’s YTD share price performance. 

Peninsula also notes the contract offers a premium above the spot price per pound (but did not state a figure—NYMEX prices imply a contract worth US$14.4m). 

Management pleased 

In short, the DOE is offering Peninsula a highly competitive deal.

“We are pleased to support the DOE’s efforts aimed at revitalising the US nuclear fuel cycle,” Peninsula chief Wayne Heili said, describing his company as “very happy.” 

The premium price the DOE is paying Peninsula, however, has more to do with scarcity than competition. 

What was the April NYMEX bull run about? 

The performance of uranium futures on the NYMEX in April had a lot to do with perceptions surrounding Russian sanctions and the country’s inability to provide uranium to world markets. Kazakhstan is the world’s largest producer. 

Regardless, Citi this week upgraded its long-term price outlook for uranium, going so far as to describe its enthusiasm in this regard as “overwhelming.” It sees robust demand in the future.

A look at Peninsula Energy's three charts