Uranium stocks line up for cash as spot prices climb to 11-year highs

Thu 24 Mar 22, 2:30pm (AEST)
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Key Points

  • Uranium prices are hovering around the 'incentive price' of US$60/lb
  • Several ASX-listed uranium companies have kicked off capital raisings in March
  • Is this the beginning of a trend as the industry climbs out of a 10-year long bear market?

Uranium spot prices have rallied to the US$60/lb level - a price point widely viewed as the ‘incentive price’ to which new supply might begin to come online. 

At increasingly appealing prices, several local uranium stocks have turned to faithful shareholders to help fund project development aspirations. 

In March alone: 

Aura Energy (ASX: AEE) raised $8.8m to fund a planned resource enhancement program and commencement of engineering works. The company plans to make a final investment decision in the fourth-quarter of 2022 for its Tiris Uranium Project in Mauritania, Africa. 

Boss Energy (ASX: BOE) raised $120m to help fully fund the company’s Honeymoon Project into production.

Vimmy Resources (ASX: VMY) raised $17m to complete its Mulga Rock Bankable Feasibility Study and advance pre-development site works. 

Bannerman (ASX: BMN) raised $40.7m to support a Definitive Feasibility Study and Front-End Engineering and Design (FEED) works for its Etango-8 mine.

The average discount for new shares across the four capital raisings was 18.5%. The companies on average fell -7.4% on the day the trading halt to raise funds was lifted.

So far, only Vimmy Resources has managed to climb back above its pre-raised share price.

Why now? 

More advanced uranium companies like Paladin Energy (ASX: PDN) and Boss Energy expect production costs to sit around US$27-32/lb.

Just 12-months ago, uranium prices were hovering around the US$30/lb level. A price point which was hardly encouraging for explorers to advance later-stage activities such as feasibility studies or early-development works. 

Uranium prices
Source: Boss Energy Capital Raising Presentation

Things to consider

Investors might want to observe the recent trend in uranium companies raising capital. Are there any other candidates that might need to raise capital to fund project activities or milestones?

Another interesting point has been raised by Boss Energy, where the company did not want to commit to long-term off-take agreements in a rising price environment.

“Boss anticipates that committing to long-term contracts in the current rising uranium price environment would adversely impact the long term upside potential of Boss and we intend to wait for further increases in contract prices before making any offtake commitments,” said Managing Director Duncan Craib.

President Vladimir Putin has hit back at the US, considering halting uranium exports to the US. Russia plays a relatively small role in uranium mining, with a market share of circa 6% in 2020, according to the World Nuclear Association.

However, the nation plays a massive role in supplying secondary uranium, essentially recovered uranium that's reprocessed and enriched. Russian enrichment capacity represents around 40% of global capacity.

The way sanctions play out could be a near-term catalyst for uranium prices.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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