US to build domestic uranium supply: Paladin Energy, Boss Energy shares soar

It's a sea of green for ASX-listed uranium stocks on Wednesday, with most names including Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL) up around 5-8% in early trade.

The broad-based rally was fuelled by the US Department of Energy's (DoE) plans to jump start the production of domestic uranium supply for advanced nuclear reactors. The DoE is seeking bids from contractors for uranium enrichment services to help establish a reliable domestic supply of high-assay low-enriched uranium or Haleu.

This is a form of uranium fuel that is enriched up to 20% compared to the 5% of traditional uranium fuel used in today's reactors and only commercially available from Russia, Reuters reports.

President Biden's Inflation Reduction Act will provide up to $500 million for HALEU enrichment contracts.

Supply vulnerability

In late 2023, the US House of Representatives passed legislation to ban the purchase of enriched Russian uranium. The bill still needs to be passed by the Senate and then signed by President Joe Biden to become law.

The Prohibiting Russian Uranium Imports Act seeks to bar Russian uranium imports 90 days after enactment while allowing a temporary waiver until January 2028.

But here's where things get tricky – The US has been neglecting domestic enrichment capabilities since the 1990s, in favour of cheap Russian imports. Today, roughly a third of enriched uranium used in the US is imported from Russia.

There's only one US facility that can enrich uranium and produce Haleu. But even that facility, owned by Centrus Energy in Ohio, has been offline for more than 20 years. It only started enriching again in October 2023.

The US on a tight deadline to rip itself from Russian supply. This is taking place against a backdrop where uranium spot prices have crossed US$90 per pound or a 16-year high earlier this month.

Soaring spot prices. The US struggling to free itself from Russian supply. A looming supply and demand imbalance borne out of a decade long uranium bear market. It's a perfect storm to drive uranium valuations higher.

Supply aide, 2023 marked a step change for US nuclear investment, where it progressed multiple small modular reactors (SMRs) and micro-reactor projects, including:

• Xe-100 (60MW) reactors in Washington and Texas received approval

• Three micro-reactor projects received approval

SMRs and micro-reactors are being exampled as a substitute for both fossil fuel-based generation in places where traditional nuclear reactors would have too much capacity or too expensive to build.

The Lone ASX-listed Enrichment Player

When I see the above developments – I immediately think about names like Paladin Energy (the largest and most liquid ASX-listed name) and Boss Energy (its Honeymoon Project is located in South Australia and set to commence production).

You can also check out a full list of local uranium stocks here.

It's easy to forget about Silex Systems (ASX: SLX) – A $1.05 billion market cap technology company focused on commercialising its SILEX laser enrichment technology. The stock is up around 10% at noon to a near 12-month high. But it has underperformed most local uranium exploration and development plays in the past twelve months, up just 15%.