Which ASX uranium stock offers the best value?
Local uranium resources are valued much higher than those in other countries, even in early stages
Source: iStock
Mentioned
KEY POINTS
- Australian uranium resources are valued much higher than those in other countries, even in early stages
- Namibia, despite abundant resources, is perceived as higher risk and miners trade at a discount relative to Australian peers
- Boss Energy, despite its seemingly expensive price tag, has consistently outperformed
We're only half way through January and most uranium stocks are already up at least 25% year-to-date as prices for the commodity top US$100 a pound for the first time in 16 years.
At its simplest form, investing in mining is all about who has the biggest resource with the best grades and the ability to extract it at the lowest cost.
In this series, we’ll be looking at which uranium explorers, developers and producers offer the best value for money based on two simple metrics:
Market Capitalisation
Mineral Resource
Which Uranium Stock Offers the Best Value
The below table puts into perspective how much investors are paying for a pound of uranium based on the company's latest mineral resource and market capitalisation.
Ticker | Company | Mkt Cap | Projects | Status | Mlb U3O8 | A $/lb U308 |
|---|---|---|---|---|---|---|
Boss Energy | $2.08bn | Australia | Construction | 71.6 | $29.05 | |
Alligator Energy | $303m | Australia | Scoping Study | 24 | $12.63 | |
Paladin Energy | $3.59bn | Australia, Canada and Namibia | Construction | 455.8 | $7.88 | |
Aurora Energy | $171.5m | Mauritania | DFS | 58.9 | $2.91 | |
Deep Yellow | $1.02bn | Australia and Namibia | DFS | 402.3 | $2.55 | |
Bannerman | $515.1m | Namibia | DFS | 206.8 | $2.49 | |
Peninsula Energy | $132m | US | Construction | 53.8 | $2.46 | |
Lotus Resources | $551.8m | Malawi | DFS | 241.5 | $2.28 | |
Elevate Uranium | $175.8m | Namibia and Australia | Explorer | 142.5 | $1.23 | |
Aurora Energy Metals | $26.3m | US | Explorer | 50.7 | $0.52 |
Data as at Tuesday, 16 January 2024.
You should also note the following points:
The data is calculated on a 100% ownership basis. When adjusted for partial ownership such as Paladin Energy (owns 75% of Langer Heinrich) and Bannerman (owns 95% of Entago Uranium Project) should have A $/lb U308 adjusted to $8.69 and $2.62 respectively
The data is based off the resource contained within the company's 2023 Annual Report. Alligator, Lotus and Elevate incorporate the latest mineral resource upgrade/acquisition.
The data does not take into consideration other factors that may influence project economics such as geographic location, project status, uranium grades etc. which means the data is a good starting point for comparisons but does not capture the full picture
The first thing you'll notice is that an Australian resource is worth at least 2-3 times more than resources from Namibia, Canada and the US – Even if the project is in a relatively early stage such as Alligator Energy's Samphire Uranium Project.
Namibia is considered politically stable with a government that actively encourages foreign investment but the market often perceives the entire region as high risk. This discounting is consistent across other miners from sectors such as gold and lithium.
Peninsula Energy is the only ex-Australia name that's in construction phase. The company successfully raised $50 million last year to fund continuing construction works to restart its Lance Project in Wyoming. What's interesting is that almost 10% of the company's shares are shorted.
Namibia has one of the richest uranium mineral reserves in the world and the third-largest producer of uranium in 2022. But most ASX-listed players with Namibian projects are still working through key studies and further exploration. What happens when a project hits construction phase like Paladin Energy? Could we see:
A substantial re-rate as the company begins to put things together
No change as the markets continue to perceive projects in the region as high risk as well as substantial project financing risks (e.g. dilution from capital raise, debt etc.)
A question that might stand out is whether or not having a 'cheap' resource results in greater share price upside.
Let's take a look (I've left the order of stocks from highest to lowest A $/lb U308).
Data as at Tuesday, 16 January 2024.
The answer: Not really.
The best performing uranium stocks in the past month are: Aurora (+97.4%), Deep Yellow (+55.7%) and Boss Energy (+46.0%).
While the best performing names in the past year are: Boss Energy (+132.5%), Alligator Energy (+86.9%) and Deep Yellow (+86.8%).
Leadership Status
Most uranium stocks were rangebound between September 2021 and May 2023. Interestingly, Boss Energy was the first name to break above the longstanding trading range.
Boss Energy vs. other uranium stocks (Source: TradingView)
Despite Boss Energy's seemingly expensive price tag (relative to other uranium stocks) – Its outperformance has only continued to widen.
