Why uranium stocks are ripping higher on Thursday – Paladin Energy, Boss and Deep Yellow
Uranium stocks like Paladin Energy, Boss and Deep Yellow all opened 4-6% higher on Thursday. Here's why.
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KEY POINTS
- Kazakhstan's new uranium extraction tax hike, effective 2025-2026, is expected to curb supply growth for one of the world's largest uranium producers
- Kazatomprom faces potential uranium-related taxes of up to 18%, providing less incentive to grow production volumes
- Significant short interest in major uranium stocks and recent price volatility highlight the sector's choppiness despite positive long-term outlook
Uranium stocks are soaring on Thursday after an unexpected hike in uranium extraction taxes in Kazakhstan. This move is expected to curb future supply growth from the country, which is home to the world's largest producer – Kazatomprom.
According to amendments to the tax legislation signed by President Kassym-Jomart Tokayev, the new Mineral Extraction Tax (MET) will increase from 6% to 9% in 2025.
The biggest change will occur from 2026, where the government will roll out a two-tier MET based on production output and uranium spot prices.
New MET rates from 2026 for production:
Annual Production (U308) | MET Rate (%) |
|---|---|
Up to 500 tonnes (~1.3Mlb) | 4% |
Up to 1,000 tonnes (~2.6Mlb) | 6% |
Up to 2,000 tonnes (~5.2Mlb) | 9% |
Up to 3,000 tonnes (~7.8Mlb) | 12% |
Up to 4,000 tonnes (~10.4Mlb) | 15% |
Above 4,000 tonnes | 18% |
New MET rates for average weighted uranium prices:
Weighted average U308 Price | Additional MET Rate (%) |
|---|---|
Above US$70/lb | 0.5% |
Above US$80/lb | 1.0% |
Above US$90/lb | 1.5% |
Above US$100/lb | 2.0% |
Above US$110/lb | 2.5% |
For perspective, Kazatomprom guided to 21,750 tonnes of uranium for 2024 and uranium prices are currently trading around the US$85/lb level.
Bad for Kazatomprom, good for everyone else
BMO says the "new rates are not marginal, thus the new MET penalises large mining assets with potential MET of up to 20.5% (18% for anything over 4ktU, or ~10.4Mlb U3O8, plus an additional 2.5% if the uranium price is >US$110/lb)," as reported by Zerohedge.
The analysts warn that the new rates "appear to provide less incentive for Kazatomprom to increase production, in our view, with less penalty for higher uranium prices than production, which could add to support for the uranium price."
A MET tax of up to 18% linked to production and an additional 2.5% linked to uranium prices could shave off as much as 5-12% of Kazatomprom's future cash flow.
Uranium stocks rally
Pretty much every single uranium stock opened 4-6% higher as the market opened on Thursday.
Ticker | Company | Price | % Chg | 1-Year |
|---|---|---|---|---|
Bannerman Energy | $3.30 | 8.5% | 111.0% | |
Deep Yellow | $1.47 | 8.0% | 113.2% | |
Alligator Energy | $0.05 | 8.0% | 51.4% | |
Paladin Energy | $14.11 | 7.1% | 82.5% | |
Boss Energy | $4.00 | 6.6% | 28.9% | |
Elevate Uranium | $0.41 | 6.6% | 39.6% | |
Lotus Resources | $0.36 | 6.0% | 100.0% | |
Aura Energy | $0.14 | 5.3% | -31.3% | |
Devex Resources | $0.30 | 5.3% | 5.3% | |
Terra Uranium | $0.08 | 4.0% | -54.9% | |
Peninsula Energy | $0.11 | 1.9% | -34.6% |
Data as at 10:30 am AEST on Thursday, 11 July 2024
Another important factor to consider is the significant short interest in major uranium stocks. As of July 4, Paladin Energy, Boss Energy, and Deep Yellow had short interest levels of 4.22%, 6.36%, and 5.69%, respectively.
Note: Short selling data is four days behind today's date because reporting is not mandatory until three business days after the trade.
While the high short interest is notable, it's premature to declare a short squeeze. Most uranium stocks are rebounding today after a 20-40% decline from their late-May peaks. The sector's long-term outlook remains optimistic, driven by factors like energy security concerns, decarbonisation efforts, and growing nuclear energy adoption. However, it's hard to deny that uranium remains one of the most choppy sectors out there.
