Boss Energy (ASX:BOE): Its Honeymoon Uranium Project is back in production! So why have shares had a bad 2024?

Boss Energy’s (ASX:BOE) South Australian project may be called Honeymoon, but it has been anything but that for investors.

Boss Energy had a great 2022 and 2023, but a bad 2024

It had been a stellar couple of years in 2022 and 2023 as investors rode the uranium wave. After more than a decade in the doldrums post-GFC, yellowcake prices reached levels not seen since then. Boss Energy had been planning to re-start Honeymoon since it took over the project in late 2015. But as prices recovered, things were really getting serious as it raised $125m to fully fund development of the project and made a Final Investment Decision.

Source: Company

Boss Energy’s Honeymoon project was officially restarted in 2024, but it was not the best timing. After uranium prices peaked in January (at over US$100 per pound), they corrected and are now at US$76.40 a pound. Even though there is interest in nuclear power (look no further than Peter Dutton’s plan or at tech giants to invest in nuclear-backed solutions for AI-related energy requirements), the talk has not (yet) translated into uranium buying and procurement. Again, look at Peter Dutton’s plan to build nuclear power plants – this will take multiple decades to realise.

Moreover, as companies like Boss restart production, this is resulting in an over-supply. Investment bank UBS expects a 3.4% increase in uranium consumption and a 6-7% growth in supply. The former figure could be lower if China’s economy is weak, and the latter could be higher if junior players like Boss and Paladin restart production quickly.

Granted, there are arguments that uranium could go higher (like Trump’s favourability towards yellowcake and potential restrictions on imports on yellowcake from Russia). And there are some brokers more optimistic than UBS. Bank of America for instance expects a 50% increase in prices to US$120 a pound. Morgan Stanley is more cautious but still expects an increase to US$90 a pound.

Boss Energy’s Honeymoon project

Lying in South Australia, it has 52.4Mt at 0.062% uranium for 71.6Mlbs. The Measured category has 3.1Mt for 7.6Mlbs uranium. Boss anticipates a 10 year mine life with 2.5Mlb annual production over that time. And that’s before you account for further exploration at the project – it reckons there’s a 100Mlb exploration target. In FY25 alone, it anticipates 850k lbs.

Boss prides itself on being a low-cost operation. This is because it uses In-Situ Recovery (ISR) Mining. This involves leach liquor being injected through the uranium hosted ore body to recover high grade pregnant liquor solution by production wells and is pumped to the surface. Uranium is extracted using ion exchange, precipitated out and dried to produce uranium. This is 2/3 the cost of conventional mining and the average capex is less than 15% of conventional mines.

Source: Company

The company has a market cap of over US$1.3bn, zero debt and $245m in cash and liquid assets. Its addition to the ASX 200 has raised its attention among institutional investors. The company has entered into binding sales agreements to sell 3.5Mlbs to major American an European power utilities over the next 8 years.

And many investors may not know this, but it picked up 30% of a project in Texas – the Alta Mesa ISR Uranium Project. This has produced the third largest amount of uranium of all ISR assets in the US, producing 4.5Mlb between 2005 and 2013. It has a 20Mlb total high-grade resource of 1,200ppm and a 1.5Mlb plant capacity.

Conclusion

Boss Energy deserves a hat tip because it took courage to hold onto an asset like Honeymoon for so long, in optimism such a time would come when production there could be profitable again. We are optimistic about the long-term outlook for uranium.

However, we think even if the company keeps its production on track, it’ll be difficult to see upward momentum without a gain in uranium prices. And it’ll take evidence of concrete investors by those tech giants, or maybe even an election win by Peter Dutton to have investors more confident in yellowcake.

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