ASX uranium stocks: Here’s why you might want to consider them and our top 3 picks

Nick Sundich Nick Sundich, June 14, 2023

ASX uranium stocks have gained increased attention in recent months as uranium prices have undergone a major rally for the first time in roughly a decade. Demand for uranium, like other commodities, is expected to grow at the world decarbonises.

Although uranium is not the only ‘decarbonisation’ resource, a difference with this sector is that a high proportion of companies aren’t explorers but companies with existing mines that are looking to bring them back into production after they were mothballed due to low prices.

But which ASX uranium stocks are the best ones?

 

What are the Best ASX uranium stocks to invest in right now?

Check our buy/sell tips on the top uranium stocks in ASX

 

Why might you consider investing in ASX uranium stocks?

Uranium is a non-renewable resource with low carbon emissions, making it an attractive alternative to traditional fossil fuels. It has a wide range of applications in nuclear power plants and can be used for medical research and other industrial processes.

The uranium market has never reached its pre-GFC highs (of over US$140 per pound), being hit by that crisis along with the Fukushima nuclear tragedy. But as the push for decarbonisation grows, uranium has become increasingly sought after as an effective fuel source with minimal environmental impact.

And prices have rallied to levels that will enable several mothballed projects to restart and deposits with potential to grow into operating mines suddenly become appealing to explore at. And there is a handful of uranium stocks that might be able to capitalise as demand ticks up.

 

Uranium spot price, log scale (Source: Trading Economics)

 

 

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What makes the best ASX uranium stocks?

There are several ASX uranium stocks, but we will only consider our top 3 picks. All 3 stocks we mention have solid projects that actually were operating mines once upon a time, only to be mothballed due to low prices. But they are expected to re-start production in the next 12 months which will provide a boost to their bottom lines. This would make them safer investments compared to companies that are just exploring for uranium and have no certainty that they have an operating project.

 

1. Boss Energy (ASX:BOE)

Boss Energy has had the South Australian Honeymoon Uranium Project since 2015. The deposit, which has a JORC Resource of 71.6Mlb at an average grade of 620ppm, has lied dormant for a decade since the previous owners mothballed it due to low prices.

Boss has gradually worked towards bringing it back into production completing feasibility studies, raising capital and undertaking infrastructure construction works at the project.

Production will begin by the end of CY23. It is anticipated that the mine can last for 11 years, produce 21.81Mlb, with an IRR of 47.1% and a pre-tax NPV of A$412m (using a US$60/lb spot price and an 8% discount rate). It anticipates low capital costs of just US$80m and US$580m in free cash flow over the life of the project.

 

2. Peninsula Energy (ASX:PEN)

This company just might have the most upside because it is re-starting production in just a manner of months. Its flagship Lance project lies in Wyoming, USA and it is undergoing final construction before production starts again.

It is one of the largest US uranium projects with 53.7Mlb of JRC Resources. The conservative DFS, estimated a 14-year mine life generating 14.4Mlb, deriving a 43% pre-tax IRR, US$895.2 project revenue across the life of the project and a US$124.8m pre-tax NPV.

We also note that it will produce with the low-pH ISR method to produce. The method involves recovering minerals from a suitable orebody before dissolving them and pumping the solution to the surface where the minerals can be recovered, thereby generating no tailings or waste rock. This means the project, which is the only US project authorised to use this operation. will be a low-cost operation. There may be further upside from exploration work conducted at the project.

 

3. Paladin Energy (ASX:PDN)

First of all we need to disclose that Paladin is focused in Namibia – a nation that has a significant proportion of the world’s uranium resources, but spooked investors only a couple of weeks ago when the minister for mining hinted that the government was considering having a free-carried holding in the companies. It has not backed down from these but has clarified that it would be done ‘in a balanced way considering the interests of both investors and the Namibian nation’.

Paladin owns 75% of the the Langer Heinrich Mine which it intends on restarting in the March quarter of CY24. It anticipates a 17 year mine life, producing 77Mlb of uranium. It also owns a handful of exploration assets in Canada and Australia.

 

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