The near-term uranium producers Boss (ASX:BOE) and Paladin (ASX:PDN) have been on fire in response to spot prices for the nuclear pushing back over the $US60/lb level.

Their share price gains in the last month have been something to behold, with Boss up 40% and Paladin up 22%. On a combined basis, the market cap of the pair has increased by close to $1 billion.

The latest share price push for the pair, and the trigger for the $US60/lb breakthrough, came from the world’s number two producer, Canada’s Cameco.

It disclosed production at two key Canadian mines would be 8% lower this year due to some operational issues.

Cameco fuelled the uranium price gain by making good news of the bad, saying the production shortfall “further highlights the growing security of supply risk at a time when we believe the demand outlook is stronger and more durable than ever and where the risk has shifted from producers to utilities.’’

“Uncertainty about where nuclear fuel supplies will come from to satisfy growing demand continues to drive long-term contracting, with clear evidence that the broader uranium market is moving toward replacement rate contracting for the first time in over a decade,’’ the Canadians said.

“This is the type of contracting necessary to promote the price discovery already seen in the enrichment and conversion markets, and that is expected to incentivise investments in the supply needed to satisfy the growing long-term requirements.’’

Stockheaders have been on-board with all that more than most and are hopefully enjoying a turbo-boost to their portfolios while the rest of the ASX mining sector limps along on broader global economic concerns and the China slowdown.

The Chinese aren’t slowing down in nuclear power though, with 150 new reactors to be built over the next 15 years. It seems that they like to breath clean air like the rest of us.

Garimpeiro notes that the uranium boom underway has yet to rub off on the ASX-listed explorers and would-be developers in a meaningful way.

So he has gone looking amongst those that he follows and came up with Alligator Energy (ASX:AGE) as one that could be worth watching in the next 6-12 months or so due to a likely strong newsflow, with the uranium price doing its thing in the background.

There is also an interesting comparison that can be made with Boss which now has market cap of more than $1.4 billion. Alligator was trading during the week at 5.5c for a market cap of about $180m.
 

Power up

There is a reason for the big difference in the market caps. Boss is due to restart its Honeymoon uranium mine in South Australia in the coming December quarter, with the all-in sustaining cost of production put at $US25.60/lb.

And as a derisking exercise and a demonstration of its faith in the uranium thematic, Boss bought 1.25Mlbs of physical uranium at around $US30/lb a while back. It means utilities can contract for supplies from Boss with confidence.

Honeymoon is of the in-situ recovery type (ISR) which accounts for 60% of world production from existing operations in SA, and on a much larger scale from Kazakhstan which because it is within a Soviet orbit, is not everyone’s ideal shopping destination for uranium.

All that is great for Boss. What about Alligator?

Its name is a throwback to 13 years ago when it listed as a uranium explorer in the Alligator River uranium province in the Northern Territory. It still has exploration interests there and is planning to step up exploration near the historic high-grade Nabarlek mine.

But it is Alligator’s Samphire ISR project near Whyalla in SA that has caught Garimpeiro’s eye in light of the market’s love of Boss.

Samphire was the subject of a scoping study released earlier this year that scoped a 1 million pounds a year project (Boss is bigger at 2.45M/lb annually) with an all-in sustaining cost estimate of $US30.20/lb.

Alligator is now working on project enhancements, most notably the potential to start out at higher rate of 1.2M/lbs annually which would have a dramatic impact on things like the internal rate of return and net present value metrics presented in the scoping study.

It is only a target at this stage but could begin to take shape in the final months of the year with the expected release of a resource upgrade, an updated scoping study, and a stock exchange compliant “exploration target’’ to demonstrate the region’s upside.

It is all stuff to look out for and has prompted some low-key speculation that Boss with its mighty market cap could well take a shine to Samphire once it has Honeymoon on song.

Again, it is low-key speculation, with Garimpeiro preferring to focus on Samphire’s emerging value story alone. But the chatter is out there.
 
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

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