Barry FitzGerald: When the second wind blows, these uranium juniors are set to sail

The uranium price has taken a breather after its stellar run. It has settled back at $US100/lb from the recent peak of $US106/lb which was more than double its starting price for CY2023 of $US48/lb.

There are lots of reasons for the run-up in the price during 2023, topped off as it was by the recent kick to $US106/lb in response to the world’s biggest producer, Kazakhstan’s Kazatomprom, disclosing it could struggle to produce at planned levels in 2024/25.

It was due to update the market on its production outlook at its December quarter briefing on Friday (Australian time) which was ahead of Garimpeiro’s deadline. But needless to say the briefing will be the subject of intense scrutiny by uranium watchers.

The same goes for Canadian giant Cameco which is due to update its 2024 guidance next Friday (Australian time) after previously indicating slightly lower production for the year. Along with what Kazatomprom says, the update from Cameco will determine short-term sentiment on prices.

That stands to reason as collectively the pair control about 64% of global mine supply (39% on an attributable basis).

Analysts at Canada’s BMO Capital Markets reckon that if Kazatomprom’s and Cameco’s production guidance comes in lower than expected and/or meaningfully lower than their respective sales commitments, we could see upward pressure return to the spot market.

It said that while there was potential downside to spot prices because of likely financial market selling, near-term catalysts are mostly positive.

Back home, longtime uranium watcher Shaw and Partners reckons uranium’s recent push through $US100/lb has been bigger and earlier than it expected.

But it added that as the market remains “orderly’’, the price increases do not appear to be driven by panic buying. Not yet anyway.

“That might change if utilities believe that they will have difficulty covering their fuel demands late this decade.”

Given that outlook, Shaws materially upgraded its uranium price forecast to peak pricing of $US150/lb in 2025/26/27.

When it plugged that expectation in to its price expectations for uranium stocks it follows, the impact was understandably powerful.

The report was penned on January 22. Adjusting for share price moves since, the implied potential upside in the price targets from current share prices was 17% to $1.50 for Paladin (ASX:PDN), 45% to $7.60 for Silex (ASX:SLX), 178% to 34c for Peninsula (ASX:PEN), 105% to 72c for Lotus (ASX:LOT) and 95% to $7.04 for Bannerman (ASX:BMN).

So there could be explosive action in the uranium stocks. Garimpeiro’s area of interest includes those stocks, as well as some names not mentioned on the smaller market cap side of things.

Alligator (ASX:AGE) has been mentioned here previously on the strength of its Samphire project in uranium friendly South Australia. The quality and scale of the resource continues to grow and the company has plenty of cash on hand to step things up in 2024.

Samphire is of the in-situ recovery (ISR) type practised elsewhere in SA. Notably, Alligator has recently put its foot on more ISR expertise by taking up a position in the unlisted EnviroCopper which has been working up two oxide copper ISR projects in SA.

Alligator was trading mid-week at 7.6c for a market cap of $285 million.

Garimpeiro has also been keeping his eye on ASX-listed Canadian uranium exploration specialist 92 Energy (ASX:92E). It was a 36c stock in December when it announced its involvement in a three-way merger with Canadian companies ATHA and Latitude, with ATHA taking charge of the enlarged group.

92E’s share has since taken off to 56.5c. The consideration is ATHA scrip which has been performing well in response to the merger news. So much so that a big arbitrage has opened up between 92E’s share price and the imputed value of the ATHA scrip offer.

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