Money Talks: Uranium has good ‘tailwind fundamentals’ and could be set to ignite
Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for. Today, we hear from Arun Sengupta, executive director at Canary Capital.
While all the money is going into financials and computing at the moment, Sengupta says he looks for opportunities that are yet to run.
“I suppose I look to find something of value before anyone else does,” he told Stockhead.
“If you have a look at something that hasn’t performed well but has good tailwind fundamentals behind it, I believe that’s uranium.
“In terms of a technical basis, they haven’t as a sector picked up, but if you look at the fundamentals behind uranium last year, the actual uranium price went up quite a bit. It was actually quite a good performing commodity in its own right.”
The case for uranium is strong, according to Sengupta, particularly when you factor in there are 55 nuclear power reactors currently under construction and another 150 on the cards.
“If you go back five years or 10 years ago, there was 450 uranium companies in the world, actual uranium producers,” Sengupta said.
“There are now 40. You’re going to need uranium to run your nuclear power plant. The number of people producing it has decreased exponentially.”
The negative sentiment around the use of nuclear power also seems to be shifting.
“I think the psychology against uranium has changed,” Sengupta said.
“Even the Union of Concerned Scientists have dropped their historical opposition to nuclear power.
“They’ve said that really the transition from fossil fuels to green energy cannot be made without the help of uranium to fill the gap in between.”
One ASX small cap Sengupta sees potential in is Peninsula Energy (ASX:PEN), which has a market cap of $65.5m at its current share price of 26.5c.
Sengupta says Peninsula is a buy at 16-20c.
Peninsula is already producing uranium from its Lance operation in Wyoming, US.
The company sold 106,000 pounds of uranium during the March quarter which earnt it US$3.65m ($5.2m).
Sengupta said he would look for the whole uranium sector to start performing and then get into a stock like Peninsula.
Another stock Sengupta likes is Berkeley Energia (ASX:BKY), which has a market cap of $81.4m at its current share price of 31.5c.
He says Berkeley is a buy at 21c.
Berkeley is advancing its Salamanca uranium mine in Spain towards production.
It is expected to produce over 4 million pounds of uranium at a cost of US$13.30 per pound over a 10-year mine life.
Arun Sengupta has over 30 years of experience working in the financial markets, private equity and corporate finance sector. Sengupta started his career in 1987 working in Treasury at Westpac Banking Corporation before starting his own trading business in 1992.