Barry FitzGerald: The long-term buyers are warming up and Shaw has 7 hot uranium stocks to fuel the fire

The reasons why the Aussie uranium sector could well claim hot status before long have continued to mount.

Stockhead readers don’t need a roll call of them all but Garimpeiro reckons the most important was the recent advice from Canadian giant Cameco that nuclear power utilities were, at long last, signing long-term contracts again.

Long-term contracts count more than anything in the industry. As Cameco put it in a capital markets call for its profit report, there is no substitute for a full blown utility driven long-term contracting cycle.

For Aussie juniors looking to restart a project, or develop a new one, long-term supply contracts are all important. Spot markets are of great interest to the funds specialising in physical uranium, and are handy in gauging uranium’s performance.

But the spot price (currently more than 50% higher than the level of a year ago at $US43.25/lb) is pretty much meaningless for the uranium explorers/developers/miners. They want long-term offtake and price security.

As suggested earlier, there are another 10 or so reasons why uranium market watchers and the Aussie uranium sector reckon the good times are about to roll again. The reasons were pulled together in a uranium sector report this week by long-time sector watcher, Shaw and Partners.

“It’s time to glow up again; Uranium sector renaissance to continue,’’ was the headline in the 51-page report.

“We remain positive on the sector on a multi-year thematic. Our thesis is based on a decade of underinvestment and longer-term demand supported by increased electrification and decarbonisation,’’ Shaw said.

It upgraded its long-term price expectation to $US65/lb, as well as upgrading company share price targets across the board for the uranium stocks it follows. The share price targets range from a 26% premium to the prevailing share price, up to 139%.

A large slice of that sweet, sweet yellowcake please

Shaw has the first five uranium stocks in the following sector coverage list as “buys’’ and the last two (Lotus and Bannerman) as “holds’’.

The report does the right thing by outlining the risks of investing in uranium juniors.

The commentary after each of Shaw’s Hot 7 is the firm’s, not Garimpeiro’s, but he is pretty much in agreement with what is said.

Paladin (ASX:PDN): Trading at 73c compared with Shaw’s price target of $1.15 (57% higher). Shaw’s preferred exposure to an improving uranium market. It is well positioned for a Langer Heinrich restart and a contract price above $US50/lb in the near term appears realistic.

Boss (ASX:BOE): Trading at $2.06 compared with Shaw’s price target of $3.25 (58% higher). Shaw expects the Honeymoon project in South Australia to be one of the first restarts once Western utilities begin signing uranium contracts again.

Peninsula (ASX:PEN): Trading at 16.7c compared with Shaw’s target price of 40c (139% higher). The company has an existing uranium term contract which provides a head start over its peers.

Vimy (ASX:VMY): Trading at 17.7c compared with Shaw’s target price of 35c (98% higher). Mulga Rock in Western Australia is one of Australia’s largest uranium development projects and has received key State and Federal permits.

Silex (ASX:SLX): Trading at $1.20 compared with Shaw’s target price of $3.40 (183% higher). It appears to be materially undervalued if the company can continue to de-risk its enrichment technology.

Lotus (ASX:LOT): Trading at 24.5c compared with Shaw’s target price 31c (26% higher). The resource base at its Kayelekera project is growing and a DFS is expected in Q3 this year which should build on the Q3 2020 scoping study.

Bannerman (ASX:BMN): Trading at 20c compared with Shaw’s target price of 30c (50% higher). Shaw believes Bannerman is the most leveraged name in the sector. The Etango resource in Namibia provides both scale and scalability. The company is expected to deliver a DFS in the 3Q this year for Etango-8.