Barry FitzGerald: With uranium set to jump, Boss is racing to get Honeymoon over the production line
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After an initial flurry in response to President Trump kiboshing the idea of quotas on uranium imports, things have settled down for the dozen or so ASX-listed stocks that have the nuclear fuel as their prime focus.
So where to from here for ASX players? It is all about the uranium price and its ability to breakout from 12 years of being in the doldrums.
When it comes to things uranium, Michael Alkin at the US uranium-focussed hedge fund Sachem Cove Partners is considered to be something of a guru. Some would even say he is the oracle of uranium.
So his take on President Trump taking no action on the Section 232 petitions from a couple of US uranium groups wanting protection has been eagerly awaited.
And for the uranium bulls out there, Alkin has not disappointed. He reckons the uranium price needs to nearly triple from today’s (spot) price of about $US25/lb. Now, that would be fun for the ASX uranium stocks.
Alkin said in his “flash note’’ to clients that Section 232 decision was really nothing but noise.
(It was never going to get up, given the lobbying efforts of the two petitioners with their 400 jobs at stake was no match for that of the nuclear power industry which accounts for about 20% of US electricity.)
The bigger theme according to Alkin is that the “uranium market has entered a significant supply deficit and in order to incentivise the necessary production to meet rising power demand – nuclear power is a growth business – the price of uranium needs to nearly triple.’’
Now it has to be said that Alkin is talking his own book given Sachem Cohen Partners is heavily invested in Canadian and African uranium stocks, and has been “building exposure’’ to Australian uranium stocks.
But read the flash note in full and it is difficult to find fault with the argument that uranium prices need to about triple if nuclear power is to remain (and grow) as one of the world’s best weapons against global warming.
Garimpeiro today is not going to give a rundown on all of the ASX uranium players.
But having braved icy conditions to take in Tuesday night’s presentation by Boss Resources (ASX:BOE) to investors at the Melbourne Mining Club’s Cutting Edge series, he does want to pass on some obviously well-timed commentary in light of the Section 232 decision from the boss of Boss, Duncan Craib.
Some background first. Boss reckons it will be the first of the wannabe uranium stocks to get into production from its Honeymoon project in South Australia. It is trading at 5.6c, having edged up from 5.2c ahead of the Section 232 decision.
Its confidence about being the first goes to Honeymoon having been a producer before under Russian and Japanese ownership, with the $170m in established infrastructure left behind in good condition and ready to go when incentive pricing for uranium returns.
Craib himself is considered something of a uranium guru. Before arriving at Boss he was involved in the companies behind the development of the big Husab uranium mine in Namibia which ended up in Chinese hands in 2012.
He told the Cutting Edge crowd three things prompted him to come back to Australia to take the helm at Boss.
First up was his read that we are on the cusp of a new emerging bull market for uranium. Secondly, Honeymoon is a quality asset which “is destined to become Australia’s next uranium producer, perhaps the next producer worldwide.’’
And thirdly, Honeymoon’s “compelling economic thesis’’ with its estimated production costs of less than $US24/lb.
Craib agrees with Alkin that prices have to rise. About 75% of the world industry is uneconomic with prices below $US60/lb.
“Prices have to rise to encourage new production,’’ he said.
NEXT: In this latest edition of The Explorers Podcast, Barry chats with Bernard Rowe, managing director of ioneer Ltd: