Ground Breakers: Boss on cusp of uranium green light at Honeymoon after mega raising

Uranium prices stormed to decade highs last week of ~US$60/lb on the back of supply concerns.

Russia and its ally states in Kazakhstan and Uzbekistan are major suppliers of yellowcake to nuclear facilities around the world, especially the USA, which is reliant on the nuclear industry for 20% of its power needs.

That run was remarkable in a way, coming just days after a fire caused by Russian shelling at Zaporizhzhia in Ukraine, Europe’s largest nuclear power plant, prompted meltdown fears and sent uranium stocks into a spiral.

Those fears prompted WA uranium hopeful Vimy Resources (ASX:VMY) to knock down the size of a capital raising planned to deliver capital for its Mulga Rock project.

But the renewed price run — at ~US$55/lb uranium is fetching three times its cyclical lows of five years ago — has finally given Boss Energy (ASX:BOE), Australia’s likely next uranium producer, confidence to hit the gas.

It is rattling the tin for $125 million via a $120 million placement to institutional and sophisticated investors at $2.15 and plans to secure a further $5m from existing shareholders in a share purchase plan.

Like a Boss

Boss says its placement will boost its cash and uranium inventory to a total value of over $200m, enough to fund the development of its Honeymoon uranium mine without securing contracts.

Honeymoon would be the third uranium mine in Australia on top of BHP’s multi-commodity Olympic Dam deposit and the Beverley uranium mine, all three in South Australia.

Its major advantage is that it is a restart of an old project with a granted mining lease and export permit already in place, avoiding some of the hurdles new uranium projects have in securing environmental and other approvals.

Boss says Honeymoon could be up and running within 18 months of the start of development.

It says the development costs will come in at $113m including contingency.

A key step will be completing its FEED study this month, which Boss says is practically complete and materially in line with its expanded feasibility study estimates.

Don’t jump the gun

Boss MD Duncan Craib said the equity route was favourable compared to debt funding because it meant the company could avoid locking in long-term contracts too early.

It is a sign the company sees continued upside for uranium prices despite hitting multi-year highs in recent days. Honeymoon would be profitable at current spot prices, with its life of mine AISC pegged at an average US$25.60/lb against recent spot of ~US$60/lb.

“The capital raising will ensure Boss is funded through to the start of production at Honeymoon,” he said.

“We have deliberately structured our funding to maintain a highly conservative and robust balance sheet with no debt, $135m of net cash and an additional $100m contingency from our existing strategic uranium inventory.

“We have not attained any debt as it requires fixing the uranium price through long term contracts.

“Boss anticipates that committing to long-term contracts in the current rising uranium price environment would adversely impact the long term upside potential of Boss and we intend to wait for further increases in contract prices before making any offtake commitments.”

Boss Energy share price today:

Resources hold ground despite iron ore tumble

Iron ore fell further on Covid outbreaks in China which have hammered sentiment for downstream steel demands, as the country continues to resort to lockdowns to keep the virus in check.

As it happens miners were largely unaffected after China caused commodities and the local resources names to tank yesterday.

The ASX200 Resources index was up 0.43% at 12.45pm AEDT, with the broader materials sector following the market into the green (+0.45%).

Lithium explorer Lake Resources (ASX:LKE) surged more than 11% to lead the mid-tier while Nickel Mines (ASX:NIC), punished for its association with under-fire Chinese stainless steel producer Tsingshan in recent weeks, was back on the winner’s list, up 4.33%.

Nickel Mines has some support from our man Guy Le Page, who reckons the demise of Tsingshan has been overstated by the Aussie market.