Monsters of Rock: How much is Boss Energy worth, and who avoided the selldown today?

Analysts at Bell Potter think Boss Energy (ASX:BOE) could make a final investment decision on the restart of the Honeymoon uranium mine as early as March next year.

Bell Potter has slapped a speculative buy recommendation on Boss after initiating coverage last week with a 44c price target. The yellowcake stock was trading at 35c today, giving it a market cap of $780 million.

Its main game is the Honeymoon uranium mine, which it picked up during the uranium doldrums and has been shut for almost a decade.

Boss has outlined a ~$107 million (US$80 million) capex cost to refire the mine, which would become just the third operating uranium mine in Australia should it enter production.

It is likely to have around a 12 month timeline from FID to first production, with Boss’ primary aim to lock up long-term contracts with utilities to support Honeymoon’s return to the uranium market.

It is a market that has been simmering this year after a decade in the pits, briefly touching nine year highs of more than US$50/lb earlier this year as Sprott’s new physical uranium trust and other investors began to hoover up product on the lightly traded spot market.

According to market leader Cameco monthly average spot prices have risen sharply from US$27.98/lb in February to US$45.20/lb in October.

“FID could be reached by March 2022, we believe, as long term uranium prices continue to rise towards the theoretical re-start price of US$50/lb, on the back of a supportive macro backdrop,” Bell Potter analyst Regan Burrows said.

“With the thinly traded spot production being soaked up by opportunistic physical uranium investment vehicles, we believe it is only a matter of time until global utilities are forced to contract supply at higher, more sustainable, prices.

“Securing long term off-take agreements is the key hurdle for BOE to restart operations at Honeymoon. Historically, the long term contract price has traded at a ~20% premium to the prevailing spot price.

“However due to recent purchases from physically backed funds, the spot price is now trading at a significant premium to the term price. This short term dislocation has the potential to form a new floor price for long term contracts, one which encourages new development and exploration.”

Burrows said Boss had indicated they would be comfortable making an FID once offtake agreements for 40-50% of production was locked in.

He said under Bell Potter’s base case scenario Boss would be expected to enter contracts at ~US$50/lb with a ceiling between US$70-80/lb, generating life of mine EBITDA margins of 49%, rising to 55% at a US$60/lb term price scenario.

Boss Energy share price today:

Materials index slides as AGM season drags

Green cement turned battery turned green steel play Calix (ASX:CXL) is on a hell of a run and celebrated its 2021 AGM with an 11.2% gain to lead the mid-tier stocks on the ASX.

Chalice Mining (ASX:CHN) was also up to an all time high, rising 3.71% or 37c to $10.33.

It now has a market cap of $3.65 billion, further boosting the value of founder Tim Goyder’s 10.8% stake to $394 million.

Negative economic news in China, led by falling steel production, weighed on the ASX 200 miners, with all of the big iron ore miners slipping into the red.

The materials index was off 1.66% for the day, the biggest loser among the 11 ASX sectors.

Off market, Vulcan Energy (ASX:VUL) returned to court after being granted an injunction against short seller J Capital, preventing the firm and research author from sharing a critical report and subsequent reply that prompted a selldown of its stock last month.

Vulcan subsequently responded, telling investors in an ASX release, “the Report contains many claims that are wrong and misleading”, saying it categorically rejected J Capital’s claims.

Federal Court Justice Craig Colvin extended the original orders for a further two weeks.

Vulcan shares were up slightly to $10.60 at the close.