Boss sends bullish warning to growing army of uranium shorters

It has been a tough month for the leading ASX-listed uranium stocks notwithstanding the non-Australia-world’s pile on to nuclear energy as a big part of the answer to global decarbonisation.

Then there is Russia saying nyet to supply the US with processed fuel and the US saying no thanks to supplies from Russia, both at a time when hostilities over Ukraine have taken a turn for the worse.

Some weakness in the spot price for the nuclear fuel is being held up as the reason why the ASX sector has been struggling. But the reality is that the long-term uranium price – the important one to watch as it is the one that determines contract prices with the power utilities – is at 21-month highs.

So clearly something else has been at play. It’s all about the ramp-up surprises to the downside at uranium mine restarts by Paladin (PDN, it is also sweating on its Canadian takeover offer getting the all-clear) and Peninsula (PEN).

The fallout has resulted in Paladin falling to a 15-month low and Peninsula to a 4-year low. There’s nothing terminal in the reduced FY2025 production guidance by the pair. It’s just that ramping up restarted uranium projects has its challenges and takes time.

There has been a rub-off from the Paladin and Peninsula ramp-up downgrades on Boss (BOE) which is ramping up production at its restarted Honeymoon project in South Australia. The stock is at a 3-month low of $2.96 and is also one of the most-shorted stocks on the ASX (14.9%).

But judging by commentary at this week’s annual meeting by its chief executive Duncan Craib, Boss is doing just fine.

“We are very confident that we are going to achieve our production guidance of 850,000/lbs by June next year, and then onwards to 1.6 million/lbs, and then to the 2.45 million/lbs nameplate,” Craib said.

He had just returned from Honeymoon in SA’s outback and acknowledged that like its neighbours in the broader region, including BHP at Olympic Dam, power supplies were an issue in October when some transmission lines went down when a big storm came through.

“Despite that, we are still on track to achieve our ramp-up schedule and hit our production guidance for next year,” Craib said.

Honeymoon is an-situ leach operation which was originally a producer up until 2013. It produced its first uranium in its second life in April this year, with Boss (it acquired the project in 2015) first switching from solvent extraction to an ion-exchange process, as well as making other enhancements.

The uranium is accessed through wellfield developments, with the second field brought on two weeks ago and a third one to come online next month. More ion-exchange columns are also to be added.

“The results from the well fields have been quite spectacular to date, (albeit) they are in a high grade part of the resource,” Craib said.

He added that a week or so ago Boss produced 7,400/lbs or 10 per cent of its monthly target in a single day. “It is a terrific outcome to see,” he said.

Having said that, Craib acknowledged some in the market – including the shorts no doubt – were waiting on Honeymoon’s cost guidance.

The guidance is to be announced after the current (December) quarter is complete, with Boss understandably wanting it to be representative going forward given the project is still in ramp-up phase and more processing capacity (ion-exchange columns) is being added.

So the stand-off between the shorts in the stock and Craib’s apparent pleasure with how things are going is unlikely to be resolved until sometime early in the new year. A difficult but passing honeymoon period perhaps, and something for the shorts to ponder over the festive season.

ARGONAUT’S BUPs:

Argonaut’s annual analysis of the best undeveloped projects (BUP) owned by ASX-listed companies has just landed.

A nice bit of work it is too, all 104-pages of it, as it guides investors to those companies with projects that are likely to amount to something, which is not all that easy to divine sometimes in the heavily promoted junior space.

In all, Argonaut has selected 18 projects/companies as its 2024 BUPs, and another six that are deemed worthy of a special mention in that they could be advanced to BUPs status in future.

In the past, selected BUPs have outperformed. That wasn’t the case in 2024 with the share prices of the lead BUPs nominated in 2023 falling by 17%, weighed down by the performance of lithium and rare earths inclusions.

But the smaller pool of special mentions increased by an average of 58% to comfortably outperform both the broader market and sector indices.

The key criteria for inclusion as a BUP remains the same - projects are low cost, high margin assets with the capability to maintain strong financial returns through the commodity price cycle.

The idea is that the quality of such projects enables a broader range of financing options and underpins likely development, as well as increasing M&A appeal.

Eighteen BUPs and six special mentions is too long to list today. But it is certainly worth listing the eight BUPs where Argonaut’s valuation (not all BUPs have an Argonaut valuation) is at a premium of 99% or more to the market price, and the four special mentions on the same basis.

The eight BUPs in the 99%-plus club were Aura (AEE, 186%), De Grey (DEG, 103%), Develop (DVP, 99%), Northern Minerals (NTU, 189%), New World Resources (NWC, 186%), Predictive (PDI, 124%), Patriot Battery Metals (PMT, 206%) and West African Resources (WAF, 137%).

The special mentions with 99%-plus valuation premiums were Encounter (ENR,161%), Magnetic (MAU, 179%), New Murchison Gold/NMG (previously Ora Gold,150%) and WIA Gold (WIA, 100%).

A notable shift in the latest selection is the greater presence of copper stocks. Paring it down further, New World was the only one to appear in both the 2023 and 2024 BUPs list, with Develop and Firefly (FFM) new additions in 2024.

Copper is expected to benefit from the supply deficit that BHP reckons will begin to open up in 2027 and grow to 10mtpa by 2035. Incentive pricing for the red metal to close the supply deficit is needed.

New World expects to do its bit from its Antler project in the US. Permitting in the US can be an issue but early work by the company has it positioned to receive the final permits for a low-cost and high-margin development to proceed in the first half of CY25.

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