Boss stands out from uranium pack as production, costs cheer analysts

There was a bit of a love-in during the week between Boss Energy chief Duncan Craib and the army of analysts that had dialled into the investor call for Boss’ December quarterly.

It was kind of appropriate given the call was principally about progress in the ramp-up of Boss’ restarted Honeymoon uranium project in South Australia.

While uranium projects held by other ASX-listed uranium stocks have stumbled in returning to production, or in the slow lane towards production, Honeymoon has emerged as the star performer.

And didn’t the analysts tell Craib as much, not that the seasoned campaigner in the uranium space doesn’t know already that things are going swimmingly towards the initial ramp-up target of 850,000lbs for FY25.

Adjusting for inflation, costs were bang on what Boss said they would be at this stage of the ramp up back when it took the decision at much lower uranium prices to bite the bullet and get Honeymoon back into production.

As Craib puts it, others that have dithered are missing out on feasting on the roast that being in production (with a rising production profile to 1.6Mlbs annually in the next stage, and eventually 3.25Mlbs at Honeymoon) can deliver in a long-term rising uranium market.

Somewhat strangely though, Boss has long been undervalued compared with peers on the assumption that it would strike trouble in the ramp-up of Honeymoon. The December quarterly tells a different story.

Boss shares have performed strongly since the release of the quarterly, closing on Thursday at $3.14. That is also up nicely from its starting point this year of $2.38. The stock nevertheless remains well short of its level a year ago of $5.47.

Boss is not alone there. All of the uranium stocks have taken a hit in response to the uranium price falling from more than $US100/lb early last year to less than $US70/lb (spot), with the long-term or contract price – a more representative read of where the market is at - holding at around $US80/lb.

While down from a year ago, those prices are at levels that the industry used to say was the incentive level needed to get back in production, as Boss has done at Honeymoon, or to begin a new development.

Craib was as bullish as ever on uranium’s outlook.

“The fundamentals improved significantly in 2024,” he said, noting the IEA’s latest outlook was for global nuclear capacity to more than double by 2050.

“The industry also saw unprecedented interest in nuclear capacity to support data centre growth. Amazon, Microsoft, Meta and Google announced MOUs with nuclear utilities to develop nuclear capacity aimed at supporting these data centres.

“And this phenomenon wasn’t even contemplated a year or two ago.

“It highlights the strategic shift towards sustainable and reliable energy sources to power the growing demands of data infrastructure. This was further complimented by last week’s Stargate project announced by President Trump – a $US500 billion AI infrastructure venture.

“Growing demand for electricity generation has also driven nuclear capacity upgrades , life extensions, and recommissioning of shutdown reactors.’

“And while demand expectations are increasing, risks on the supply side cannot be ignored,” Craib said.

“Geopolitical concerns continue to dominate worldwide. These include potential import bans, sanctions, transport issues, potential tariffs and counter-tariffs - it is making headlines daily, all of which will continue to create uncertainty in the market regarding the availability of supply now and in the future.”

The Boss briefing was after the big selldown of AI stocks in the US earlier in the week in response to the buzz around DeepSeek’s generative AI model which the Chinese company said was much cheaper and consumes less energy than its US rivals.

Maybe so, but analysts on the Boss call didn’t ask for Craib’s view on whether DeepSeek had derailed the thesis that nuclear power/uranium stood to benefit from the massive AI data infrastructure buildout.

Fair enough, it is early days on that one, with uranium price weakness over the weekend having more to do with Kazatomprom, the world’s biggest producer, forecasting stronger than expected uranium production in 2025.

After passing on their congrats to Craib on the December quarterly, the analysts were keen to pump out fresh research notes with increased price targets on the stock.

Bell Potter increased its price target from $4.70 to $4.90. “We said previously that a successful 2QFY2025 would warrant a re-rate in Boss given the valuation versus its peers. We believe it is now well and truly warranted,” Bell said.

It made an interesting point about the big short position in the stock. It said that given the average daily volumes in Boss, a difficult scenario for shorts attempting to close out their positions has emerged, meaning Boss could “swiftly re-rate over the near-term”.

Lithium/Pilbara:

The release of December quarterlies from the ASX lithium brigade during the week had a soothing affect for investors on the hot subject of whether the rout of the past couple of years is over.

Pilbara (ASX:PLS) boss Dale Henderson led the way, telling analysts on the company’s investor call that the industry had been in rebalancing mode through supply curtailments over the past year, Pilbara included.

“We note that spodumene concentrate pricing has lifted off the lows of $US750 per ton that we saw in October last year and is now moving into the range of between mid-$US850s to low $US900s,” Henderson said.

“While volatility is expected to continue as the industry continues to take shape, we remain focused on the incredibly strong long term fundamentals this exciting market presents for our shareholders and all our stakeholders connected with the business.”

There is obviously a way to go as Pilbara, the lead stock in this market, remains well short of its $3.60 a share price of a year ago. It closed on Thursday at $2.33.

Still, Henderson’s confidence was backed up by his decision last August to stump up $560m for Latin Resources and its undeveloped project in Brazil. And then there was Rio Tinto’s vote of confidence with its agreed $10.7 billion bid for Arcadium in December.

Further out, industry consultant Benchmark reckons an additional 1.5mt of lithium carbonate equivalent is required for the battery revolution by 2030. Annual output is currently running at 1.2Mt.

It is a huge task and by Benchmark’s reckon requires 52 new lithium operations producing 30,000t of LCE annually on average. It is not going to happen.