Buy Hold Sell: 5 uranium stocks as prices bottom out

Sam Berridge: I'm cautiously optimistic. I mean after that big run last year, it's reasonable that the bigger participants in the market take some pause for thought. My understanding is what's causing the hiatus in price rises is a little bit of reluctance from the utilities to re-engage at these higher price levels, but ultimately their inventories continue to tick down. So they're going to have to at some point and I think that's what the market's waiting for.

David Franklyn: A couple of points. Firstly, I think you've got to look beyond the spot price and look at where the contract price is and that's currently around US$80/lb, which I think is a pretty good long-term price. It looks like term contracting was actually below average in FY24, so we think we can see more of that. On the consensus numbers, if you look at someone like FactSet who do consensus, CY24 is about US$90/lb, then it's dropping off to US$86/lb and US$83/lb over the next couple of years. And I think that reflects the fact that demand growth is going to be substantial, but ultimately at some point supply will kick in.

Sam Berridge: My understanding is that interest levels have kicked up, so the amount of tyre kicking is increasing, but there's no bites just yet.

David Franklyn: Yeah, much the same. As I said, term contracting wasn't really up to expectations in FY24 and I think that highlights that people are holding back, but you can only hold back for so long. So I think it is forming a base at US$80/lb. I think it can kick up and probably spike a bit higher.

Sam Berridge (SELL): I've got to go sell on this one, Matt. I mean it looks like a reasonable project, but just after the pullback that's occurred across uranium equities, Deep Yellow has held up much better than some of their peers. And I just think on relative valuation, you'd be selling this one and buying something else.

David Franklyn (SELL): I've got a sell on Deep Yellow as well. And again, for similar reasons that Sam outlined. I think if you look at the uranium space, there's only a small number of investable companies globally really, and it's one of them. However, a number of the other peers have had some issues. They haven't, so more money's floating there. So notwithstanding having a great management team, I think it lacks scale at Tumas and Mulga Rock. I think they're forecasting production in FY28. A lot would need to go right to achieve that, so we got it as a sell.

Boss Energy (ASX: BOE)

Sam Berridge (HOLD): It's a hold for this one, Matty. I just need to see some more data from the ramp-up to get conviction here and know that the bottom is in. Much like the rest of the Australian market, I'm a bit new to the granularity of a ramp-up of an ISR project, so I just need to see a little bit more.

David Franklyn (HOLD): We've also got to hold on Boss. I think the price has come back. Obviously, the market had some concerns about the MD selling down his holding just prior to commissioning, but I think that's created a bit of an opportunity. It now comes down to the execution risk of bringing it into production. So we've got it as a hold.

NexGen Energy (ASX: NXG)

Sam Berridge (BUY): I'll give it a begrudging buy for some of those reasons. I mean the resource is absolute quality. It is best in class, but along with F1 sponsorship, I mean running two capital raisings at the same time really does stretch the friendship a little bit there with management. But the resource is quality and I think ultimately a bigger player might come for it at some point.

David Franklyn (HOLD): We've got it as a hold. On the positive side, it's come back to reasonable value, partly on the back of those governance issues that the market is focused on. But at its core, it is a fabulous asset. It's global scale, it's low cost. The OpEx is going to be about $15/lb. Very high grade. Will generate something like $2.8 billion in EBITDA per annum, so it's a great asset and so we're happy to hold it.

Sam Berridge (BUY): I'll go with a bit of a dark horse and that's Bannerman. Again, on relative valuation basis, this stock has been absolutely torched compared to where it was a few months ago when uranium sentiment was a little bit more bullish. It is a lower grade deposit, we have to acknowledge that, but the metallurgy is very simple. The strip ratio is very low. I think it should get into production this cycle, and if uranium sentiment turns, certainly the scope to rebound in this stock from current levels is quite strong.

David Franklyn (BUY): My favourite buy in the space is Denison Mines. It's in Athabasca but in the eastern part of that. It's got an ISR project called Phoenix Wheeler River, which looks really, really fantastic. It will be 9 million pounds per year. The first production is in 2028. Permitting should come through next calendar year and we think it's probably the best in class. It's also got $120 million in cash, about $300 million in physical uranium. So that goes a long way to funding the development.