Paladin Energy or Boss Energy? Brokers reveal their preferred ASX uranium stocks

January is typically a busy time for investors in Aussie resources stocks. This is because companies involved in exploration, development, and production of natural resources are required to issue their December quarterly activities reports before January 31.

Last week, the two largest ASX listed uranium companies, Boss Energy (ASX: BOE) and Paladin Energy (ASX: PDN), each issued their much-anticipated December quarterly activities reports. In each case, investors were hanging out for an update on just how close each is to first production at their respective uranium projects.

Boss likely still first to market

Boss remains the front runner at its Honeymoon project in South Australia. The company reported Honeymoon continues to run “on time and on budget” with commissioning in its final stages. Boss was able to produce production-grade uranium at the pre-flush stage of start-up wells. It had also signed its first binding off-take agreement with a major US nuclear power utility for seven-years from next year at “market-related prices”.

Paladin reported that it is not far behind on achieving first production at its Langer Heinrich project in Namibia. Production activities have commenced with first ore scheduled to feed into the processing plant on 20 January. Paladin suggests recommissioning of Langer Heinrich is now 93% complete and commercial production is on track for the end of the current quarter, or early in the next.

Note, the warning production could be delayed to early next quarter is a slight pushback on earlier guidance and was blamed on “lower contractor productivity” over the Christmas-New Year period. Also missing expectations was the revised cost estimate for the Langer Heinrich restart, up to US$125 million from $118 million.

Broker views on ASX uranium stocks

As is customary, brokers who cover various resources companies will issue research notes following major news announcements. Below is a summary of the research updates issued by major brokers on ASX listed uranium companies in the last week:

Bell Potter on Boss Energy – “In a bull market, leverage remains the key”

• Offtake agreement signed during quarter represents approximately 5.5% of Boss production
• Boss is “most leveraged” of ASX producers from an earnings perspective vs spot uranium price
• Spot uranium price peak upgraded to US$130/lb due to Kazatomprom production downgrade news and increased term contracting purchases
• Recent acquisition of US uranium project Alat Mesa “diversifies BOE’s operations and revenue streams”, making Boss one of just two geographically diversified uranium producers this year
• Upgrades Boss earnings estimates by 88% in FY25 and 92% in FY26
• Downgrades rating to “Hold” from “Speculative Buy” due to Boss’s stock price outperformance relative to peers
• Valuation increased from $5.69 to $6.41

Bell Potter on Paladin Energy – “Langer on the cusp of restarting”

• Once updating for increased Langer Heinrich restart CAPEX, estimates Paladin has approximately $40m remaining spend, which should leave “a liquidity buffer of US$170m” including the company’s debt facility
• Paladin’s offtake agreement gives it roughly 80% market exposure to spot prices
• Believes that when Langer Heinrich reaches full capacity, it will be “a top ten” global uranium producer with annual production of 6 million pounds per annum by FY26
• Upgrades Paladin earnings estimates by 83% in FY25 and 77% in FY26
• Upgrades rating to “Speculative Buy” from “Hold”
• Raises valuation from $1.31 to $1.60

Citi on Paladin Energy – “New Uranium Outlook” spurs rating and price upgrades

• Citi’s Commodity Team has upgraded its forecast for short and long term uranium price, taking into account “imminent Russian nuclear fuel ban’, continued production issues at Kazatomprom and in Niger
• Spot uranium to average US$101/lb in 2024, US$110 in 2025, and US$115/lb in long term (up from US$87/lb)
• Upgraded uranium price assumptions result in a circa 30% increase on average in FY25-FY27
• Australian and Canadian resources bases increased in value to US$1 billion and US$110 million respectively
• Upgrades rating to “Buy” from “Neutral”
• Raises price target from $1.05 to $1.45

Shaws on Uranium Sector – "Nuclear Summer – Upgrading Uranium to US$150/lb"

• “Materially” upgrades uranium price forecasts, now peaking at US$150/lb in 2025-2027 (from US$85/lb), but will likely settle back around US$75/lb by 2030
• Also changes approach in valuing undeveloped resources
• Result of above two factors results in upgrades to valuations and price targets for several ASX uranium stocks, mainly Bannerman Energy (BMN: ASX) Paladin is “preferred exposure” despite it looking “no longer cheap”, but stock is likely to attract “strong interest from international investors” as Paladin grows in prominence as a major global producer, second in terms of listed options to Cameco. Retains “Buy” rating and raises price target from $1.15 to $1.50
• Boss looks “fully valued”, but upgrades rating from “Sell” to “Hold” on revised uranium price outlook and increases price target from $3.60 to $4.75
• Bannerman Energy has “most leverage to a rising uranium price”, and could garner interest from Chinese investors. Retains “Buy” rating and increases price target from $3.20 to $7.04
• Lotus Resources (ASX: LOT) has “a number of looking positive catalysts. Retains “Buy” rating and increases price target from $0.53 to $0.72
• Peninsula Energy (ASX: PEN) faces potential funding issues, and locking in debt funding is crucial. Still, it remains “cheapest” in broker’s ASX uranium coverage. Retains “Buy” rating and increases price target from $0.25 to $0.26.

This article first appeared on Market Index on January 29 2024.