Uranium story: Bang the drum, there's a new Boss in town

Keller spent Valentine's evening in February at Honeymoon (much to the amusement of his wife) and what struck him mainly was the buy-in from the entire team. In previous conversations about Boss, Keller has shared with me that of all the mine sites he has been to and all the crews he has met, he struggles to remember a more engaged team - which he credits to Craib and the entire leadership. It's also what makes Boss special. 

"Everybody on the site was using the word 'we'... i.e. 'we' can't wait until 'we' get to production". 

That belief from that whole team was impressive and I think the decision to owner-build has been a good one". 

From a nuts-and-bolts standpoint, it became clear to Keller on this trip that Honeymoon would exceed feasibility study forecasts, with uranium-rich Pregnant Leach Solution (PLS) from the well-fields, IX column resin loading, and high-grade IX column eluate all outperforming study estimates. 

What is your current view on the stock and what does a full valuation look like?

He notes that Boss has already proven its ability to grow through brownfields exploration and M&A and he expects growth to come from both exploration and additional M&A.

Keller particularly likes the Alta Mesa investment, calling it "extraordinarily shrewd and strategic", noting that Boss will now be one of just a handful of companies (Cameco and Encore came to mind) with more than one uranium-producing asset. 

"I think you're going to find that deal is just the beginning of a partnership that will allow both Boss shareholders and Encore shareholders to benefit from the ability of those two teams to work together on pretty accretive deals", he adds. 

As for valuation, he points out that Street valuations use Boss study assumptions that only include 50% of the Honeymoon resource, adding that market valuations also tend to undervalue the fact that an ISR operation does not need to define a large resource pre-mining, and just needs to be “two steps ahead” with well-field development.

"In terms of Honeymoon, at their 2.45Mlb plant capacity (which admittedly will take 2-3 years to reach) and AISC of A$39/lb, at full Boss will generate EBITDA of circa A$200m+ at current uranium prices around US$80/lb".

Concerning Alta Mesa, Keller assumes production reaches a plant capacity of 1.5Mlb and makes an assumption that cost is in the range of $30-35/lb AISC. 

"So at US$80/lb uranium, the operation should be doing over A$100m EBITDA, which for Boss’ 30% share is circa $32m EBITDA".

"Using Cameco broker estimates of 2025 and 2026 EBITDA multiples, it can be easy to conclude BOE is not fully valued at these levels". 

Whilst things can change, based on those assumptions outlined above, Keller sees plenty more upside, and that’s ignoring Boss' "proven ability to do smart and accretive M&A deals, grow existing operations and add new greenfield discoveries from their exploration program", he adds. 

What else is going on in the space?

Keller and I have spoken numerous times recently about the uranium opportunity, the latest of which you can view via the link below.

Commodities

Uranium to keep running hot (and 4 ASX stocks to join the party)

View

As a final word, Keller reiterates that the thesis for uranium has not changed. If anything, it's only getting stronger. 

"The drive that is coming from not only governments now, but industry, is strengthening that demand side of the equation every day".