Top 5 ASX Small Caps To Buy In 2023

21 Sept 2023 | Veye Pty Ltd

1. AUSTRALIAN STRATEGIC MATERIALS LIMITED

TEAM VEYE | 21-SEP-2023 ASX – ASM

Australian Strategic Materials Limited is a company focused on producing critical metals for advanced and clean technologies. They are involved in the extraction, refining, and manufacturing of high-purity metals, alloys, and powders. Their products are supplied directly to global manufacturers in industries such as clean energy, electric vehicles, aerospace, electronics, and communications. The company operates through three segments: Korea, Dubbo, and Corporate. The Korea segment includes the construction and commissioning of the Korean Metals Plant, while the Dubbo segment involves the evaluation and feasibility of the Dubbo Project. The Dubbo Project is situated near Toongi, 25 kilometers south of Dubbo in central-western New South Wales, Australia. On the other hand, the Korean Metals Plant is situated in the Ochang Foreign Investment Zone, approximately 115 kilometers south of Seoul, Korea. The products offered by Australian Strategic Materials include neodymium, praseodymium, terbium, dysprosium, zirconium, niobium, and hafnium, which are crucial components in various advanced and clean technologies.

Stock Performance Profile:

(Source: Trading View) Three-Month Performance of ASM compared with ASX-All Ordinaries Index (XAO) and Basic Materials Index (XMJ)

Synopsis:

Australian Strategic Materials Limited (ASX: ASM) is building a global rare earths and critical minerals business.

Its Dubbo project is construction ready and delivers strong financials.

20-year life of mine and further 50 years of resource.

Grant support received from Federal Government

From the Company Reports:

On 3 August 2023, Australian Strategic Materials Limited (ASX: ASM) (ASM or the Company) announced that its wholly owned subsidiary, ASM Korea Co., Ltd, had signed a five-year binding agreement with USA Rare Earth, LLC. The sales and tolling framework agreement is for the supply of neodymium iron boron, NdFeB alloy, which is expected to commence in 2024. The tolling clause provides USA Rare Earth the option to have an agreed percentage of the total indicative quantity to be supplied as tolled product using USA Rare Earth supplied feedstock.

The Framework Agreement builds up ASM’s growing customer portfolio and reinforces the Company’s strategic supply relationships with the US magnet production industry, through its Korean Metals Plant (KMP).

USARE’s production ramp-up of high-performance rare earth magnets will be boosted by NdFeB alloy supplied from KMP.

Australian Strategic Materials Limited on 26 July 2023 announced entering into a non-binding Memorandum of Understanding with ASX-listed nickel producer Blackstone Minerals Limited (ASX: BSX), and rare earth element refiners, Vietnam Rare Earth Company.

The agreement between three companies having identified synergies and shared objectives, provides a framework to collaborate in several areas.

This could be handy in identifying, assessing, and securing REE mining opportunities in Vietnam, which can be used as feed stock for VTRE’s REE refinery, strengthen the parties’ capability to obtain REE mining concessions and in securing long-term offtake of REE oxides.

On 24 July 2023, Australian Strategic Materials, provided its Quarterly Activities Report, to 30 June 2023.

The company began a strategic partnership with US-based rare earth magnet manufacturer Noveon Magnetics Inc., by sale of an initial 100 tonnes of NdFeB alloy from ASM’s Korean Metals Plant. It also secured the supply of rare earth oxides with a binding agreement with Vietnam Rare Earth Company, to ensure the continued ramp-up of production at the KMP;

Competitive Advantage:

Australian Strategic Materials gets a perfect customer and partner in USA Rare Earth, with its magnet manufacturing capability and approach to market. ASM continues to increase its metal production output from its Korean Metals Plant, while this longterm supply agreement demonstrates the growing demand and positive trajectory of the US rare earth magnet market. Both ASM and USARE are currently focused on scaling up their respective operations and developing an alternative rare earths and critical minerals supply chain to support forecast growth in these and other sectors. Because of the Framework Agreement, USARE will secure the majority of its metal and alloy requirements for magnet production and depend upon ASM til it begins using materials from its Round Top reserve in Sierra Blanca, Texas.

Business Catalyst:

It is anticipated that the global demand for NdFeB magnets will increase at a compound annual growth rate (CAGR) of 7.5% from 2023 through 2040. The growth in the electric vehicle and wind power sectors will translate to a comparable demand growth for the critical rare earth elements (e.g., neodymium, dysprosium, and terbium) which these magnets contain. ASM sourcing the required oxides from Vietnam, simultaneously building its relationship with VTRE, is also ensuring greater oversight of its supply chain. Thus supporting its sustainability and governance commitments its our customers as well as shareholders.

Outlook:

ASM had entered into a binding agreement with VTRE in April 2023 to buy rare earth oxides from Vietnam, to be used as feedstock at ASM’s Korean Metals Plant. It had been intending to progress this to a further long-term supply agreement. This three-party MOU with VTRE and Blackstone is an extension of ASM’s current relationship with VTRE. It validates the commitment of both companies to continue to explore long-term supply agreements and manufacturing opportunities. It also has the potential to drive a more collaborative approach within the rare earth elements and critical minerals sector and deliver positive outcomes for all parties involved.

Technical Analysis:

The monthly chart shows a solid base formation at $1.090 and subsequent stock recovery, indicating a strong presence of bullish investors with potential for continued upward trajectory. On the weekly chart, the stock exhibits “Higher Highs,” trades above the 14-day EMA, and is positioned at the upper Bollinger Band with RSI indicating further upside momentum. This convergence of bullish indicators in both time frames suggests a strong bullish trend for the stock.

Veye’s Take:

ASM had already established a strong relationship with the VTRE and it was encouraging to witness the progress they were making to increase their oxide production capacity. The three way partnership they are looking to build with Blackstone has the potential to benefit ASM’s existing supply of rare earth oxides for processing at the KMP. It could become a great opportunity to develop the full value chain for rare earths in Vietnam. It is rare to find a potential partnership in which the strategic advantages and core competencies of each party are so complementary. Blackstone’s potential move into Rare Earths in Vietnam aligns with ASM’s Technology Mineral strategy and is synergistic to its Ta Khoa Project and its existing relationships in the EV industry. ASM, can seize upon this opportunity to extend its relationship with VTRE and to progress their vision of full vertical integration in critical minerals. This agreement leverages Australia’s world-leading regulatory frameworks for mining and resources, and Vietnam’s abundant labour supply and strong manufacturing base. ASM, along with MOU partners will now progress discussions with a view of potentially establishing a world leading fully integrated rare earths business. Veye recommends a “Buy” on “Australian Strategic Materials Limited” at the closing price of $1.665 (As of 21 September 2023).

*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters.

2. GENESIS MINERALS LIMITED

TEAM VEYE | 21-SEP-2023 ASX – GMD

 

Genesis Minerals Limited is an Australian company focused on gold exploration and mine development. The company’s main activities involve processing operations at Mt Morgans, exploring its 100% owned tenement packages in Laverton and Leonora, and undertaking pre-development activities at the Ulysses Gold Project. Mt Morgans hosts a diverse range of open pit and underground Mineral Resources, along with a conventional carbon-in-leach processing plant capable of handling 2.9 million tons per annum (Mtpa). Additionally, the company holds promising exploration tenure in this area. The Leonora Gold Project is strategically situated approximately 30 kilometers south of Leonora and 200 kilometers north of Kalgoorlie, within the Eastern Goldfields region of Western Australia. Furthermore, the Barimaia Gold Project is positioned in the Murchison District of Western Australia, about 10 kilometers southeast of the Mt Magnet Gold Mine. Among its operations in the Leonora region, Genesis Minerals Limited manages the Gwalia underground mine, operates the 1.4Mtpa Leonora mill, and is actively involved in the Tower Hill project, Zoroastrian project, Aphrodite project, and Harbour Lights refractory projects.

Stock Performance Profile:

(Source: Trading View) Six-Month Performance of GMD compared with ASX-All Ordinaries Index (XAO) and Basic Materials Index (XMJ)

Synopsis:

  • Genesis Minerals Limited targets sustainable, high-quality earnings with capital-light production growth.
  • The company’s main focus is on the Gwalia mine, which offers higher-grade and consistent deposits.
  • To optimize resource allocation, Genesis de-prioritizes lower-grade northern extensions and peripheral mineralization.
  • By sharing fixed costs between the Ulysses and Gwalia projects, the company achieves lower group costs.

From the Company Reports:

Genesis Minerals Limited (Genesis) (ASX: GMD) on 3 July 2023 reported that is had completed the acquisition of the Leonora assets from St Barbara Limited (ASX: SBM). The strategic transaction is fully funded delivering distinctive synergies to the prolific Leonora District. The deal can have the potential to generate significant long-term shareholder value.

Simultaneous with the transaction, Genesis has been progressing the Leonora Gold Project (LGP). This project consists of the Ulysses, Admiral, Orient Well and Puzzle deposits. It is to confirm that the Genesis assets achieve the long-term targets set as part of the acquisition of St Barbara’s Leonora assets.

Genesis announced an initial LGP Ore Reserve of 9.8Mt @ 2.0g/t for 630koz. While Ulysses, Admiral, and Orient Well had done Feasibility level studies, a Pre-Feasibility level study was carried for Puzzle. The LGP Ore Reserves consists of two new development projects, Admiral open pit and Ulysses underground. These will be combined with the Gwalia mine to fill the Gwalia mill that has been under utilised.

In the future years, with the addition of Admiral initially, to be followed by Ulysses ore, the processing costs (better utilisation of high fixed cost mill) will be reduced. It will facilitate a lower cost “quality over quantity” mining strategy at Gwalia.

After significant preparatory work in FY23, which included intensive grade control drilling, Ulysses is now ready for underground development. This provides the ability to optimise the delivery of high-grade ore.

Competitive Advantage:

The St Barbara’s Leonora assets transaction has the potential to position Genesis as a gold industry leader with a dominant position in Western Australia’s world-class Leonora District. Most of the investors and industry players look for sensible regional consolidation. This transaction is spot on, targeting long-life production growth to 300,000 ounces per annum exclusively from Leonora. The company is keen to integrate the assets resulting in unlocking the significant synergies available in Leonora. Subsequently, Genesis’ close by Ulysses mine will render unique value at Gwalia, offering Gwalia with a new lease of life by enabling a focused ‘margin over ounces’ business plan. Ultimately, the investors will reap the long-term benefits of more production at lower cost and lower risk from this prolific mining district.

Business Catalyst:

Leonora acquisition has elevated Genesis to a leading Australian gold house Group. While its Ore Reserves increase to 3.9Moz, Group Mineral Resources of 15Moz paves the way for future growth in sustainable production and mine life.

Outlook:

Genesis Minerals Limited has a short-term vision supported by the successful production of approximately 120-130koz per annum at the Gwalia mine as a stand-alone operation. Looking ahead to medium-term growth, the company aims to achieve a long life, 300koz per annum base case plan with a focus on maximizing margins over ounces. Additionally, Genesis sees significant potential in new mine options for further expansion. The Ulysses project presents a unique opportunity for the company, offering the possibility to restore Leonora’s production to up to 200koz per annum with lower costs and reduced risks. Gwalia / Ulysses operated as one mine with deposits just 35km apart. Ulysses Reserves are imminent with first ore expected in FY24, having a haulage time less than that from underground heading to Leonora mill.

Genesis has a strong balance sheet with A$156m cash at 1 July 2023 (excluding Dacian). It has no bank debt to adequately invest in Leonora and aims to deliver the long-term benefits of more production at lower cost and lower risk.

Technical Analysis:

GMD has been exhibiting a bullish trend in both monthly and weekly charts.

On the monthly chart:

  • The stock has consistently remained above the support level at $1.110 for the past three to four months.
  • The 50-day Exponential Moving Average (EMA) has been acting as a strong support for the stock.
  • The price pattern is trading above the 14-day EMA, and any downside movements have been rejected, indicating a potential for continued upside trajectory in the medium to long term.

On the weekly chart:

  • The 200-day EMA has acted as a solid base for the stock.
  • The current price is trading above the 14-day and 50-day EMA crossover, which suggests a bullish trend.
  • There is a resistance level at $1.475, and if breached, it could trigger further upward movement in the stock’s price.
  • The Relative Strength Index (RSI) is at 55, pointing to further upside potential, supporting the bullish trend.

Overall, the price pattern in different time frames, along with the indicators pointing towards the upside, indicate a bullish potential for the stock

Veye’s Take:

Genesis Minerals Limited’s acquisition of the Leonora assets from St Barbara Limited for A$625m on a cash free, debt free basis, has created a leading Australian gold house, 100% focused on Leonora. It can lead to creation of a central player in the tier-one Leonora District, where the company has home ground advantage as Genesis management has previously operated ~1/2 the mines on the Leonora map. The company is getting ready to unlock the unique synergies made available by pairing the new, shallow Admiral and Ulysses mine development projects with the Gwalia mine. Genesis Minerals Limited has accelerated and resized the Admiral open pit project to meet the 1.4Mtpa Leonora mill’s needs for the next ~2 years..Genesis can have the opportunity to execute the long life, ‘margin over ounces’ Leonora business plan. Genesis Minerals will now have its focus on strategically reviewing Gwalia. By revamping the foundations, a new lease of life for this prolific gold asset can be ensured. Veye recommends a “Buy” on “Genesis Minerals Limited” at the closing price of $1.530 (As of 21 September 2023).

*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters.

3. PALADIN ENERGY LIMITED

TEAM VEYE | 21-SEP-2023 ASX – PDN

Paladin Energy Limited is an Australian company primarily focused on uranium mining and exploration. Its key asset is the Langer Heinrich Mine in Namibia, where uranium is produced and sold. The company also has exploration projects in Australia, Canada, and holds significant interests in the Michelin and Manyingee uranium projects.

Stock Performance Profile:

(Source: Trading View) PDN Three-Month Performance compared with ASX-All Ordinary Index (XAO) and Energy Index (XEJ)

Synopsis:

Paladin Energy Limited (ASX: PDN) is having high-grade uranium mining and exploration portfolio.

The company is bringing its Langer Heinrich Mine to production again.

Strong demand growth for nuclear energy is driving the uranium market.

While there is a primary supply shortage, secondary supplies are declining. Paladin is well funded having a strong balance sheet.

From the Company Reports:

Paladin Energy Limited (ASX: PDN) on 20 July 2023, announced its quarterly activities report for the period ended 30 June 2023 wherein it provided an update on cash flow and activities for the quarter.

The company’s main aim is to return Langer Heinrich Mine (LHM) to production. The project continues on track to commence its first production in Q1 CY2024. It is also remaining on a budget (~US$118M).

The project making steady progress and has been approximately 60% completed. With over 1,000 personnel on site, the contractor workforce is at an expected peak. During the reporting period, key work packages progressed including delivery of critical equipment and plant to site inclusive of agitators, thickeners, cyclones, Hydrosort classifiers, prefabricated tanks and tank strakes, and structural steel.

On 7 July 2023, Paladin reported that post completing the process required under the Michelin Joint Venture Agreement, to sell the entirety of the JV on mutually acceptable terms; Paladin is to retain its 75% interest in the Michelin JV. The Michelin JV owns the exploration project of Michelin Advanced in Labrador, Canada.

Paladin had no corporate debt as of 30 June 2023, with cash at the bank at US$126.2 million, thus signifying sufficient available liquidity.

Paladin had disposed of ~390,363 shares in Global Atomic Corporation (TSX: GLO) during the quarter. The gross proceeds realised were US$0.8M.

Business Catalyst:

Paladin has already secured cornerstone offtakes when the uranium market is strengthening. It is actively pursuing to secure further offtake agreements with industry leaders ahead of production, with five agreements already in place in the USA, Asia, and Europe. The company has finalized negotiations on the final outstanding tender award and expects to execute the offtake agreement soon. Paladin is having a low-risk brownfield start with long term growth optionality at a time when uranium inventory levels are fast reducing.

Outlook:

Paladin is striving to obtain agreements prior to production, though varying in duration and pricing, they feature distinct pricing mechanisms, as part of their strategy. Through requests for proposals and off-market discussions, the company continues to engage with the industry’s top-tier counterparties on uranium sales. Partner ADP engineering provides company procurement and engineering services for the delivery of growth project process upgrades to improve operational ability and throughput capacity. The company is also in commercial negotiations with conversion facilities and shipping companies. It is having Life of Mine offtake with CNNC, one of the largest consumers of uranium in the world. With the market-related contract already in place with CNNC, Paladin is well-positioned to benefit from the strengthening uranium market fundamentals.

Technical Analysis:

On the monthly chart, the 50-day Exponential Moving Average (EMA) has acted as a robust support since May 2023. The stock has consistently maintained its price levels at or above this EMA, reflecting strong bullish strength. This suggests that the bulls have effectively prevented the price from dropping further. The formation of “higher highs” on the chart, coupled with the price pattern trading above the 14/50/200-day EMAs and surpassing the middle Bollinger Band, indicates a positive momentum for the stock. Furthermore, the indicators are pointing upwards, signaling a potential for bullish movement.

Looking at the weekly chart, the stock price continues to trade above the EMAs and resides near the upper Bollinger Band. The Relative Strength Index (RSI) at 60 is positioned in an upward direction, which is indicative of a bullish trend. Across different time frames, the price pattern remains above the EMAs and is well-supported by indicators, collectively suggesting a strong bullish momentum in the stock.

Veye’s Take:

Paladin is fast progressing to restart the Langer Heinrich Mine and securing uranium offtake agreements. The company had six offtake contracts worth approximately 18Mlb. This is 48% of the estimated production to CY2030. With shipping companies and conversion facilities ahead of Paladin’s return to production, its marketing continues to progress through commercial negotiations. The analysis of exploration data from the Michelin project in Canada will assist in identifying new drill targets for future exploration programs. Meeting all tenement expenditure commitments ensures the company retains the rights to mining tenements, and ongoing engagement with local communities, government, and native title holders is essential for maintaining positive relationships and social license to operate. These activities can potentially increase the company’s reserves and extend the life of the mine, contributing to its long-term growth and success. Paladin’s ongoing activities can significantly increase its reserves and extend the LOM (life of mine) to 17 years. It has a 10-year history of successful operations. Paladin’s disciplined approach to growth ensures value and delivers future optionality. With a significant global exploration portfolio, it is well-positioned for long-term growth potential. De-carbonization, support for nuclear power, energy security, and geopolitical events are some of the global macro drivers favoring PDN. Veye recommends “Buy” on “Paladin Energy Limited” at the closing price of $0.980 (As of 21 August 2023).

*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters.

4. Deep Yellow Limited (ASX: DYL)

TEAM VEYE | 21-SEP-2023 ASX – DYL

On 3 July 2023, Deep Yellow Limited (ASX: DYL) announced an upgraded Mineral Resource Estimate for the Angularli deposit, which is a part of the Alligator River Project. The Inferred Mineral Resource Estimate (MRE) at the Angularli deposit has experienced a 27% uplift.

The updated estimate for the Angularli deposit is now 32.9 million pounds of U3O8 (uranium oxide), with a total tonnage of 1.37 million tonnes at a grade of 1.09% U3O8. This estimate was calculated using a cutoff grade of 0.15% U3O8. It is worth noting that the MRE demonstrates relative insensitivity to the cut-off grade. Even with the cutoff grade doubled to 0.3%, the estimate still increases to 31.5 million pounds of U3O8 at a grade of 1.30% U3O8, representing a 21.5% increase.

These results confirm that the Angularli deposit has a high-grade nature, indicating the presence of a significant amount of uranium in the deposit.

On 30 May 2023, Deep Yellow Limited responded to reports of Namibia considering government equity in mining projects, stating that it was not aware of any such discussions. The company expressed confidence in the government’s understanding of foreign investment and highlighted its existing local equity partners in Namibia’s mining projects.

For the quarter that ended on March 31, 2023, Deep Yellow Limited reported a robust balance sheet with $48.478 million in cash. The integration of Vimy Resources has been successfully completed, marking a significant milestone for the company’s expansion and operational efficiency.

During the quarter, the Tumas Project delivered strong results from the Definitive Feasibility Study. The project is considered world-class, with the capacity to produce up to 3.6 million pounds of uranium and 1.15 million pounds of vanadium annually. The economic assessment showed robust financials, with an estimated capital cost of $372 million and an after-tax net present value of $341 million. The project demonstrated moderate to low sensitivity to most factors but was most sensitive to uranium price and the USD: NAD exchange rate. A drilling program was initiated to expand the resource and confirm a long mine life of over 30 years.

Deep Yellow received approval for the Mulga Rock Project’s Sandhill Dunnart Conservation Plan, allowing the construction of the operational airstrip. Additionally, a 50,000-meter resource drilling program commenced to convert the Inferred Mineral Resource to Indicated Mineral Resource status and better understand grade variability within the Ambassador and Princess Deposits.

Outlook:

Deep Yellow Limited has a positive outlook based on its recent achievements and ongoing projects. The upgraded Mineral Resource Estimate at the Angularli deposit confirms the high-grade nature of the Alligator River Project, positioning the company for future success. Additionally, the Tumas Project and the Mulga Rock Project, along

with the completion of the Vimy Resources integration, contribute to Deep Yellow’s geographically diversified uranium portfolio.

The strong balance sheet with a substantial cash balance provides financial stability and flexibility for further growth initiatives. The successful approval of the Sandhill Dunnart Conservation Plan at the Mulga Rock Project allows for continued progress in its development. The ongoing resource drilling programs aim to expand resources, convert Inferred Mineral Resources to Indicated Mineral Resources, and improve grade variability understanding.

Deep Yellow’s active engagement with relevant government ministries and its membership in the Chamber of Mines highlight its commitment to working collaboratively and ensuring mutually acceptable outcomes. The company’s recognition of the importance of local ownership and its existing partnerships with local Namibian equity partners demonstrate a strong understanding of the regulatory and socio-economic environment.

Overall, with its strong project pipeline, financial position, and strategic approach, Deep Yellow is well-positioned to capitalize on opportunities in the uranium sector and deliver long-term value to its stakeholders.

Cornerstone:

The insensitivity of the Mineral Resource Estimate to the cutoff grade at the Angularli deposit is positive for Deep Yellow Limited. It confirms the high-grade nature of the deposit, strengthens its long-term potential, and instills confidence in stakeholders regarding the value and sustainability of the company’s uranium mining operations.

Risk Analysis:

Investing in Deep Yellow Limited carries risks such as market volatility, operational challenges, regulatory changes, financing difficulties, geopolitical factors, price fluctuations, and exploration uncertainties. Investors should carefully assess these risks before making any investment decisions.

Technical Analysis:

The formation of a base at $0.490 on a monthly chart with price trading above the 14/50-day EMA (Exponential Moving Average) and trading near the close of the previous month indicates upside momentum to continue.

Veye’s Take:

Deep Yellow Limited has a favorable long-term investment outlook due to the increasing global demand for nuclear power and clean energy sources. The company’s focus on uranium mining aligns with this industry trend, presenting significant growth potential. Deep Yellow strategically manages a geographically diversified uranium portfolio, including the Angularli deposit, Tumas Project, Omahola, and Mulga Rock Project. This approach minimizes risks, maximizes resource utilization, and expands market access. The company also maintains a strong balance sheet with ample cash reserves, providing financial stability and flexibility for project development and expansion. Overall, these factors position Deep Yellow as a resilient and prosperous player in the uranium industry. Veye maintains a “Speculative Buy” on “Deep Yellow Limited” at the closing price of $1.080 (As of 21 September 2023).

*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters.

5. BANNERMAN ENERGY LIMITED

TEAM VEYE | 21-SEP-2023 ASX – BMN

Bannerman Energy Limited, an Australian uranium development company, is focused on the Etango Uranium Project in Namibia’s Erongo Region. They possess a significant uranium resource of approximately 207 Mlbs of U3O8. The company has completed a definitive feasibility study, obtained environmental permits, and de-risked the project with a Heap Leach Demonstration Plant, paving the way for an open-pit uranium operation at Etango.

Stock Performance Profile:

(Source: Trading View) One-year Performance of BMN compared with ASX-All Ordinary Index (XAO) and Energy Index (XEJ).

From the Company Reports:

Bannerman Energy Limited (ASX: BMN) (Bannerman or the Company), on 4 September 2023, provided an update on key project activities regarding advancement of its Etango Uranium Project (Etango) in Namibia.FEED activities were advancing as per schedule and budget for the Etango Project.Bannerman Energy Limited released its Quarterly Activities Report on 28 July 2023 for the period ended 30 June 2023. It reported, that during the period, it continued to progress Front End Engineering and Design for the 8Mtpa development of its flagship Etango Uranium Project in Namibia (Etango). The company kept fiscal discipline and strategic patience as uranium sector dynamics continue to build.At the end of quarter, the company had significant cash balance of A$42.6M and zero debt. Uranium spot prices surged during the period, ending the quarter above US$56/lb.Sector fundamentals have continued to strengthen, with utilities prioritising enrichment/conversion services contracting during H1 2023. Term contracting of U3O8 is expected to accelerate during this half.

Industry Analysis:

Australia’s uranium sector ranks first in terms of uranium resources and is positioned as the third-largest producer in the world. Export earnings are on track to double by 2028. Uranium prices are forecast to rise above US$60 a pound by 2028 in real terms. This is anticipated to encourage stronger production from Australia. Production from Australia has been expected to ramp up to almost 8,000 metric tons by 2027–2028, Price and volume growth are expected to increase uranium export values from $605 million in 2021–2022 to around $1.2 billion in real terms by 2027–2028. Forecasts for 2023–2024 are largely unchanged from the December resources and energy quarter (REQ). Forecasts for export earnings in 2026–2027 have been revised up by $300 million. The changes reflect an evolution in the price outlook, with less price pressure in the short term but a buildup of price pressure beyond 2025. In the United States, a recent national survey observed that 76% of respondents favor nuclear energy due to its affordability, reliability, and environmental benefits, and 71% of respondents agreed that more nuclear power plants should be built in the future. In Finland, 68 percent of the population supports nuclear power, while in Estonia, 75 percent of the population is reported to support the construction of a nuclear power plant. Overall, this gives a positive path for long-term uranium market fundamentals to remain strong.

Risk Analysis:

Operational risk: The developments and the intensification of security concerns regarding long-term nuclear fuel supply have resulted in utilities reviewing their inventory policies and stock-building in an effort to ensure operational sustainability in the company’s business.

Geopolitical risk: A ban on nuclear fuel imports transiting through Russia was not included in the European Union’s 11th package of Russian sanctions, and utilities continue to assess risks to the supply of nuclear fuel in the current geopolitical environment.

Outlook:

Bannerman holds 95% of the Etango Uranium Project. The FEED work on the Etango Project has been progressing according to schedule. Additional metallurgical testing was done in April 2023 to confirm some of the metallurgical parameters for the design work.All environmental clearance certificates and national heritage consents have now been received, and the Etango Project is fully permitted in this regard. The Etango Mining License application was submitted to the Ministry of Mines and Energy in August 2022. Following the submission of the DFS in December 2022, Bannerman has been working with the MME to secure a mining license.Advancing FEED and other key work streams on Etango and overall development while maintaining strong balance sheet liquidity. Etango is advancing towards, uranium market permitting, a targeted positive Final Investment Decision (FID) during H1 CY2024. The construction of the Etango Project is expected to take approximately 34 months.

Technical Analysis:

Monthly Chart:

The 50-day Exponential Moving Average (EMA) has formed a solid support, which suggests that the stock is finding strong buying interest around this level.

The stock is forming “Higher Highs” from this support level, indicating an upward trend in the price.

It is trading above the 14-day EMA, which is another positive sign, as it shows short-term strength.

Trading above the middle Bollinger Band is considered a bullish sign, indicating potential upward momentum.

The Relative Strength Index (RSI) positioning upside further supports the bullish momentum.

Weekly Chart:

The price pattern on the weekly chart shows that the stock is trading above the EMAs, which indicates strength in the medium-term trend.

It’s also trading above the upper Bollinger Band, which can be seen as a bullish signal, suggesting that the stock may be overbought but is still in an uptrend.

Well-supported indicators pointing upside confirm the bullish trend.

Overall, the price pattern analysis on both the monthly and weekly charts suggests a bullish trend for the stock.

Veye’s Take:

Bannerman Energy Limited’s well-established position with respect to offtake marketing is that the company will not diminish the long-term underlying value of the Etango Project by committing to contracting its planned uranium output at a price that it considers unrepresentative of long-term market fundamentals and producer opportunity. The uranium industry, poised for outstanding fundamentals, continues to strengthen, with utilities prioritizing conversion services and contracting during H1 2023. The term contracting of U3O8 is expected to accelerate during the current half. The company is a leader within Namibia in social development and community engagement and exercises best-practice governance in all aspects of its business. The Bannerman team has enormous experience in the development, construction, and operation of uranium projects in Namibia, as well as extensive links to the downstream nuclear power industry. Veye recommends a “Buy” on “Bannerman Energy Limited” at the closing price of $2.470 (As of 21 September 2023).

*All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters.

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Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

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