Top ASX Uranium Stocks To Buy In 2023

TEAM VEYE | 28 Sep 2023

1. PALADIN ENERGY LIMITED

TEAM VEYE | 28-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 $1.080 (As of 28 September 2023).

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

2. BANNERMAN ENERGY LIMITED

TEAM VEYE | 28-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 $2.830 (As of 28 September 2023).

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

3. Deep Yellow Limited (ASX: DYL)

TEAM VEYE | 28-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 $1.290 (As of 28 September 2023).

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

 Disclaimer

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