3 uranium bulls ready to charge
The last 24-hours have seen uranium miner Paladin Energy (PDN) take advantage of a great rally over the last 3-months to raise almost $220m at 37c, an almost 19% discount to the stocks last traded price.
To put things in perspective the company's market cap prior to the raising was just under $1bn hence it was clearly a major relative dip into fund managers' ample liquidity stream. At Shaw, we were involved in the raise yesterday and bids from institutions were very strong.
The funds are planned to help the company to pay down debt and restart its mine in Namibia. The company's Langer Heinrich mine is PDN’s primary asset and it was effectively mothballed (care & maintenance) back in August 2018 due to the plunging uranium price.
We feel this heavily oversubscribed raise looks likely to light the fuse for PDN to really perform in 2021/22.
Indeed MM believes the PDN offer being heavily oversubscribed is reflective of the attraction moving forward for both the stock and sector. The underlying Uranium market has been clearly “hot” over the last year with the commodity’s rallying 50% in quick fashion, albeit from a very low base. Australia chooses not to use nuclear power to turn on the lights but we do have almost a third of the world's uranium, although at this stage we only deliver just over 10% of the globe's production.
As the world accelerates away from fossil fuels uranium is a viable option for countries like the US, China and France who are comfortable with the controversial energy source. Importantly for the first time in a decade demand is starting to outpace supply which by definition pushes prices higher. At this stage, we believe the sustainable long-term cost curve support is ~$US55-60/lb, almost double today's spot prices.
PDN was trading above $5.50 when the Fukushima disaster occurred in Japan back in 2011 and amazingly nearly $10 before the GFC, as we regularly say be open-minded for financial markets in both directions. Following the successful placement yesterday at 37c MM things the stock has the financial and fundamental backdrop in place to trade higher, with 37c clearly being a point where larger investors were happy to step up.
In our opinion, PDN is the standout business in the sector with the restart of the Langer Heinrich (PDN owns 75%) uranium mine in Namibia plus the company has a quality suite of exploration assets putting it in good stead.

Boss Energy Ltd (BOE) 15c.
BOE is now an almost $280m play following the stocks rapid appreciation in 2021, it owns the fully permitted Honeymoon project in South Australia which requires low upfront capital and only 12 months to restart – just higher uranium prices of course to make it stake up! With operations in Australia, there is a degree of stability offered by the company, at this stage we believe Boss requires around $125m to restart operations and move through to 2Mlb/yr of U3O8 production, hence it will need to raise a total of A$50m equity to recapitalise the company – a strategic position might enable investors to get access to “cheap” stock in a future capital raise.

Peninsula Energy (PEN) 12c
PEN is another WA based uranium business, it is the smallest of the 3 with a market cap of just $107m in our view Peninsula Energy’s flagship Lance Projects in Wyoming, USA, requires low upfront capital and can rapidly restart. PEN is the only ASX company with direct exposure to US Government initiatives which are pro-domestic mine development. Also, the business is term debt-free with an unrestricted net cash balance of US$8m (end Dec20q).

The bottom line
MM likes the uranium space moving forward with our favourite 2 plays being the US-based Global X Uranium URA ETF (URA US) and Paladin (PDN).
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