Terra Capital\u2019s Jeremy Bond delivered the only mining pick for this year\u2019s Heart and Minds Conference portfolio \u2013 Canadian uranium developer NexGen Energy
\nBond tells us why its Rook I discovery is a \u201cgeological freak\u201d
\nThe fund manager reckons uranium could surpass its 2007 highs of US$149\/lb in an emerging bull market<\/p>\n
Despite its dominance in the Australian investing landscape, fund managers presenting at the Sohn Hearts and Minds Investment Conference rarely pick resources stocks.<\/p>\n
Since its establishment in 2018, Hearts and Minds has invested around $700m and donated almost $44m to medical research, and introduced punters to ideas from some of Australia\u2019s top fundies.<\/p>\n
35% of the portfolio is made up of stocks selected by presenters at the SHM Investment Leaders Conference at the Sydney Opera House, held last Friday.<\/p>\n
Last year\u2019s sole mining selection \u2014 high grade Canadian iron ore miner Champion Iron (ASX:CIA)<\/a> \u2014 netted a 21% gain for Hearts & Minds Investments (ASX:HM1)<\/a>. Kudos to Regal\u2019s Tim Elliott on that one.<\/p>\n This year again resources was an outlier, with just one pick in the 2023-24 conference portfolio. <\/p>\n That was dual-listed uranium developer NexGen Energy (ASX:NXG)<\/a>, now sitting on a C$4.6 billion market cap after a ~50% rise in its share price this year on the back of uranium\u2019s 60% lift in prices to a 15-year high of US$80.75\/lb yesterday.<\/p>\n The fundie who picked it \u2014 Terra Capital\u2019s Jeremy Bond \u2014 reckons this uranium run has way more legs, saying fundamentals are there to surpass 2007\u2019s boom-time highs of US$149\/lb.<\/p>\n \u201cIt\u2019s hard not to be pretty excited on a 12-month basis on that uranium price. The market has got so tight,\u201d he told Stockhead<\/em>.<\/p>\n \u201cYou can see the reactors under construction plus the extensions, coupled with your things like Sprott Uranium Trust and Yellowcake \u2014 over the last 18 months they\u2019ve just been slowly taking pounds out of the market.<\/p>\n \u201cAnd you\u2019re coming into the contracting cycle. If your nuclear facility\u2019s to be constructed by \u201925 or \u201926 or you\u2019re extending like you need the pounds now, you can\u2019t borrow them in \u201925 or \u201926 pounds now\u2026 there\u2019s just not the pounds there.<\/p>\n \u201cYou\u2019re seeing the price having to gap up like a dollar each night sort of thing and the market\u2019s small so it\u2019s got the capacity to do that. <\/p>\n \u201cYou look back at the last boom and it was pretty aggressive. I think this one\u2019s based a bit more on fundamentals so I don\u2019t think it\u2019d be quite as boom and bust but I think you could easily see the price go past the last high.\u201d<\/p>\n Uranium prices have rocketed this year to US$80.75\/lb. Could they go higher? Pic: Numerco<\/p>\n \u00a0<\/p>\n NexGen is the owner of the Rook I discovery in Canada\u2019s Athabasca Basin, a geological miracle in the backwoods of the Saskatchewan Province.<\/p>\n Where most economic uranium deposits \u2014 like those found in southern Africa \u2014 grade in the parts per million, Athabasca mines can grade as high as 17-20% U3O8.<\/p>\n That\u2019s one in five.<\/p>\n NexGen\u2019s Rook I isn\u2019t quite at that level for grade, but it does the rest for scale.<\/p>\n All the picks from this year\u2019s SHM Investment Leaders Conference. Pic: HM1 ASX<\/p>\n A 2021 feasibility study put a $1.3 billion capex bill on developing the project which at that point had 3.75Mt of ore grading 3.10% U3O8 for 256.7Mlb of yellowcake.<\/p>\n At 29Mlbpa for its first five years of a 10.7 year mine life, Rook I would be the largest uranium producing mine in the world.<\/p>\n With operating costs of just US$5.69\/lb, that mine once developed could pay back that enormous initial outlay in just nine months \u2014 and that\u2019s at US$50\/lb.<\/p>\n If prices run to US$100\/lb, Bond says the mine would on its own generate as much free cash as Freeport McMoran did last year. For context, that\u2019s the world\u2019s top producing copper miner.<\/p>\n \u201cIt\u2019s one of the best undeveloped assets of any kind in the commodity market,\u201d Bond said.<\/p>\n \u201cIf you put a gold equivalent and a copper equivalent on it, it\u2019s a geological freak.<\/p>\n \u201cAt US$100\/lb it\u2019s doing free cash flow of a billion and a half US, which is the same free cash flow that say Freeport did.<\/p>\n \u201cFreeport\u2019s capped at US$60b, so call it C$90b, NexGen is C$4.5b.<\/p>\n \u201cAdmittedly it\u2019s not in production, so it\u2019s not like for like but even more interesting is that Freeport free cash flow comes off 22 assets, whereas this could come from one. So it really is quite a unique asset.\u201d<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n Sohn asks fundies to give their high conviction bets and that would certainly describe Bond\u2019s approach to uranium.<\/p>\n \u201cIf we really are going to achieve any of those 2050 targets, you just can\u2019t really see a world in which those targets are achieved without a much larger adoption of uranium,\u201d he said.<\/p>\n \u201cWe\u2019re all for renewables and I believe in the lithium story and the copper story very much so. <\/p>\n \u201cA solid part of that demand is predicated on the rollout of renewables, but in a high cost, high rate environment I think there\u2019s going to be a push for other energy sources and baseload power and uranium does fit that bill<\/p>\n \u201cIn Australia, we don\u2019t see it because we\u2019re just anti-nuclear. But China I think needs to do nine reactors a year for the next 10 years or something. <\/p>\n \u201cThere\u2019s 450 reactors globally now. And they\u2019re looking to build 90 over the next 10 years.<\/p>\n \u201cWe think the long term story is real, the short term story is real \u2014 as in there\u2019s a physical squeeze in the market at the moment. <\/p>\n \u201cSo you\u2019ve got a short term story in a spot market squeeze and then a long term story and I just think the adoption nuclear is going to become more mainstream.\u201d<\/p>\n Other uranium stocks Bond likes include IsoEnergy (TSX.V:ISO)<\/strong>, which has made the world\u2019s highest grade uranium discovery at Hurricane in the Athabasca.<\/p>\n On the ASX he says Terra has also been in Paladin (ASX:PDN)<\/a> and Lotus Resources (ASX:LOT)<\/a> previously, though they\u2019re not currently in the fund.<\/p>\n \u00a0<\/p>\n Terra has all up $185m of funds under management, with around $170m in its natural resource fund, a surprisingly under-serviced part of the Australian investment landscape.<\/p>\n Outside of uranium, Bond has a number of picks across lithium, copper, iron ore, met coal and specialty metals.<\/p>\n \u201cWe have started buying some lithium and copper exposure. I think they\u2019re the two commodities that sort of got a bit beaten up this year,\u201d he said.<\/p>\n \u201cI think now it\u2019s time to start sort of scaling into some of those producers. <\/p>\n \u201cI\u2019m thinking Pilbara Minerals (ASX:PLS)<\/a> in the lithium space. In copper, we tend to express that offshore so we\u2019ve been buying Lundin Mining (TSX:LUN)<\/strong> and Capstone Copper (TSX:CS)<\/strong>.\u201d<\/p>\n Bond also likes Champion Iron, which is ramping up to 15Mtpa of high grade magnetite concentrate from its Bloom Lake complex in Canada.<\/p>\n \u201cWe think that high grade product is only going to become more and more valuable. We also think when you look at Champion, those high grade producers assets other than Champion\u2019s really all owned by steel mills,\u201d he said.<\/p>\n \u201cChampion\u2019s the last sort of decent, unencumbered one and look you at the consolidation in the steel industry and I don\u2019t think it\u2019s a stretch to think that one of those companies might find Champion interesting.<\/p>\n \u201cWe don\u2019t own it for M&A, but I wouldn\u2019t be surprised if there was M&A.\u201d<\/p>\n Other ASX companies on Terra\u2019s radar include Queensland met coal producer Stanmore Coal (ASX:SMR)<\/a>, Brazilian rare earths darling Meteoric Resources (ASX:MEI)<\/a>, Orica backed Alpha HPA (ASX:A4N)<\/a> and resurgent WA gold explorer Spartan Resources (ASX:SPR)<\/a>.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n At Stockhead we tell it like it is. While Spartan Resources is a Stockhead advertiser, it did not sponsor this article.<\/em><\/p>\n <\/span><\/p>\n The post Jeremy Bond thinks this uranium deposit is a \u2018geological freak\u2019 poised for a nuclear bull market<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Why NexGen?<\/h2>\n
NexGen Energy (ASX:NXG) share price today<\/h2>\n\n
High conviction<\/h2>\n
Where to for mining?<\/h2>\n
Terra ASX picks share prices today<\/h2>\n\n