Uranium closing on the all time high of US$149\/lb seen only briefly in 2007
\n\u201c\u2026 there\u2019s not actually that many projects that are ready to respond to this price at the moment\u201d: Guy Keller
\nKeller\u2019s uranium picks: BOE, PDN, DVX, AGE, BMN, LOT, DYL, BSN<\/p>\n
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MoneyTalks is Stockhead\u2019s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.<\/strong><\/p>\n Today we hear from Guy Keller,\u200b Tribeca Nuclear Opportunities Strategy fund manager.<\/em><\/p>\n \u00a0<\/p>\n Since launching six years ago \u2014 when the price of uranium was so low a retail investor wouldn\u2019t touch a yellowcake stock with a 10\u00a0 foot pole \u2014 Tribeca\u2019s Nuclear Opportunities Strategy has enjoyed a 565% gain.<\/p>\n Running in line with surging prices for the nuclear fuel, it\u2019s been a year of vindication for the tactic employed by fund manager Guy Keller, who has emerged as one of the leading Australian voices on the long depressed energy commodity.<\/p>\n U3O8 spot prices finally broke the shackles in 2023 by rising 88% to US$91.50\/lb, spurred by a decade of underinvestment due to bargain basement prices, the start of a new multi-year contracting cycle, and a rush to extend the life of existing nuclear plants or build new capacity.<\/p>\n They have since continued to moon, running to ~US$106\/lb this week.<\/p>\n COMEX UxC #Uranium<\/a> #U3O8<\/a> Futures soared +$1.75 today to a new 16-year high of $105.75 Up +500% from its Nov 2016 lowas #Nuclear<\/a> fuel continues to beat out all competition as World\u2019s Top Performing Commodity #NetZero<\/a> #EnergySecurity<\/a>\u2026 pic.twitter.com\/IZeFaFOwIk<\/a><\/p>\n \u2014 John Quakes (@quakes99) January 17, 2024<\/a><\/p>\n\n Keller told Stockhead<\/em> there was no reason to think the price could not go higher, closing on the all time high of US$149\/lb seen only briefly in 2007 before the Global Financial Crisis put a dagger through the heart of demand.<\/p>\n Generally higher prices mean the start of new operations in response, or a ramp up in supply from incumbent producers. But that isn\u2019t happening, because permitting uranium projects is a long, uncertain and complex process, and majors Cameco and Kazatomprom have struggled to meet production targets.<\/p>\n \u201cJust because the price has gone from US$60 to US$100 in a short period of time \u2026 doesn\u2019t mean that a government department approving a permit is going to move any faster,\u201d Keller said.<\/p>\n \u201cThis is what the market\u2019s realising is there\u2019s not actually that many projects that are ready to respond to this price at the moment.<\/p>\n \u201cThey\u2019re all going through a process that takes time.<\/p>\n \u201cTo the point there. Where does the price go? The question should be what\u2019s going to happen to stop the price going up any further?<\/p>\n \u201cBecause here we are at a price when, in theory, a heap of development projects should be able to come to market and they\u2019re not because they don\u2019t have the ducks all lined up.\u201d<\/p>\n \u00a0<\/p>\n Of all the projects due to come online some time this decade the only one of real market moving size is NexGen Energy\u2019s (ASX:NXG)<\/a> Arrow project in Canada\u2019s famously high grade Athabasca Basin, which at its height is expected to produce around 29Mlbpa, making it the largest single mine producer at its peak.<\/p>\n But it\u2019s still at the front end engineering design stage, and Keller says by the time it comes to market \u201cit\u2019s needed anyway\u201d.<\/p>\n \u201cWhere does that mean the price settles? Not lower,\u201d Keller said.<\/p>\n \u201cI was out at the end of the last year saying there\u2019ll be a US$175\/lb price at some stage in 2024, everyone laughed at me and thought I was an idiot.<\/p>\n \u201cWhy can\u2019t it get there? I don\u2019t see anything stopping it getting there.\u201d<\/p>\n Last year was the largest contracting year in over a decade for nuclear utilities \u2014 somewhere in the vicinity of 160Mlb.<\/p>\n However \u2026<\/p>\n \u201cRegardless of what the actual number for 2023 works out to be, it\u2019s still going to be below replacement rate contracting,\u201d Keller said.<\/p>\n \u201cDepending on who you talk to, utilities consume 180-195Mlb a year, so to replace what they\u2019re burning each year they need to be contracting around that 180Mlb.<\/p>\n \u201cI suspect 2024 will be closer to replacement because it has to be, but what you have got to remember as well is utility contracting cycles last a few years. It\u2019s not just a destock-restock like you see in China with other commodities that lasts three to six months.<\/p>\n \u201cThey spend two, three, four or five years doing it and they\u2019re contracting for 5-10-15-20 years.\u201d<\/p>\n In recent years, utilities have been able to dip into the spot market to top up on cheap material after prices fell below US$20\/lb. Now higher spot prices and low liquidity after producers, physical trusts like Sprott and hedge funds hoovered up available pounds in recent years have dramatically tightened the spot trade in U3O8.<\/p>\n \u00a0<\/p>\n While lithium producers are licking their wounds on chemical prices dipping below US$15,000\/t and spodumene falling under US$1000\/t, it wasn\u2019t long ago that they surged over 15 times from their record lows, pulling equities along with them.<\/p>\n Keller said it was a lesson for the sceptics that such booms could be seen in other commodities.<\/p>\n \u201cFrom the 2020 lows to the highs last year, companies like Core Lithium (ASX:CXO) rallied 14,000%, Pilbara Minerals (ASX:PLS) rallied 4000%,\u201d he noted.<\/p>\n \u201cAnd everybody was sitting there saying, \u2018but that\u2019s lithium so of course it\u2019s going to happen\u2019.<\/p>\n \u201cAnd I was sitting there at the time saying, \u2018but hang on, lithium is rallying on future demand and you\u2019re OK with that\u2019.<\/p>\n \u201cUranium is actually coming from a position where this is a primary mine supply deficit that\u2019s been in place for 10 plus years.<\/p>\n \u201cWe\u2019ve got the largest reactor build program in decades adding future demand that we can\u2019t see a solution for and stocks rally 30% we say it\u2019s done.\u201d<\/p>\n So which ASX stocks does Keller like as the uranium bull movement \u2014 at least for now \u2014 looks to be on the right track?<\/p>\n \u00a0<\/p>\n There are few surprises when it comes to the top rated uranium stocks on Keller\u2019s radar. The Tribeca man likes $2.3 billion Boss Energy (ASX:BOE)<\/a> and $3.7b Paladin Energy (ASX:PDN)<\/a>, both likely to enter production early this year in South Australia and Namibia respectively.<\/p>\n \u201cWe\u2019ve been a very big supporter of Boss Energy \u00a0from the moment we started looking at this sector, and the same people telling me today they can\u2019t buy it at this price, I heard the same thing and $1, at $2, at $3, at $4,\u201d Keller said.<\/p>\n \u201cThe fact of the matter is, literally them and Paladin\u00a0are the only two ASX-listed companies that are going to be able to get themselves in a position to be producing uranium in the short term.<\/p>\n \u201cYou have to argue that those two stocks are going to continue to be the darlings of the market. You\u2019re not going to get 1,000% returns like some of these penny stocks will.<\/p>\n \u201cBut they\u2019re on the radar of a lot of institutional investors. Those institutional investors six or 12 months ago, were not looking at those two companies nor even looking at the uranium sector so they\u2019ll continue to be supported by that.\u201d<\/p>\n Despite the price run, Keller says value can still be found in stocks which are still at a discount to the levels they hit during a mad rush in September 2021 inspired by Sprott\u2019s entry to uranium spot purchasing.<\/p>\n \u201cI think you\u2019re going to have to really, really pick your stocks to work out what\u2019s going to outperform, so depending on what your appetite is and where you are in the market cap stack and what you\u2019re prepared to do there\u2019s plenty of different options,\u201d Keller said.<\/p>\n \u201cOutside of that next to market group, your obvious group which is your Bannermans (ASX:BMN)<\/a>, Deep Yellow (ASX:DYL)<\/a>, Lotus Resources (ASX:LOT)<\/a>, (you\u2019re looking for) the juniors who are doing things.<\/p>\n \u201cDevEx (ASX:DEV)<\/a> [and] Alligator Energy (ASX:AGE)<\/a> are doing things in Australia.<\/p>\n \u201cBasin Energy\u2019s (ASX:BSN)<\/a> doing things in the Athabasca.<\/p>\n \u201cYou\u2019re going to see a whole bunch of ASX [projects] come to the market in the next 3-6 months saying \u2018I\u2019m the greatest thing\u2019.<\/p>\n \u201cI look for those explorers that are actually spending my money on the project.<\/p>\n \u201cThere\u2019s going to be a lot of noise in that space and I think that\u2019s why you need to try look through that and focus on a few of them where there\u2019s actual project progression happening.\u201d<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post MoneyTalks: Tribeca\u2019s Guy Keller doesn\u2019t ask why uranium could hit US$175\/lb \u2026 he asks why not?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Is US$175\/lb a possibility?<\/h2>\n
It could be like lithium<\/h2>\n
Look for stocks with activity afoot<\/h2>\n
Guy Keller\u2019s uranium picks<\/h2>\n\n
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