Some interesting things happened in the world of Australian uranium stocks today.
The big loser however was Peninsula Energy Limited [ASX:PEN], down a whopping 26.23%, which had been trading upwards from low at the beginning of February:
Why the diverging fortunes?
To understand what went down, we look the recent announcement by US President Donald Trump, why this hurt Peninsula Energy and uranium’s prospects going forward.
Trump rejects uranium quotas and PEN share price tumbles
In rejecting a uranium import quota that would limit imports and effectively reserve 25% of the US market for domestic production, Trump’s move had a big impact on the PEN share price.
The Trump memorandum noted that the US imports roughly 93% of its commercial uranium.
Peninsula Energy’s project in Wyoming would likely have benefitted as it is the only ASX-listed US producer of uranium.
The company has a JORC-compliant resource estimate for the Lance Projects mine that stands at 53.9 Mlbs.
With a significant quantity of uranium under contract to major utilities in the US and Europe, a domestic production requirement would have had flow on effects to Peninsula Energy’s bottom line.
It is possible that the market had been betting on Trump sticking to his usual ‘buy American’ policy platform in the lead up to today’s news.
There is however potential future upside for Peninsula Energy as Managing Director/CEO Wayne Heili emphasised:
‘While we recognise that there would have been benefits for U.S. uranium projects if some of the Section 232 petition recommendations were eventually implemented, we also believe the presidential action will put an end to the market uncertainty created by the Section 232 investigation. This is positive for the uranium market as a whole as we now expect market activity to increase. The establishment of a working group for the expressed purpose of developing recommendations for reviving and expanding domestic nuclear fuel production should also result in a positive outcome for the Company and may lead to enhanced project economics at Lance.’
Australian uranium producer Boss Resources welcomes decision
With a contrast in fortunes to Peninsula Energy, Boss Resources, which owns 100% of the Honeymoon uranium project, welcomed the decision.
Managing Director Duncan Craib said after the decision:
‘Boss is in a very good position to respond as US utilities come back to the market. We have solid relationships with a variety of US utilities with whom we have been discussing off-take contracts. Australia has been a long-term reliable and important supplier of uranium to the US and this decision will see this continue, underpinning project development in Australia as well as providing foreign investment.’
The Honeymoon mine was placed on care and maintenance by previous owners Uranium One in 2013 and acquired by Boss Resources in December 2015.
This is what has been happening with the uranium price in the last five years:
We note rising bottoms since the end of 2016.
According to the World Nuclear Association, there are 53 reactors under construction globally, 10 of which will be located in China.
There are over 100 reactors on order or planned, and more than 300 proposed.
At some point, the uranium bull market should return with numbers like these, you would think.
Our editor, Greg Canavan takes a look at the important factors that could drive the uranium comeback, and covers the demand and supply story in this free report. It is a must read for any investor interested in uranium.
For Money Morning