Each Friday, we highlight the key trading themes of the week, along with companies and sectors investors should be keeping their eye on.
As part of the weekly recap for Stockhead, our Head of Trading, Trent Primmer, was interviewed to share some trading highlights of the week.
Uranium stocks moved back on the investor radar last month, with a couple of ASX plays booking big gains in May. This week, Trent flagged it as a sector to watch within his broader commodities thesis.
Market mechanics
Spot prices for uranium edged above US$30/pound this week — a 10-month high — after trading in a range between US$25-30/pound through the first half of this year.
At those prices, the economics still don’t stack up for a lot of junior uranium producers so further catalysts will be required for longer-term growth.
Assessing the recent price action, Primmer said uranium prices have remained in a state of flux for the past decade since the Fukushima disaster in Japan.
In the fallout from that event, global uranium demand fell while supply inventories rose steadily.
Speaking on the StockheadTV RockTalks panel earlier this week, Bannerman Resources (ASX: BMN) CEO Brandon Munro noted that global uranium demand now exceeds pre-Fukushima levels, except supply stocks are still in the process of recalibrating.
Munro also flagged the recent activity in secondary demand markets, such as buy-and-hold strategies for physical uranium.
In late April, global asset manager Sprott Holdings entered the market with its acquisition of Uranium Participation Corp and the launch of the Sprott Physical Uranium Trust.
Munro said he expects the move to have a “big impact” with a “dramatic increase in liquidity”.
Uranium opportunities
BMN is one of the ASX uranium stocks that Primmer highlighted in his appraisal of the market.
Bannerman Resources (ASX: BMN)
Trent said:
“Their share price seems to have the highest leverage to physical uranium prices, and they’ve been a strong performer with the largest market cap in the ASX uranium sector.”
Energy Resources (ASX: ERA) and Deep Yellow (ASX: DYL)
Trent also highlighted Energy Resources (ASX:ERA) and Deep Yellow (ASX:DYL) as two other uranium stocks on his watchlist. Trent said:
“With these plays I’d be using any price weakness to accrue small positions.”
He added that along with the shifting dynamics around global supply and demand, uranium is also included as part of the broader focus on clean energy as well.
“Uranium is a thematic that’s going to be sticking around over the next several months — there’s a lot of market chatter around it. If you can get in early on the upswing, I’d be watching these stocks and if they come off 15-20% I’d be buying some small parcels just to get exposure to the underlaying commodity.” In short
- Trent Primmer, Head of Trading
To read the full Stockhead's article, click here.
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