This time last year MM’s Webinar: Resources into 2024 focused on the global energy transition which covered the key related commodities such as lithium, copper, and uranium – definitely worth a listen to remind ourselves of some of the huge thematics moving forward . Three of our main takeouts were as follows:
- Copper (Cu) – very bullish with a significant multi-year and decade bullish cycle coming through due to supply challenges with short-term concerns around global growth providing buying opportunities.
- Lithium (Li) – The markets proved to very wrong on the demand side here and the reality is the worlds not short of Li making it harder to forecast, although we believe the ~80% correction is maturing.
- Uranium (U) – very bullish as nuclear power regains global acceptance, we now have more nuclear power facilities under construction than since the 70s’. The supply challenges in U are on a comparative level to Cu especially with Russia supply now off the market for the foreseeable future.
We we’re on point 12-months ago which is always nice but importantly we remain very bullish towards Cu and U over the coming years and hence we are going to be ”buyers of dips” and only cautious reducers, as opposed to aggressive sellers into spikes.
MM is bullish uranium prices medium term
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The Global X Uranium ETF provides exposure to a broad range of stocks involved in uranium mining including overseas giant Cameco Corp (CCJ US) plus it holds 8% in physical U. This is a good way to play the sector for investors who want some overseas exposure and aren’t keen on stock specific risks.
- We like the risk/reward towards the URA ETF into the current pullback but wouldn’t be surprised to see a test of the $US27-28 level.
MM is bullish on the URA ETF
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Paladin (PDN), whose market cap was just shy of $4bn on Friday have bid $921mn for Canadian-listed Fission Uranium (FCU CN) an implied price of $1.30 per share, a ~30% premium to its last trade. FCU shareholders will receive 0.1076 PDN shares for each of their FCU shares with shareholders in the Canadian company owning 24% of the combined company. Importantly the FCU board has recommended shareholders vote in favour of the deal which is targeted to close in September – we bet BHP wish things had been so easy with their attempted purchase of Anglo American (AAL LN)!
- We believe FCU shareholders will be happy with the takeover allowing them to maintain U exposure in the sector via PDN shares which will now dual list on the Toronto and Australian exchanges, with a broader asset base.
MM is bullish FCU under $1.20
PDN’s bid for FCU heralds the return to acquisitions in the sector amid a nuclear renaissance. Russia’s invasion of Ukraine has sent the world scrambling for alternative energy sources sending the price of U soaring, especially as its regarded as a clean energy by most major countries.
- If/when Australia’s restrictive policies on uranium exploration and mining are lifted, it could deliver some huge gains for ASX uranium stocks – if Dutton moves ahead in the polls, watch this space!
