Thoughts on Carnaby Resources (CNB), NexGen (NXG) and Lynas Rare Earths (LYC) please
Hi guys Your thoughts on the stocks please: CNB, NXG and LYC Keep up the good work! cheers, Craig
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Hi Craig,
An eclectic bunch.
- Carnaby Resources (CNB): For subscribers not familiar with CNB its a $70mn WA based exploration and development company focused on copper and gold projects in QLD and WA. The companies share price, after experiencing a volatile 3-years is back where it started in 2021. The companies burning cash, it lost $12mn in FY24 and raised $17mn in the last 12-months. We see better risk/reward alternatives elsewhere for both gold and copper exposure.
- NexGen (NXG): we like this $5bn Canadian based uranium exploration and development company, and it has a phenomenal asset base, but like the whole space its struggled over the last 12-months. NXG is advancing the Rook I Project, which hosts the high-grade Arrow Deposit, discovered in 2014. This deposit is one of the largest development-stage uranium deposits in the world. The risk/reward looks great below $9. While we’ve been wrong with the nuclear theme of late, we retain our very bullish bias towards the sector.
- Lynas Rare Earths (LYC): LYC is a leading producer of rare earth materials outside China but therein lies the issue, the worlds 2nd largest economy which produces 60-70 of rare earths and processes 85-90% ultimately controls the market. This makes it extremely hard to value LYC and hence it’s not a stock we would be chasing into strength. Around the current $8 area we have a negative bias as Beijing becomes increasingly self-focused as trade negotiations play out.
Some further points to refresh/reinforce our take on Uranium/Nuclear after a tough period for the sector:
- Decarbonising power grids needs clean base load power which means hydro or nuclear. Tech firms are underwriting new nuclear power stations for their datacentre/AI needs. China and India have huge nuclear ambitions. This all means more uranium demand.
- Uranium supply is constrained. Existing producers have limited growth options at current prices, brownfield restarts are ramping up slower than expected and there are only a handful of greenfield projects with enough scale to make a difference.
- The past year has been difficult because the utilities have been on a buyers strike. Unlike most commodities, uranium consumption and uranium demand are two different things. Utilities consumption has been growing, but demand last year was weak as utilities depleted their uranium inventories. Utilities were instead focussed on securing conversion and enrichment capacity. They are likely to refocus on uranium purchasing this year.
