Deep Yellow rally enters third day on upsized uranium fund investment
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The news: Uranium miner Deep Yellow’s shares are rallying for a third consecutive day. The spot price of the energy commodity is set to lift after the world’s largest physical uranium fund announced an upsized USD200 million ($308 million) investment raise.
The numbers: Shares in Deep Yellow had risen 3.9% to $1.72 at 11:05am AEST and are up 23.6% over the last five days.
Analysts at stockbroker and wealth management firm Morgans raised their price target from $1.56 to $1.92 and maintained a speculative ‘buy’ rating on the expected spot price boost from Toronto-listed Sprott Physical Uranium Trust’s (SPUT) investment raise.
Rival miner Boss Energy was up 1.6% to $4.54, after announcing it met output guidance, while Paladin Energy had slipped 0.5% to $7.56.
The context: SPUT said it would raise $US100 million on Monday afternoon by issuing new shares in a bought deal arrangement with Canaccord Genuity, but later announced that USD200 million had been raised after strong investor demand.
The trust said in a media release that the proceeds will be used to “acquire physical uranium in the form of uranium oxide in concentrates and uranium hexafluoride and related fees and expenses”.
The Morgans analysts flagged that since the spot market is “shallow and thinly traded …inflows into SPUT typically translate into immediate buying pressure”. The analysts also said that the spot price and uranium equity performance are highly correlated.
What they said: “Following a USD200 million raise by the Sprott Physical Uranium Trust we are increasingly optimistic regarding the growing institutional confidence in the uranium investment case and confirms SPUT now has ample funding to purchase material volumes from the spot U3O8 market,” Morgans analysts said in an investment note.
The sources: Sprott Physical Uranium Trust media release, Morgans research
