Uranium stocks rise as E&P says it prefers Boss to Paladin
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The news: Shares in Boss Energy and Paladin Energy both gained in morning trade after E&P Capital initiated coverage on the two uranium producers and detailed its "tactically cautious" outlook on the wider sector.
The numbers: Paladin shares were up 1.7% to $6.77 at 11:40am AEDT. E&P opened coverage of the stock with a $5.70 price target and 'negative' rating.
Boss shares were up 1.3% to $2.42, as E&P gave the company a $3 price target and 'positive' rating.
Fellow uranium play Deep Yellow added 0.7% to $1.02. Energy, down 2.4%, was the worst performing sector as its largest stock Woodside Energy (-4.3%) traded ex-dividend.
The context: E&P Capital holds a "relative preference" for Boss over Paladin, seeing fewer operational risks at Boss's flagship Honeymoon project, compared to Paladin's key Langer Heinrich mine.
E&P analyst Branko Skocic said Honeymoon's ramp up appears to be exceeding management's initial expectations, with the recent cost update ahead of consensus. This is in contrast to Paladin, he noted, which has encountered challenges with stockpile grade, water access and "ambitious" ramp up assumptions.
E&P also sees lower jurisdictional risk at Boss, operating in Australia and the US, compared with Paladin in Namibia and Canada.
On the broader uranium sector, Skocic said E&P flagged "elevated near-term uranium price expectations" and "likely execution risks" during the ramp up of new projects.
However, the analyst said the medium-term outlook looks more attractive, driven by a growing recognition of nuclear's role as a reliable, affordable and clean source of baseload power.
The sector will likely benefit from structural tailwinds around energy security and data centres, Skocic said, supporting investor sentiment. This should "put a floor under the uranium spot price" and the listed Australian equities, both of which have pulled back over the past six to 12 months, he noted.
The source: E&P Capital research
