Replying to
@RDawg's post (
https://hotcopper.com.au/posts/64019749/single) here. I have a different view on uranium vs coal.
I think long term it's part of the answer if societies really want net zero emissions and yet not live in the dark. However from an investment viewpoint, most of the ASX uranium equities are already hugely overcooked on valuation grounds. They're already pricing in far, far higher uranium prices (i.e. around US$75-90/t or more by my calculations) yet the punters on HC and Twitter seem to think that if/when the underlying commodity price moves, so will the equities. The fact is, they already have moved way in anticipation. Uranium is one of the most volatile commodities out there, check out a 25-year chart, it's just a series of spikes and dramatic collapses. With spot at US$50, none of these companies are even economical, yet they've got market caps in the mid-hundreds of millions and some in the billions. In terms of actual management skill to successfully commission and run these mines to production, there's a huge shortage of expertise in the wider uranium market - a result of the long, dark bear market it's been in since Fukushima. The knowledge base has broadly departed and gone to all the other hot commodities such as lithium, copper, battery metals, etc. Very few experienced operators that have actually commissioned a mine are left. When you look at the project economics, they've all got pretty low NPV's, because they're only able to do small amounts per annum. Take Boss Energy as an example, their export license caps them at 3.3M lb's p/a and according to their FS, they're going to do just 2.45m lb's at nameplate capacity (due to a small resource size). When your annual output is that constrained, you have to have an astronomically high commodity price to justify the valuations being ascribed. I did the numbers on Boss Energy using their own Enhanced Feasibility Study numbers, with uranium at US$75/lb they'd be doing around max A$130M in free cash flow
each year (by my calcs at current coal prices/exchange rates,
WHC is doing that figure every 1.5 weeks!). Further, Boss Energy mine life is only 10 years. Current market cap is A$920M!
Ironically everything the uranium bros want from their thesis, they could be getting in coal right now:
- historically unloved commodity
- chronic underinvestment in the past decade
- huge demand as the world wakes up to its errors
- very small number of equities to choose from to get exposure to the sector
- miners printing millions of dollars cash on a daily basis
- hefty dividends and buybacks occurring
Yet when it comes to relative valuations coal remains far, far cheaper than uranium equities.
I used to be invested in uranium, and I probably will be again, but right now they're far too fat. The U faithers are still on Twitter wondering why every "next leg up" in the equities is promptly followed by "the next leg down", and going on about how cheap their stock is, at a multi-hundred million market cap with no mine production plan in sight, never mind the team to effect it...
(20min delay)
