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Article from * based on the latest Bell Potter valuation
Monsters of Rock: How much is Boss Energy worth, and who avoided the selldown today?

Analysts at Bell Potter think Boss Energy (ASX:BOE) could make a final investment decision on the restart of the Honeymoon uranium mine as early as March next year.

Bell Potter has slapped a speculative buy recommendation on Boss after initiating coverage last week with a 44c price target. The yellowcake stock was trading at 35c today, giving it a market cap of $780 million.

Its main game is the Honeymoon uranium mine, which it picked up during the uranium doldrums and has been shut for almost a decade.

Boss has outlined a ~$107 million (US$80 million) capex cost to refire the mine, which would become just the third operating uranium mine in Australia should it enter production.

It is likely to have around a 12 month timeline from FID to first production, with Boss’ primary aim to lock up long-term contracts with utilities to support Honeymoon’s return to the uranium market.

It is a market that has been simmering this year after a decade in the pits, briefly touching nine year highs of more than US$50/lb earlier this year as Sprott’s new physical uranium trust and other investors began to hoover up product on the lightly traded spot market.

According to market leader Cameco monthly average spot prices have risen sharply from US$27.98/lb in February to US$45.20/lb in October.

“FID could be reached by March 2022, we believe, as long term uranium prices continue to rise towards the theoretical re-start price of US$50/lb, on the back of a supportive macro backdrop,” Bell Potter analyst Regan Burrows said.

“With the thinly traded spot production being soaked up by opportunistic physical uranium investment vehicles, we believe it is only a matter of time until global utilities are forced to contract supply at higher, more sustainable, prices.

“Securing long term off-take agreements is the key hurdle for BOE to restart operations at Honeymoon. Historically, the long term contract price has traded at a ~20% premium to the prevailing spot price.

“However due to recent purchases from physically backed funds, the spot price is now trading at a significant premium to the term price. This short term dislocation has the potential to form a new floor price for long term contracts, one which encourages new development and exploration.”

Burrows said Boss had indicated they would be comfortable making an FID once offtake agreements for 40-50% of production was locked in.

He said under Bell Potter’s base case scenario Boss would be expected to enter contracts at ~US$50/lb with a ceiling between US$70-80/lb, generating life of mine EBITDA margins of 49%, rising to 55% at a US$60/lb term price scenario.