Nothingto see here! Deep Yellow cancels fundie catch-upsSarah...

Nothingto see here! Deep Yellow cancels fundie catch-ups

Sarah Thompson, KanikaSood and EmmaRapaport

Jan 18, 2024 – 6.37pm

Uranium stocks are the hottest thing this sideof Christmas but it seems not all attention is welcome.

Several sources told Street Talk earlier thisweek that stockbroker Bell Potter was teeing up meetings with investors.However, the $1.2 billion company was said to have cancelled the planned charmoffensives by late Wednesday after being shaken by a Street Talk request forcomment on whether the meetings were ahead of a possible capital raising.

A spokesperson for the uranium explorerconfirmed to this column that meetings with fund managers were on the agendabut said the catch-ups were routine, allowing investors to speak withmanagement following its December quarter cash-flow report, released onThursday morning. It appears the scheduled meetings were pulled due to concernsan article would fuel speculation.

The quick change of heart comes amid a wave ofinterest in the burgeoning sector – from long-term investors and short sellersalike. Uranium is seeing a resurgence across the globe as economies seekingreplacements for traditional sources of energy look past nuclear disasters,including Fukushima in 2011.

While the demand for uranium has risen, supplyhas remained constricted after decades of underinvestment in bringing new minesonline.

Uranium stocks have been on a tear this yearas uranium prices surge to their highest level in more than a decade.As reported, the price of the nuclear fuel broke above $US100 for the first time since 2007in mid-January after Kazatomprom, the world’s largest uranium miner, warned itwas likely to fall short of its production targets over the next two years.

This has given the uranium bulls something tocheer about: Paladin Energy is up 67 per cent, Boss Energy has soared 85 percent, Nexgen Energy 79 per cent, Deep Yellow 126 per cent and Bannerman Energy129 per cent over the past six months. But it’s also seen short sellers get involved. Deep Yellow is nowamong the most shorted stock on the ASX. Short interest in the stock jumped to10 per cent in late December.

Go, shorty,it’s your birthday

Short sellers are known to take positions incompanies they think will need to raise capital. Raises are almost always doneat a discount to the last traded price, allowing short sellers to participateand cover their shorts. However, it’s a risky strategy. If you’re wrong and thecompany doesn’t elect to raise capital, you risk the share price gaining. Andeven if you’re right, the company may choose to do a rights issue, which limitsthe participants to shareholders.

Street Talk is not suggesting an equity raiseis imminent, or even on the cards, at Deep Yellow. Still, it’s certainly atopic fund managers are likely to raise with management – if and when themeetings are reinstated. The company reported $32 million cash on hand inSeptember, and quarterly cash burn around $13.5 million. It also announced $529million ($US360 million) in capex for its flagship Tumas uranium project lastmonth.

Rival Boss Energy announced a $215 million equity raise in Decemberto buy a Texas-based mine Alta Mesa from Canada-listed Encore Energy. ElevateUranium also raised cash last month to accelerate its growth strategy, andPeninsula Energy added $60 million to its balance sheet in November to fund therestart of its uranium production.