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China has recently confirmed its ambitions to build 20 nuclear power plants over the next decade as part of a larger development plan for up to 150 new installations.  As the demand for nuclear power intensifies, securing uranium supplies is set to become a key issue for countries embracing nuclear power. Looking at the local Uranium sector we see an intricate web of operations and joint venture partnerships to develop and commercialize mines. 

On the 27^th August, China made its biggest investment in the Uranium sector, agreeing to pay $96 million for 70% of Perth based junior Energy Metals, which itself has a 54% stake in the Bigrlyi uranium and vanadium project, 350km northeast of Alice Springs. The other shareholder in this project is Paladin Energy (PDN).

Paladin has made headlines recently after raising $440 million to fill its war chest for further acquisitions. We believe Paladin will look to diversify out of Africa, where it currently mines 6% of the world's Uranium production and Australia where it already has grounds.

BHP is the biggest player in the Uranium market with 100% ownership of Olympic Dam, the world's largest uranium deposit plus additional reserves in WA. Rio Tinto gains its Uranium exposure from a 68.4% holding in Energy Resources Australia (ERA), with mines in Australia. It also partners the Namibian Government in Rossing, a large open pit mine in Namibia and holds a 15.6% stake in Australian based Extract Resources (EXT). 

Extract Resources controls a large Uranium deposit in Namibia, just south of Rio’s Rossing project, with the resource tipped to be the world’s second largest deposit. It appears Rio is keen to secure more involvement in Rossing South through its strategic stake in EXT. Incidentally, Extract Resources has been the best performing stock on in the S&P/ASX 200 this year gaining an impressive 700%. A pullback recently could present a buying opportunity.  

Our View

Extract Resources (EXT) has some great growth prospects and its share price has certainly factored this in. Paladin Energy (PDN) would be preferred for growth while those looking to avoid sovereign risk look to ERA. In the junior space, look towards ARM, DMA, DYL, TOE, UUL, USA, SNU & UEQ. 

Drop me an email for a full list of Uranium producers on the ASX.

James Gerrish