Shares in Boss Energy (ASX: BOE) were up as much as 7% at the open after the ASX300 multi-mine uranium producer posted strong operational and financial results for the three months to end-March.
What captured the market’s imagination today were revelations Boss had recorded its first free cashflow (FCF) from its flagship Honeymoon project (South Australia) during the March quarter.
During the quarter the company produced 295,819 pounds of uranium concentrate, up 116% on the previous quarter and 10% ahead of consensus forecasts.
Today’s announcement shouldn’t have come as a complete surprise to the market given that it pre-released March quarter numbers mid-April.
Lower production costs
But adding to today’s positive market update were management iterations that production is also running at costs lower than second-half guidance.
The net direct cash cost (aka the C1 cost) of $33/lb came in under cost guidance of $37-41/lb.
Commenting on today’s update, Boss managing director Duncan Craib said the generation of free cash flow at Honeymoon marked a watershed quarter for the company.
"This milestone is the result of the highly successful ramp up… importantly, we generated robust margins at current prices, demonstrating the strength of Honeymoon in the current market."
He also flagged the project’s immense upside from future uranium price increases as the market tightens.
Despite some commissioning challenges at Honeymoon, the company assured investors that they won't affect its guidance target of 850,000 pounds.
Improving supply/demand fundamentals
The uranium price is currently down 12% year to date and stubbornly low uranium spot prices suggest that the long-term uranium market remains fractured.
However, recent beats to Boss’s forecasted production and realised prices coincide with improved supply/demand fundamentals for the global uranium industry.
Market experts expect mounting supply and demand imbalances to force utilities to accept higher prices.
With IX column 3 and wellfield 3 now both online adding to flow rates, Ord Minnett believes the Honeymoon project is well-positioned to meet or beat FY25 guidance of 850,000 lbs, while Macquarie forecasts 912,000 lbs in FY25.
Overweight uranium
Following the Shaw and Partners hosted Uranium Conference back in late March, the broker recommended an overweight position on the uranium sector in equity portfolios, with Boss being one of its main picks along with Paladin Energy (ASX: PDN), NexGen Energy (ASX: NXG), Silex Systems (ASX: SLX), and Bannerman Energy (ASX: BMN).
Boss Energy has a market cap of $1.3 billion.
Boss’s shares are down 35% over one year and up 26% year-to-date.
The stock is currently trading at a 20% discount to a 12-month target price of $3.69.
The stock’s shares appear to be in a strong near-term rally within a longer-term bearish trend.
Consensus is Strong Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
