Proactive Investors - Uranium prices have surged to levels not witnessed in over a decade, crossing the US$66 per pound mark recently, a milestone last achieved just before the Fukushima nuclear disaster in 2011.
The price resurgence has been driven primarily by the pressing need to secure fuel supplies, as uranium returns to the spotlight as an essential source of carbon-free, baseload power in the global battle against climate change.
For supply to meet the increase in demand, uranium companies will need to add pounds of ore their yearly production and the easiest way to do this is by acquiring a company with a much-needed resource. That said, we have filtered through and found five uranium stocks that have emerged as attractive acquisition candidates.
NexGen Energy (TSX:NXE): A premier uranium developer
Nexgen Energy Ltd is number one on our list as it has become one of North America’s top development stage uranium companies. Its flagship Rook I Project, located in Saskatchewan’s Athabasca (TSX:ATH) Basin, is Canada’s largest high-grade development-stage uranium resource.
NexGen’s 2021 feasibility study (FS) estimates the project as having a net present value (NPV), using an 8% discount rate and a uranium price of US$50 a pound, of C$3.47 billion while operating at an estimated all-in-sustaining cost of just US$10 per pound. The study also forecasts after-tax free cash flow of C$1.04 billion from operations over the first five years.
The FS does not include the project’s Inferred resource, which is estimated at more than 80 million pounds.
NexGen also has a 50% equity stake in IsoEnergy, which owns the Hurricane uranium deposit in the eastern Athabasca Basin that PI Financial analysts called “the most significant high grade plus-50-million-pound uranium discovery in years (one of the Athabasca’s top 10 deposits)”.
Industry giant Cameco (TSX:CCO) Corporation would be an obvious suitor for NexGen, as Cameco has operations in the Athabasca Basin that includes the large Cigar Lake and McArthur River mines.
Cameco had $2.5 billion in cash, cash equivalents, and short-term investments as of June 30, 2023, and has the share capital to make the deal happen.
Denison Mines (NYSE:DNN): A key player in the Eastern Athabasca basin
Denison Mines Corp (TSX:DML) is next in line as the company has a 95% effective interest in the Wheeler River project, which it calls the largest undeveloped uranium project in the infrastructure rich eastern Athabasca Basin.
Denison also has a 67.41% interest in the Waterbury Lake project, which has estimated life of mine production of 9.7 million pounds of uranium oxide, at average cash operating costs of just US$12.23 per pound, plus a 22.5% interest in the Strategic McClean Lake Uranium Mill, as well as smaller stakes in other projects operated by majors.
And the company holds 2.5 million pounds of physical uranium in storage facilities, valued at more than $170 million based on the current market prices.
Ur-Energy: A valuable asset for larger producers
Ur-Energy Inc. (NYSE:URG, TSX:URE), meanwhile, would be appealing to a larger producer since the Wyoming-focused uranium mining company owns the Lost Creek in-situ recovery (ISR) uranium facility, which has produced and packaged about 2.7 million pounds of uranium from Lost Creek since operations began 10 years ago.
Lost Creek has an estimated 11.9-million-pound Measured and Indicated resource as well as a 6.6-million-pound Inferred resource, with a 14-year remaining mine life that has had low output costs during past production.
Ur-Energy also owns the Shirley Basin ISR uranium project in Wyoming, which is expected to begin production in about two years. It has an estimated 8.8 million pound Measured and Indicated resource.
As well, the company holds about 224,000 pounds of uranium in inventory valued at about US$13.4 million, based on the recent spot price, and had approximately $63.7 million in cash in the bank as of the beginning of August.
Ur-Energy ranks as North America's second commercial uranium producer behind Cameco.
Energy Fuels: holding vital production centers
Energy Fuels Inc. (TSX:EFR) also deserves a spot on our list as it holds two of America's key uranium production centers: the White Mesa Mill in Utah and the Nichols Ranch ISR Project in Wyoming.
The company also recently began production of advanced rare earth element (REE) materials, including mixed REE carbonate, and plans to produce commercial quantities of separated REE oxides in the future.
The White Mesa Mill is the only conventional uranium mill operating in the US today, has a licensed capacity of over 8 million pounds of uranium oxide (U3O8) per year, and is able to produce vanadium when market conditions warrant, as well as REE products, from various uranium-bearing ores.
The Nichols Ranch ISR Project is on standby and has a licensed capacity of 2 million pounds of U3O8 per year.
Energy Fuels also owns the Pinyon Plain Mine in Arizona and the La Sal Complex in Utah, both of which are in pre-production.
As well, the company said it has three large-scale projects (Sheep Mountain, Roca Honda, and Bullfrog) in permitting that have the potential to produce an additional 4+ million pounds of uranium per year.
The $1.2 billion market cap Energy Fuels had about $100 million in cash and marketable securities as of June 30, 2023.
F3 Uranium: A promising discovery in Saskatchewan
Finally, F3 Uranium Corp (TSXV:FUU) could be attractive to a larger development-stage company due to its promising discovery.
F3 currently holds 18 projects across Saskatchewan’s Athabasca Basin, several of which are near large uranium discoveries including Triple R, Arrow and Hurricane.
It’s the company’s Patterson Lake North (PLN) property, however, that has people talking, especially after drilling an 18-metre intercept of 8.8% uranium oxide from the JR Zone in August, which followed equally impressive off-scale mineralization discovered last November.
F3 management has called it the best discovery since IsoEnergy’s Hurricane deposit, which ranks as the most significant uranium discovery made in the Athabasca Basin in recent years, according to PI Financial analysts.
"We recognized early on that the geology and the alteration in that structure was quite similar to the Triple R deposit itself," F3 Uranium president Raymond Ashley told Canadian Mining Journal recently, referred to the discovery his former company, Fission Uranium, made at the Patterson Lake South (PLS) project in 2014.
Denison recently provided F3 with unsecure convertible debentures financing in the amount of $15 million, which could see the company take an approximate 6% equity stake in F3 Uranium presuming it doesn’t issue more shares.
That would make the $1.7 billion market cap Denison Mines a logical suitor for F3, which sports a market valuation of about $150 million.
In the end, time will tell if any or all these companies are eventually acquired. Regardless, the rosy outlook for uranium demand bodes well for much higher stock prices in the months ahead.