The spot price of uranium is hovering around a two-and-a-half year high and China and India are building nuclear power plants as fast as they can.
This can only be a good thing for companies with uranium interests, right?
Energy Resources of Australia Limited (ASX: ERA) may be an S&P/ASX 200 stock that comes to mind when you think of uranium, but then again, many have never even heard of this under-the-radar small cap, despite Rio Tinto Limited (ASX: RIO) owning a large chunk of it.
With a mere $194 million market cap and a share price that has seen better days, Energy Resources mines uranium ore through stockpiles created from the Ranger mine in Australia – selling the product to power utilities across Asia, Europe and North America.
But the company released the Ranger Mine closure plan during the June quarter, with the finalisation of rehabilitation activities expected in the fourth quarter of FY18.
And in the minds of many investors, this small fry player is yet to prove its worth.
According to Energy Resources' recently-released half-year report, the company posted a net loss after tax of $78 million – which did include a non-cash impairment charge of $90 million to the Jabiluka Undeveloped Property.
While Energy Resources is of the view Jabiluka is a high-quality uranium ore body of global significance, investors were likely disappointed by a reduction in sales volumes over the period, with uranium oxide production for the half-year ended June 30, 2018, at 842 tonnes, compared to 1,046 tonnes for the same period in 2017.
While Energy Resources managed to increase revenue by 6% over the period all eyes will be on its second-half performance as higher uranium prices and China-led demand for nuclear power programs creates opportunities.
But can Energy Resources get the formula right to leverage off this growth?
At the big end of town BHP Billiton Limited (ASX: BHP) and Rio Tinto both maintain uranium interests – BHP via its Olympic Dam project and Rio via is 68.4% interest in Energy Resources.
With BHP and RIO heavily diversified it's hard to gauge whether their share price ebbs and flows are directly related to uranium industry news, but it is something to keep in the back of your mind if you're already holding these stocks, or wish to buy-in soon.
A watch and wait option in the sector would go to Paladin Energy Ltd (ASX: PDN) which has fallen on hard times of late – entering into administration last year after issues with a long-term supply agreement with Electricite de France.
But spot price rises could see Paladin make its resurgence in the following months, with investors watching how the company fares from its production restart at its Langer Heinrich project now it has emerged from its administration period.
