Why the Peninsula Energy (ASX:PEN) share price tumbled 25% from multi-year highs

The uranium explorer share price has been tumbling ever since it hit multi-year highs.

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The Peninsula Energy Ltd (ASX: PEN) share price might have hit a near-term top after rallying to a 3-year high of 35 cents on 17 September.

Shares in the uranium explorer have since tumbled 25% to 25 cents.

share price dropping

Image source: Getty Images

Why the Peninsula Energy share price is sliding

Uranium prices ease from 9-year highs

Uranium prices skyrocketed in a short period of time, rallying from around US$30/lb in mid-August to above US$50/lb by late September.

During this time, the Peninsula Energy share price surged 180% from 12 cents to 35 cents.

Back in late May, the company initiated a $15 million capital raising to settle its purchase of 300,000 pounds of uranium at a price of US$31.35/lb.

The company believed that acquiring uranium inventory "during a period when there is a focused and continued drive by the United States Government to support and revitalise the domestic uranium industry, is a low-risk strategy that has the potential to deliver considerable upside value for shareholders."

The recent jump in uranium prices to US$50/lb meant that Peninsula Energy would've been sitting on a hefty US$5.5 million profit from its physical uranium acquisition.

The jump in uranium prices has been driven by a Canadian investment fund, Sprott Asset Management and its Physical Uranium Trust.

The uranium fund has an aggressive strategy to purchase physical uranium off the spot market and store it in secured locations.

The fund was regularly purchasing physical uranium up until 17 September, broadly in-line with when uranium prices plateaued.

Uranium prices have since struggled to hold above US$50/lb, sliding to US$44.3/lb according to Trading Economics.

Broader selloff among ASX-listed uranium players

The Peninsula Energy share price isn't alone in its recent selloff.

The pullback for uranium prices has triggered broad-based selling across all ASX-listed uranium players.

The largest of them all, Paladin Energy Ltd (ASX: PDN) has tumbled 11% in the past week and down 26% from its recent high of $1.12.

Prospective explorers such as Deep Yellow Limited (ASX: DYL) and Boss Energy Ltd (ASX: BOE) have also experienced similar falls.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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