Demand for uranium is expected to increase materially over the coming decades as the world embraces nuclear power again.
This bodes well for a handful of ASX 300 uranium stocks that trade on the ASX boards.
One of those is Deep Yellow Limited (ASX: DYL), which has deep pockets following a recent capital raising.
These funds will be used to advance the development of its flagship Tumas Project in Namibia, as well as progress the development activities at the Mulga Rock Project in Western Australia.
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Is this an ASX 300 uranium stock to buy?
The team at Bell Potter was pleased with the capital raising and believes it makes the company a great option for investors that are wanting to gain exposure to uranium. It commented:
DYL has gone hard early, which we believe puts the company in a better position to negotiate offtake with utilities, ultimately feeding into debt negotiations. We estimate the capital requirement to bring Tumas into production at $657m, which following the $250m allocation to Tumas in the recent capital raise, leaves $407m to be sourced. We suspect DYL will look to source traditional debt for most of the remaining balance, however other options include pre-production sales and as a failsafe option, strategic equity.
In response to the capital raising, the broker has reaffirmed its speculative buy rating and lifted its price target on the ASX 300 uranium stock by 5% to $1.90 (from $1.81).
Based on its current share price of $1.31, this implies potential upside of 45% for investors over the next 12 months.
Though, it is worth noting that it has a speculative rating. This makes it a higher risk option that may not be suitable for all investors.
The broker concludes:
Further upside in uranium remains, as limited near-term supply spurs the spot market whilst the global path to decarbonisation shapes the role of nuclear over the longer-term. Following the merger with VMY (Vimy – de-listed), DYL has a Mineral Resource Estimate (MRE) of 431mlbs U3O8, and an Ore Reserve of 110mlbs U3O8. We see DYL as being attractively positioned in a rising uranium bull market, capable of delivering the next wave of supply into an increasingly tight market.
Overall, this could make it a good option if you're bullish on uranium and have a high tolerance for risk.
