Shares in the uranium explorer are booming. Here’s why
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The Peninsula Energy Ltd (ASX: PEN) share price has surged 70% since late August, briefly hitting a 2-year high of 23 cents on Monday.
Shares in the uranium explorer are currently changing hands for 21 cents.
Peninsula Energy operates the Lance Uranium project in Wyoming, United States. The company aims to fast-track the Lance project into production. It is currently focused on transitioning the project from alkaline to low pH extraction methods.
Peninsula Energy share price booms on uranium highs
Over the last week, uranium prices have shot up to 6-year highs of about US$35/lb, according to Cameco.
A major catalyst behind the sudden jump in uranium prices is the Sprott Physical Uranium Trust, the world’s largest actively managed uranium fund that invests in physical uranium.
According to Sprott’s Twitter, the fund has been aggressively buying uranium off the spot market, adding 3.45 million pounds of physical uranium in September alone.
Analysts at Kitco have pointed to the Sprott Uranium Trust as a “critical factor behind the recent push in the energy metal’s price”.
The uplift in uranium prices has helped bring life back to the Peninsula Energy share price and the broad uranium sector.
How does this impact Peninsula?
Peninsula Energy is in a unique position given its current uranium holdings and sales contract book.
Back in May, the company successfully completed a $15 million capital raise to fund the purchase of 300,000 pounds of uranium at a price of US$31.35 per pound.
The board believed that “holding uranium 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”.
It looks like management was on the money, given the recent jump in uranium spot prices.
In addition, Peninsula Energy has a number of long-term sales contracts in place, extending to 2030.
This includes contracts in place for up to 5.5 million pounds at US$51-53/lb with major utilities in both the United States and Europe.
Peninsula Energy share price snapshot
It’s been a good year for Peninsula Energy shares, which are up around 72% in 2021 so far. They have also gained more than 190% over the past 12 months.
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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.