The Uranium Producer With Early Mover Advantage & Global Ambition

• Boss Energy is a uranium producer that owns the Honeymoon mine in South Australia and 30% of Encore Energy's Alesa mine in Texas
• CEO Duncan Craib discusses the company's strategy to become a producer and take advantage of rising uranium prices
• Boss Energy has timed the market well, ramping up production gradually with the goal of reaching 2.45M lbs/year by June 2027
• The company has remained nimble, with only 16% of production contracted, to benefit from expected further uranium price increases
• Boss Energy aims to organically expand production at Honeymoon while evaluating potential M&A opportunities to grow further

As the world increasingly looks to nuclear power as a reliable, carbon-free energy source, the spotlight has turned to uranium producers poised to meet rising demand. Boss Energy (ASX:BOE), an Australian-based uranium miner, is working to capitalize on strengthening uranium markets and benefit from this clean energy trend.

Boss Energy is the 100% owner of the Honeymoon uranium mine located in South Australia. The company also owns a 30% stake in a joint venture with Encore Energy in their Alesa mine in South Texas. Boss Energy has skillfully navigated the uranium bear market of the past decade and emerged as an early mover in the new bull cycle.

Leveraging Advantages as a Restart Project 

As a former producing mine, Honeymoon benefited from existing infrastructure and permits that enabled a lower cost and faster restart compared to greenfield projects. Duncan Craib, CEO of Boss Energy, explained:

We had that first mover advantag. One of the big challenges one has as a developing company with large capex is that you're either going to raise your finance to build the mine through either debt or equity or a combination of both. And if you're having a large debt component, then the financiers will look at what contracts you've entered into.

In contrast, Boss Energy's in-situ recovery (ISR) mining method and existing mine allowed them to put more production through at a lower cost. This enabled Boss Energy to move forward while other projects waited on the sidelines for higher prices to incentivize development.

Timing the Market 

Boss Energy announced the decision to restart Honeymoon in 2021 when the uranium spot price was around $45/lb. Despite needing prices above $60/lb to justify the restart economically, the company had conviction that prices would rise sufficiently by the time production ramped up.

This conviction stemmed from several key catalysts Boss Energy identified - the emergence of the Sprott Physical Uranium Trust in 2019 which helped draw financial interest and tighten spot supplies, production disruptions from COVID-19, and heightened geopolitical tensions following Russia's invasion of Ukraine.

Interview with CEO Duncan Craib

Scaling Up Gradually 

Boss Energy has charted a gradual ramp up schedule for Honeymoon to spread capital expenditures and scale up efficiently. The mine will produce 850,000 lbs in the first year through June 2025, increasing to 1.6M lbs by June 2026, ultimately reaching nameplate capacity of 2.45M lbs in the June 2027 timeframe. Craib detailed the path forward:

As the ramp up continues, hopefully come third quarter this year, the plant's running effectively...you then switch focus to becoming more a well development type company. So focus on bringing new wellfields as one depletes, you bring one on.

Maintaining Contracting Optionality Boss Energy has also taken a measured approach to signing term contracts with utilities. Currently only 16% of the mine's production is committed under long-term contracts. The company has deliberately kept 'powder dry' as Craib believes:

The uranium price has still got a lot of room to move.

By staying mostly unhedged, Boss Energy can capture more exposure to spot prices which Craib expects to overshoot to the upside as a supply deficit emerges. He predicts many new uranium mines will struggle to come online fast enough, driving prices higher to incentivize the needed production.

Growth Potential 

Beyond expanding output at Honeymoon, Boss Energy is evaluating regional opportunities to add satellite deposits to its production pipeline. The company is also assessing potential acquisitions according to Craib:

We're hoping that we can grow and expand. Of course Honeymoon's been our focus and the board's been very disciplined on me to make sure that the flagship asset works as it should be. But yes, I'm aware that you don't want all your eggs in one basket. We want to expand.

Boss Energy is taking a disciplined approach, conducting thorough due diligence on growth opportunities. The company recognizes many uranium assets are sub-economic even at higher prices. Boss Energy will move forward on M&A

if it goes back to open pit or underground, that's familiar, that's good too. We're open-minded, it's just the timing.

A Focus on Cash Generation 

With no debt, a carried forward tax loss position, and relatively low costs as an ISR producer, Boss Energy expects to be generating meaningful cashflow, particularly from 2026 onwards.

Craib sees this as key to the company's value proposition:

We want to build a solid footing and be corporately responsible and really deliver returns to shareholders and stakeholders alike.

After a long bear market, uranium prices are in a sustained upswing driven by growing recognition of nuclear power's role in decarbonizing electricity grids. Boss Energy has emerged as a well-positioned producer with a clear strategy to capitalize on rising prices.

By restarting an ISR mine at the bottom of the cycle, Boss Energy has gained an early mover advantage. The company's patient approach to contracting and gradual production ramp up should allow it to capture significant upside while maintaining flexibility. With additional growth potential from organic expansion and acquisitions, Boss Energy has played all the right cards in this unfolding uranium bull market.

The Investment Thesis for Boss Energy:

• Early mover advantage as one of few uranium producers in recent years
• Low-cost ISR production method supports strong margins and cashflow generation
• Gradual ramp up to 2.45M lbs/year by 2027 balances capital needs with growth
• Unhedged approach allows most production to benefit from likely uranium price upside
• Organic growth potential with satellite projects and disciplined M&A strategy
• Healthy balance sheet and tax loss position maximizes free cash flow potential
• Experienced management team and strengthened technical capabilities
• Exposure to strengthening uranium fundamentals and growing nuclear power demand.

Macro Thematic Backdrop

The macro backdrop for uranium is highly compelling. After a prolonged bear market, uranium prices increased by approximately 48.25% from the 2023 average price to the end of 2024. Driving this resurgence is growing recognition of nuclear power's role in providing reliable, carbon-free baseload electricity.

Governments worldwide are increasingly supportive of nuclear power to meet aggressive decarbonization targets. Meanwhile, uranium supply has been slow to respond after years of underinvestment. Mine production currently falls well short of reactor requirements, with the shortfall being met by secondary supplies which are rapidly diminishing.

This is setting the stage for an extremely tight uranium market by the second half of this decade. As Duncan Craib, CEO of Boss Energy explained:

You have to have that forward-looking view and if you're a developer coming on right now, to get a big contract, you're looking a few years in advance. We believe prices will go up because we see that a lot of uranium developers are not going to meet the timeframes they're suggesting, which is just going to cause that deficit to widen to a point where prices will have to increase to incentivize that new production.

The setting is reminiscent of the last uranium bull market, but the deficit this time around is being driven by structurally robust demand rather than financial speculation. With uranium prices still well below incentive levels for many new mines, there is considerable scope for further price upside. Boss Energy is well positioned as an early mover to capitalize on the unfolding opportunity.