ASX uranium shares have broadly outperformed the market in 2021.
And 2 of the biggest ASX uranium shares are gaining once more, charging higher in late afternoon trade.
The Paladin Energy Ltd (ASX: PDN) share price is up 9.03% at time of writing, trading at 51 cents per share.
The Boss Energy Ltd (ASX: BOE) share price is also running hot, up 6.9% to 15.5 cents per share.
What's driving investor interest in ASX uranium shares?
Demand for nuclear fuel plummeted following Japan's earthquake and tsunami driven Fukushima nuclear disaster in 2011. Which spelled bad news for ASX uranium shares in the aftermath.
But as the world is increasingly focused on decarbonising, uranium is back in the spotlight. And prices have been steadily rising since hitting lows of US$24 per pound in February 2020, up to US$32.30 per pound currently.
Atop growing interest in new nuclear power plants in the United States under President Joe Biden' administration, China has a huge pipeline of nuclear plants in the hopper.
Bloomberg Intelligence analyst Simon Chan points to China as a key growth area for uranium demand, saying the Middle Kingdom could potentially double "its nuclear generation capacity to as much as 100 gigawatts by 2030".
Although Australia doesn't currently use any nuclear power, the issue has been touted as a debate item in the next Federal election.
While Australia has amongst the world's largest, economically viable uranium deposits, it currently only has 2 producing uranium mines, Olympic Dam, owned by BHP Group Ltd (ASX: BHP), and Four Mile, owned by Quasar Resources.
But as indicated by Boss Energy's latest feasibility study, released on Monday, its Honeymoon uranium mine in South Australia could become a third major player.
As Bloomberg notes, Honeymoon "could add an extra 2.45 million pounds (1,225 tons) of production a year to a market, which currently requires around 67,500 tons a year, according to the World Nuclear Association".
Commenting on that study, Boss Energy Energy's managing director Duncan Craib said, "This study demonstrates that Boss is perfectly placed to capitalise on a strengthening uranium market with an existing plant and mine in a tier-one location with low costs and strong financial returns."
The ASX uranium share is also banking on a significantly higher price for uranium than the current spot price. In defence of that assumption, Boss Energy wrote:
Boss considers a base case price of US$60/lb U3O8 [uranium] over the LOM is reasonable given that current spot and term uranium prices are well below the price required to guarantee viability of a large proportion of the world's existing production.
Uranium analysts predict that a long-term spot price in the mid US$40's will incentivise restart of idled production while a spot price closer to US$60/lb will be needed for most new mines.
In an interview with Bloomberg, Craib added, "There is significant uncovered demand in the coming decades – and post-2023, primary supply to meet that demand is severely limited… We see activity picking up in the third quarter and continuing into the next calendar year."
If uranium prices rise in line with Boss's projects, that should offer strong tailwinds to ASX uranium shares.
Boss Energy and Paladin share price snapshot
ASX uranium shares Boss Energy and Paladin have both soundly beaten the returns posted by the All Ordinaries Index (ASX: XAO) this year.
So far in 2021, Boss Energy shares are up 60%, and Paladin shares are up a whopping 94%, compared to a gain of 9% on the All Ords.
The outperformance goes back a full 12 months too, with Boss Energy up 158% since this time last year and Paladin shares up 405%.
