Here's why the Bannerman Energy (ASX:BMN) share price has surged 37% in a week

Bannerman shares continue their run on the chart.

| More on:
A boy is wowed at a surge of water from a blowhole.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Bannerman Energy Ltd (ASX: BMN) share price travelled in the green during afternoon trade on Wednesday.

Whereas the S&P/ASX 200 Index (ASX: XJO) has slipped 0.5% into the red over the past week, Bannerman shares have climbed 37%.

Let's investigate further.

A quick recap on Bannerman Energy

Bannerman Energy is in the minerals exploration business and has projects located in Namibia.

It has the majority of its interests tied up in uranium assets, particularly open-pit uranium operations.

At market close on Wednesday, Bannerman has a market capitalisation of $289 million.

What tailwinds are behind the Bannerman Energy share price?

The Bannerman share price has been on a wild ride over the last month. In early August, the company released feasibility study results at its Etango-8 Uranium Project in Namibia.

In the report, Bannerman advised the study "confirms strong technical and economic viability of conventional open-pit mining."

It also recognised a "maiden Etango-8 ore reserve" declaration of 117.6 million tonnes (Mt) at 232 parts-per-million (ppm) uranium for "60.3 million pounds (Mlbs)" of uranium.

As such, Bannerman is drawn to the "attractive economics" of a potential US$65 per pound of uranium, which signals a post-tax net present value (NPV) of US$222 million and post-tax internal rate of return (IRR) of 20.3%.

The company forecasts a net project cash flow of US$642 million from these calculations, after capital expenditures and tax.

Don't forget the recent prices of uranium

Given that Bannerman is an ASX resources share that produces commodities, it can be labelled as a "price taker".

This means its share price can fluctuate with the price of the underlying commodity cycles it has interests in, as is the case with many other minerals players.

Looking at the charts, we can see uranium spot prices have soared to 5-year highs since mid-August.

Uranium spot is now commanding US$40.05 a pound. This is a significant 33% up-step from the previous low of $30.08 on 16 August.

This relationship between the volatility of commodities and their producers' share price generally has a lag.

That simply means that changes underlying commodity prices may be reflected in the respective industry's share basket a short time afterwards – usually a few days.

We can see this phenomenon in the case of the Bannerman share price, as it made its move upwards on 27 August. This was around 11 days after the big increase in uranium spot prices.

Given Bannerman's concentrated exposure to uranium assets and the fact it is a price taker on uranium, it starts to make sense why the Bannerman share price has climbed almost 40% in the last month.

Bannerman Energy share price snapshot

The Bannerman Energy share price has climbed 155% this year to date, extending the previous 12 months' gain to 515%.

These results have far outpaced the ASX 200 return of around 25% over the past year.

The author Zach Bristow has no positions 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.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »