Why the Peninsula Energy (ASX:PEN) share price is lifting 4% today

The lights are all green today for the uranium player’s share price.

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Shares in uranium mining company Peninsula Energy Ltd (ASX: PEN) are climbing in afternoon trade and are currently 4.9% higher at 26 cents each.

Peninsula Energy shares are on the move after the company released its quarterly activities and earnings report.

We pull apart the central points of Peninsula’s performance for the period ending 30 September 2021.

Peninsula Energy share price up as uranium market value lifts

The company outlined several investment highlights for the quarter, including:

  • Available cash of US$7.4 million at 30 September 2021
  • Sale of 200,000 pounds of U3O8 at US$50.35 per pound, up from US$49.57 quarter on quarter
  • Generated a net cash margin of US$3.5 million in October 2021, in line with previous quarter
  • 310,000 pounds of uranium in converter accounts at 30 September 2021
  • Market value of uranium in converter accounts US$13.1 million (US$42.20 per pound U3O8), a 32% increase from the quarter prior.

What happened this quarter for Peninsula Energy?

Peninsula took steps to address inefficiencies following variability in the well production results at the Lance Project in Wyoming.

It first prepared a hydrogeologic model to “simulate solution flow paths” and capture where the inefficiencies were occurring. It installed two additional wells within “potentially unaddressed zones of the pattern area” at the site.

There was a positive outcome as the “two new injection wells drove the composite recovery grade higher soon after activation”. Peninsula also evaluated “additional pattern configurations with shorter expected overall response times”.

Separately, Peninsula sold 200,000 pounds of uranium under long-term contracts. The realised average cash price was US$50.35 per pound, up from US$49.67 in the previous three months.

The release notes that deliveries were completed using uranium purchased in the market. This generated a net cash margin of $3.5 million which is equal to the past quarter.

By the end of the quarter, Peninsula had “uranium concentrate sale agreements with major utilities for up to 5.05 million pounds of uranium”.

These agreements stipulate an average price of US$51-$53 per pound. There is a firm commitment to 3.7 million pounds, with an optional extra 1.35 million pounds available to customers.

What’s next for Peninsula Energy?

Based on its secured long-term uranium sale agreements, Peninsula forecasts a secured net cash margin of US$7 million to US$8 million for the remainder of CY21.

Uranium sales are expected to generate a net cash margin of US$8 million to US$9 million in CY22. This is a 12-14% bump.

The forecast net cash margin is based on the difference between the fixed purchase price and the likely sales price.

Coming into December this year, Peninsula has “scheduled open committed sales of 50,000 pounds of uranium pursuant to long-term contracts”. It intends to source this from its existing portfolio of binding purchase agreements.

Peninsula Energy share price snapshot

The Peninsula Energy share price has soared by 114% this year to date. This extends its 12-month returns to 328%.

Peninsula’s gains are far greater than those of the S&P/ASX 200 index (ASX: XJO), which is up 24% in 12 months.

Should you invest $1,000 in Peninsula Energy right now?

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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.

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