It has been a great year for ASX uranium shares. Thanks to sky-high prices of the chemical element, they have been smashing the market with some very strong gains.
The good news is that it may not be too late to get in on the action according to analysts at Bell Potter.
This morning, the broker has released a note that tips one popular ASX uranium share to rise over 40% from current levels.
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Why ASX uranium share should we be buying?
According to the note, the broker remains as bullish as ever on Deep Yellow Limited (ASX: DYL).
It is the owner of an advanced portfolio of development-ready assets in Namibia (Tumas) and Western Australia (Mulga Rock).
Today's note reveals that Bell Potter has retained its speculative buy rating and lifted its price target by almost 74% to $1.84.
Based on the current Deep Yellow share price of $1.28, this implies a potential upside of approximately 44% for the ASX uranium share over the next 12 months.
'In pole position'
Bell Potter believes the company is well-positioned to benefit from strong uranium prices thanks to its two flagship projects. It explains:
As U3O8 spot prices rally, we see DYL in pole position to capitalise on the momentum and advance its two flagship projects into production within the next 3-4 years. With average planned production capacity at Tumas of ~3Mlbpa over 22 years and ~3.1Mlbs over 15 years at Mulga Rock, DYL offers longevity at the perfect point in the uranium price cycle.
As for uranium prices, the broker has bumped its forecasts higher to reflect higher-than-expected long-term demand. It said:
We see continued robust long-term demand, emphasised at the WNA conference in early September, which called for a tripling of Nuclear capacity by 2050. Such a scenario would imply an additional ~429Mlbs in annual U3O8 consumption. With this in mind, we view the long-term demand scenario as favourable for sustained higher-prices and thus have lifted our long-term spot price by US$10/lb to $70/b from $60/lb and maintain our term contract premium of 10%. Over the short-term, we see U3O8 advancing to US$90/lb by Mar-27, however, we note that this could occur much sooner given recent trajectory.
All in all, things are looking very positive for this side of the market and for Deep Yellow in particular.
