How the 'nuclear renaissance' could send ASX uranium stocks like Paladin through the roof

The stars could be aligning for ASX uranium stocks. But why?

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Despite the past month's sell-down, spurred by a retrace in uranium prices, ASX uranium stocks have broadly delivered some benchmark smashing longer-term returns.

Over the past 12 months the All Ordinaries Index (ASX: XAO) has gained a healthy 10.0%.

Here's how these leading ASX uranium stocks have performed over that same time:

  • Paladin Energy Ltd (ASX: PDN)* shares are down 5.7%
  • Bannerman Energy Ltd (ASX: BMN) shares are up 121.4%
  • Deep Yellow Limited (ASX: DYL) shares are up 94.0%
  • Boss Energy Ltd (ASX: BOE) shares are up 29.5%
  • Alligator Energy Ltd (ASX: AGE) shares are up 27.5%

(*Paladin shares entered a trading halt today pending an announcement. Rumour has it this could be related to a possible capital raising to fund a new uranium acquisition.)

And those smashing one-year gains could be just the tip of the iceberg amid what pundits are labelling the new global nuclear renaissance.

ASX uranium stocks could help power the world

Amid a global charge to build new nuclear power plants for carbon free baseload power, the World Nuclear Association forecasts uranium demand growth will outpace global supply growth through to 2040.

In another bullish signal for ASX uranium stocks, Russian uranium is now off the menu for the United States as part of the sanctions for the nation's invasion of Ukraine. Other nations are also looking at banning Russia's uranium exports.

And the US is among the 27 nations recently declaring its intention ramp up nuclear energy.

According to US Energy Secretary Jennifer Granholm:

We are entering a new era of nuclear energy, our single largest source of carbon-free electricity. We plan to invest up to US$900 million to accelerate nuclear deployment, add more small modular reactors, and reach more Americans with clean energy.

The US has said it will source its nuclear fuel both domestically and from its allies.

With Australia a top US ally and sitting on the world's largest proven economic uranium reserves, ASX uranium stocks could have some big opportunities ahead.

Last year, US congressman Neal Dunn questioned the Australian government's opposition to uranium.

Dunn said (quoted by The Australian Financial Review):

We talk about, 'Why isn't Australia with us on this?' There are a lot of commercial opportunities. You have got the uranium ore, you have got the skills, all you lack is the will.

That will may now be emerging. At least, if opposition leader Peter Dutton and the Coalition have their way.

As you're likely aware, Dutton is pushing for Australia to invest heavily in constructing nuclear plants. A move the Labor government still strongly opposes.

140% potential gains on the table

According to Morgan Stanley, the "nuclear renaissance" now underway may need US$1.5 trillion (AU$2.3 trillion) of investment between now and 2050.

And the broker noted that if Australia's restrictive policies on uranium exploration and mining are lifted, it could usher in some outsized gains for ASX uranium stocks like Paladin.

According to Morgan Stanley's Shannon Sinha (quoted by the AFR):

Nuclear power remains divisive. High construction costs, as well as concerns about waste and safety, plus political sensitivity, mean that nuclear is likely to remain a binary issue for many markets.

Sinha added, "Paladin's Australia resource base is currently impacted by uranium mining bans in Australia, but we note that the political stance on this may be changing."

Morgan Stanley estimates the ASX uranium stock could be a major beneficiary if the government eases restrictions on its Western Australian and Queensland assets.

The broker said the Paladin share price could soar as high as $32.00 in this event, representing a potential upside of 142% from Friday's closing price of $13.24.

Motley Fool contributor Bernd Struben has no position 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 Scott Phillips.

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