Why did ASX uranium shares like Boss Energy have such a bumper day?

Australia's uranium producers continue their rally in 2024.

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ASX uranium shares were soaring on Thursday, driven by a development that could impact the global uranium market.

The ASX uranium basket was trading significantly higher today, up around 7-9%. Here is how the main uranium players were faring at the close of trading on Thursday:

  • Boss Energy Ltd (ASX: BOE) shares were up 6.13% to $3.98
  • Deep Yellow Ltd (ASX: DYL) was trading at $1.49 per share, up 9.16%
  • Paladin Energy Ltd (ASX: PDN) shares were 6% higher and swapping hands at $13.98
  • Bannerman Energy Ltd (ASX: BMN) at $3.29 per share, up 7.87%.
  • Peninsula Energy Ltd (ASX: PEN): Up 4.7% to 11 cents apiece.

What was behind today's rally?

The rally in ASX uranium shares is likely due to a significant announcement on Wednesday from Kazakhstan, the world's largest uranium-producing country.

Kazakh authorities announced a surprise increase in the mineral extraction tax applicable to uranium.

Kazatomprom, Kazakhstan's national operator for the export of nuclear minerals, its subsidiaries, and joint ventures, will pay different mineral extraction tax (MET) rates based on their production volumes and market prices for uranium.

The tax rate will increase to 9% starting in 2025. From 2026, a new tiered system will be implemented, with rates ranging from 4% to 18% depending on production levels.

Additionally, further incremental tax rates will apply if the price of natural uranium concentrate exceeds certain thresholds.

Impact on ASX uranium shares

This move could impact global uranium supply, a bullish sign for uranium prices. BMO Capital analyst Alexander Pearce noted the new tax rates provided "less incentive for Kazatomprom to increase production", according to ZeroHedge.

The new rates are not marginal, thus the new MET penalises large mining assets with potential MET of up to 20.5% (18% for anything over 4ktU, or ~10.4Mlb U3O8, plus an additional 2.5% if the uranium price is >US$110/lb).

Adding to the bullish sentiment, the US Biden administration banned Russian uranium imports back in May. The new law will take effect on August 11 this year.

Russia is a major supplier of global uranium, so what this means for the long-term supply — and price — of the energy commodity remains to be seen.

ASX uranium shares FY25 outlook

The latest price moves extend rallies in the Aussie uranium basket that have been in situ for some months now.

Brokers are also bullish on several ASX uranium shares. For one, Bell Potter has buy ratings on both Boss Energy and Paladin Energy.

For Boss, the broker says its Honeymoon asset "has the capacity to generate strong margins in the current pricing environment", assigning a price target of $5.90 on the ASX uranium share.

This represents 48% upside potential at the time of writing.

Meanwhile, for Paladin, Bell Potter identifies several catalysts behind the stock. These include an increased production estimate at its Langer Heinrich site and the closure of its Fission Uranium site in September.

It valued Paladin at $15.70 per share, a 12.3% upside potential from the time of writing.

Meanwhile, consensus has buy ratings on Bannerman Energy, Deep Yellow and Penninsula Energy, according to CommSec.

Based on these recommendations, analysts' view on the sector is bullish.

Foolish takeaway

Investors are buying ASX uranium shares following a number of market and company updates this year.

Remember that commodities move in cycles, and there are specific considerations associated with investing in commodity-linked companies.

Motley Fool contributor Zach Bristow 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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