Shares in Bannerman Energy Ltd (ASX: BMN) have been under pressure recently, which the analyst team at UBS says presents a good entry point for investors keen to buy into the uranium demand thematic.
The company's shares are up 33% over the past year to $3.44, but remain well below the highs of $5.25 achieved over that period.
We'll get to UBS' share price prediction shortly, but first, we will look at the company's news, which has been generating interest.
Image source: Getty Images
Progress on Namibian project
Bannerman's flagship project is the Etango mine development in Namibia, where it is progressing towards making a final investment decision, which is expected for the middle of this year.
In February, the company announced that the Shenzhen Stock Exchange-listed China National Uranium Corporation would invest up to US$321.5 million in the project, for a 45% stake in the Bannerman subsidiary, which owns 95% of Etango.
Namibian social welfare organisation One Economy Foundation owns 5% of the project.
Bannerman said at the time that the deal enabled the debt-free construction of the mine and that there could be other potential collaboration opportunities.
Bannerman Executive Chairman Brandon Munro said at the time:
By enabling the debt-free construction of Etango, this solution maximises flexibility and dramatically derisks the construction and ramp-up phases of project execution. It also delivers us a Tier-1 cornerstone offtake partner on genuine and market terms, ensuring Bannerman remains strongly exposed to future uranium price upside potential. Importantly, the residual 40% of Etango offtake will be independently marketed by Bannerman, with strict confidentiality ring-fencing arrangements in place, and strengthened by the flexibility embedded in the cornerstone offtake.
Bannerman shares looking like good value
UBS has this week published its first analyst report on Bannerman, saying the transaction "establishes a clear pathway to development of the Etango project with minimal incremental capex needed''.
UBS said the next major step for the company was to make a final investment decision, but that they "expect minimal completion risk".
They added:
We are constructive on the long-term uranium outlook as reflected with our US$100/lb long-term price forecast, which enhances Etango's project economics.
This bullishness on uranium is driven by "increasing focus on energy security as well as increasing demand from AI and data centres'', UBS said.
They added:
We forecast spot uranium trading from US$85/lb to US$100/lb by 2028 as the deficits widens. As it relates to BMN, we are attracted to its exposure to China counterparties who offer relatively favourable terms (with regard to payment terms etc) which should reduce stress on its balance sheet as it ramps to nameplate. Further, we view Namibia as a relatively stable jurisdiction with a track record of successful and stable uranium assets with international ownership.
UBS has a $5.15 price target on Bannerman shares. Bannerman is valued at $652.3 million.
