Bank of America Merrill Lynch has switched its underperform recommendation to a buy call, making it the only major broker urging investors to weigh into the uranium miner’s shares.

 

Despite Japan preparing to shut down its final operating nuclear reactor temporarily in the wake of last year’s earthquake and the spot price of uranium a third down on levels immediately prior to the catastrophe, uranium stocks are one of the hottest resources plays around.

 

China Guangdong Nuclear Power Co., one of China’s two state-owned nuclear power giants, this month wrapped up the 2.2 billion Australian dollars (US$2.3 billion) acquisition of  Perth-based Extract Resources. The deal gave CGNPC control one of the world’s largest untapped uranium deposits just a few kilometers away from Rio Tinto’s Rossing mine.

 

Separately, Toro Energy is holding talks with Asian investors interested in taking an equity stake in its Wiluna uranium project in central Western Australia state or developing the deposit as a joint venture, while several other ASX-listed companies with uranium deposits in Tanzania are attracting Asian interest.

 

However, Energy Resources of Australia has long been in the doghouse after suffering repeated production issues at its flagship Ranger mine on the border with Australia’s picturesque Kakadu National Park. Heavy rains, the downturn in uranium prices over the past year, and concerns over how long the Ranger mine can continue to operate before it runs out of ore had led many investors to flee the stock.

 

Merrill Lynch’s move to raise its price target for Energy Resources of Australia to A$2.05 from A$1.06 helped spark a 13% rally in the company’s shares Tuesday. The stock closed at a year-to-date high of A$1.55, giving it a market value of just over A$800 million.

 

“We think the company has addressed key issues of water, traditional landowner

relations, financial viability and growth,” Merrill Lynch said in a note to clients.

 

Energy Resources of Australia, a unit of Rio Tinto, plans to arrest its production decline by developing the Ranger 3 Deeps underground prospect. It won’t start producing until late 2015 if found to be viable and the company plans to sell stockpiled ore in the meantime.