Wednesday, October 1, 2014

Cameco Corp.: A Reliable Play On Uranium Recovery

This article was originally published by Seeking Alpha on September 17, 2014

Summary: The recent bullish trends in the uranium market are led by supply-side issues. The demand side is also looking interesting. Is It time to reconsider some well known uranium stocks, particularly Cameco and Denison Mines?

More than three years ago, the tsunami in Japan which led towards the Fukushima nuclear disaster triggered a collapse of the uranium prices, falling from a peak of $65 per pound in early 2011 to less than $30 per pound over the last four months ending August. However, since the end of last month, the commodity's prices, for October delivery, have recovered to more than $33 per pound.

Supply-side issues

The improvement in prices was largely due to supply-side issues. Due to the slump in prices, Uranium producers from all around the world started cutting back on their production. Moreover, the Ukraine conflict and the subsequent sanctions on Russia, which provides a significant portion of uranium enrichment services to companies all around the world, could also hit uranium supplies.

Finally, last month, Cameco Corp. (NYSE:CCJ), the largest U.S. listed uranium miner shut down its flagship McArthur River mine, the biggest in the world, due to a labor dispute which acted as a major catalyst behind the improvement in uranium prices. On Friday, the company signed a tentative agreement with the worker's union, ending the 17-day strike.

The industry could witness additional closures in the coming months due to the pricing pressure. Analysts at Macquarie have forecast a 6% drop in production from mines in the current year. Read full article at Seeking Alpha.