2011 Performance Review Of Uranium Miners

 |  Includes: CCJ, DNN, LEU, RIO, URA, URRE, URZ
by: Zvi Bar

Most uranium providers performed exceedingly poorly through 2011, but several began to appreciate at the start of the fourth quarter. Most uranium miners approached 2011 and/or multi-year lows at the start of Q4, rebounding quickly, but then capitulating any gains from the start of the quarter. Several are now back at or near their 2011 lows.

Much of the uranium miner appreciation from the first half of Q4 appeared tied to a short-term bidding war between Cameco Corp (NYSE:CCJ) and mining powerhouse Rio Tinto (NYSE:RIO) over Hathor (OTC:HTHXF), a Canadian uranium miner. Cameco ended up backing out of the bidding war for Hathor, incapable of competing with the larger competitor.

Nonetheless, the combined interest in Hathor indicated that industry members believed it was an appropriate time to accumulate key uranium assets for the longer term. Though uranium demand has been week this year, following the Japanese nuclear concerns, these miners appear to be anticipating demand from around the globe, including the emerging power needs of China and India. Many uranium miners are now between 50% and 80% below their price levels at the start of 2011, so the timing may be right.

Below are listed several companies with business substantially relating to uranium mining and/or production, as well as their 1-month, 6-month and 12-month performance rates. I have also included Rio Tinto's performance data, as well as Cameco, Deison Mines (NYSEMKT:DNN), Uranerz Energy (NYSEMKT:URZ), Uranium Resources (NASDAQ:URRE) and USEC (USU).

Click to enlarge

Below is a 2011 comparison chart:

Click to enlarge

Though many first world nations have become wary of nuclear power in the wake of the recent Japanese crisis, China and India continue to build additional nuclear power plants. In 2011, China announced plans to increase its nuclear capacity eight-fold before the end of the decade. Additionally, India has announced a 20-year plan to increase nuclear power production thirteen-fold. Other growing nations will likely follow, provided they have the capabilities to produce nuclear power.

It appears almost inevitable that uranium demand from these new and sizable locations will begin to outpace uranium supply, possibly creating dramatic shortages and price spikes to both uranium and the shares of uranium producers. Such a trend may take another decade to occur, but miners must consider that time-frame and it is only getting more difficult and expensive to locate accessible mining assets and ramp up production.

In addition to these individual companies, some ETFs also allow investors to gain exposure to uranium pricing and demand. For example, the Global X Uranium ETF (NYSEARCA:URA) tracks the Solactive Uranium Index, which tracks the performance of the large players in the uranium mining industry. See the recent chart for URA, below:

Click to enlarge

Another ETF option is the Market Vectors Nuclear Energy ETF (NYSEARCA:NLR), which also includes exposure to energy utilities with exposure to uranium pricing and nuclear power use. It should be expected that this industry will continue to exhibit high risk/reward characteristics, and that investment allocations should be limited accordingly.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.