Reviewing Nuclear Equities: The Week Of Aug. 19

by: NEIG

Uranium stocks recorded their best week since January 2012 and second best this year, with Global X Uranium ETF (NYSEARCA:URA) gaining an impressive 8.7%. A combination of positive industry news and receding macro concerns sent many uranium stocks soaring. The strength of the upward move demonstrates how underowned the sector has become, so that even slight improvement in the sentiment is pushing the stocks much higher.

Below are a few interesting bits and pieces that we have seen the week of Aug. 13-19, 2012.

  • The United Arab Emirates pushes ahead with its plan to develop the Arab world's first civilian nuclear program. Abu Dhabi has awarded $3 billion worth of contracts to provide, convert and enrich uranium. The fuel will be supplied by a number of companies, including ConverDyn, Uranium One (OTC:SXRZF), Urenco, Rio Tinto (NYSE:RIO), Tenex, and Areva. The first unit is scheduled to deliver electricity in 2017, while the remaining three will follow in 2018, 2019, and 2020.
  • Kazatomprom plans to increase its share in Kazakhstan's uranium reserves to 52% in 2012. According to the company, in early 2009 Kazatomprom had 41.8% of all uranium deposits in the country. The share in uranium reserves is planned to be increased due to purchase of interest in joint ventures, as well as additional exploration work.
  • S&P cut USEC's (USU) corporate credit rating to "CCC." The downgrade reflects the view that near-term industry fundamentals will continue to affect operating performance as USEC faces competitive pressures with an oversupplied market and the continued delay of the Department of Energy loan guarantee.
  • Paladin (OTCPK:PALAF) has signed a six-year off-take agreement to deliver a total of 13.73Mlb U3O8 in the period from 2019 to 2024 with a prepayment of US$200 million. Uranium will be sold at market prices prevailing at the time of delivery bounded by escalating floor and ceiling prices. The prepayment will be secured by 60.1% of Paladin's Michelin project in Canada and used to repay the remaining portion of the March 2013 convertible debenture (US$134 million). The agreement provides a fairly creative solution to address upcoming maturity without diluting existing shareholders.
  • Despite improvement in the equity market, physical market is feeling less optimistic. Uranium spot price indicator was down $0.25 to $49.00/lb (UxC), and down $0.50 to $49.00/lb (TradeTech). NYMEX uranium futures are also not buying the excitement from the equity market with the curve essentially flat for the rest of the year.

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

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