Cameco should benefit from increasing uranium demand, Barron's says

Cameco (CCJ +3.2%) shares post solid gains as Barron's says the uranium market finally may be ready to heat up, with increased demand benefiting CCJ as China and Russia build nuclear plants.

Mining companies will need to meet global demand expected to climb from ~170M lbs. currently to 220M lbs. over the next decade, the report says, and CCJ's production costs are half the industry average; because CCJ's cost of production is so low, it can earn a nice return even at today's weak uranium price of ~$36/lb.

"The uranium price went below the marginal cost of production, [which is] a good time to get involved in any commodity," says James Hunt of Tocqueville International Value Fund.

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Comments (14)
  • 96815234
    , contributor
    Comments (2463) | Send Message
    There is material info (could be neg) out on this company that I dont see mentioned in the Barron's piece.
    7 Feb 2014, 03:44 PM Reply Like
  • Kringl
    , contributor
    Comments (43) | Send Message
    And what info would that be related to?
    7 Feb 2014, 03:53 PM Reply Like
  • Fain1987
    , contributor
    Comments (78) | Send Message
    q4 earnings
    7 Feb 2014, 07:07 PM Reply Like
  • B-ruce
    , contributor
    Comments (2) | Send Message
    Probably won't matter much in the long term though. As soon as Japan restarts its reactors the price of uranium is going to move violently.
    9 Feb 2014, 12:15 PM Reply Like
  • Russom
    , contributor
    Comments (175) | Send Message
    could it be related with the start up of the new mine, which was delayed already 2 times?
    7 Feb 2014, 05:25 PM Reply Like
  • 96815234
    , contributor
    Comments (2463) | Send Message
    Bruce Power = 1/3 cash flow
    7 Feb 2014, 07:25 PM Reply Like
  • fineyoung
    , contributor
    Comment (1) | Send Message
    I think they are about to acquire something soon, while Juniors are still cheap.
    25 Feb 2014, 09:51 PM Reply Like
  • Doug Meeks
    , contributor
    Comments (1936) | Send Message
    Cigar Lake is open and in production, CCJ is guiding to a 5% revenue growth in 2014 with flat uranium pricing. These figures are inclusive of the Bruce power deal. All is well. Production will grow as Cigar Lake keeps ramping up. Long CCJ.
    7 Feb 2014, 08:38 PM Reply Like
  • 96815234
    , contributor
    Comments (2463) | Send Message
    Several analyst downgrades after Bruce Power announcement, including Cannacord Genuity which rates its a "SELL" with $18.45 price target. Just FYI.
    7 Feb 2014, 08:48 PM Reply Like
  • Doug Meeks
    , contributor
    Comments (1936) | Send Message


    I looked at the free cash, you are spot on that the BPLP deal is at hit to free, cash. A little more than 1/3 I think. But in 2013, sales volume was up and prices were up a little. That same trend is expected to be repeated over the next several years as Cigar Lake ramps up. I don't know if they can keep that ramp schedule for 2018 ( 18 million lbs/year) but if they did that would be a 75% increase to current production in four years. I think the idea here is that the Uranium market has some strong fundamentals working in it's favor.
    7 Feb 2014, 09:02 PM Reply Like
  • 96815234
    , contributor
    Comments (2463) | Send Message
    Just a heads up for SA readers, as it wasnt mentioned in Barron's piece. I decided against an investment based on Bruce Power. Your mileage may vary.
    7 Feb 2014, 09:29 PM Reply Like
  • john001
    , contributor
    Comments (1217) | Send Message
    07 Feb 2014 20:19 ET


    Marketwire Canada




    -- strong performance in a weak market
    -- delivered record annual consolidated revenue
    -- strong uranium segment results - record annual revenue and average
    realized price
    -- record quarterly and annual uranium production
    -- began jet boring in ore at Cigar Lake
    -- recorded a $70 million write-down on Talvivaara asset
    -- announced the sale of our interest in Bruce Power Limited Partnership


    Cameco (TSX:CCO) (NYSE:CCJ) today reported its consolidated financial and operating results for the fourth quarter and year ended December 31, 2013 in accordance with International Financial Reporting Standards (IFRS). "2013 was a challenging year, but also a year in which Cameco was, again, able to demonstrate resilience and strength," said president and CEO, Tim Gitzel. "We were able to achieve record production and a number of record financial results, despite the continued uncertainty in the uranium market.


    That uncertainty has lasted for longer than had been expected, and this year, we've moved away from our production target of 36 million pounds by 2018. Although we still have an extensive portfolio of assets from which we can increase our production, the market incentive must be there. We're confident this change will ensure we have the flexibility to remain competitive, create value for shareholders, and benefit when certainty and growth return to the market over the long term."


    -------------- --------------
    AMOUNTS) 2013 2012 CHANGE 2013 2012 CHANGE
    Revenue 977 846 15% 2,439 1,891 29%
    Gross profit 185 255 (27)% 607 540 12%
    Net earnings attributable to
    equity holders 64 41 56% 318 253 26%
    $ per common share (basic and
    diluted) 0.16 0.10 60% 0.81 0.64 27%
    Adjusted net earnings (see non-
    IFRS) 150 233 (36)% 445 434 3%
    $ per common share (adjusted and
    diluted) 0.38 0.59 (36)% 1.12 1.10 2%
    Cash provided by operations (after
    working capital changes) 154 286 (46)% 530 579 (8)%
    prices Uranium $US/lb 47.76 49.97 (4)% 48.35 47.72 1%
    $Cdn/lb 49.80 49.37 1% 49.81 47.72 4%
    Fuel services $Cdn/kgU 17.24 17.16 - 18.12 17.75 2%
    NUKEM $Cdn/lb 41.84 - - 42.26 - -
    Electricity $Cdn/MWh 54 54 - 54 55 (2)%
    7 Feb 2014, 10:17 PM Reply Like
  • john001
    , contributor
    Comments (1217) | Send Message
    UPDATE 1-Uranium producer Cameco scraps production target
    07 Feb 2014 21:49 ET


    By Rod Nickel


    Feb 7 (Reuters) - Cameco Corp, the world's third-largest uranium producer, on Friday scrapped its lofty production target for the radioactive metal due to excess global supply in an uncertain market.


    The Saskatoon, Saskatchewan-based company also reported an increase in fourth-quarter profit, but it fell short of Street expectations.


    Uranium prices have been weak since an earthquake and tsunami struck Japan in March 2011, crippling the Fukushima-Daiichi atomic power plant, and leading it to shut down nearly all of its reactors.


    Cameco said on Friday that challenges caused by the unclear pace at which Japan will re-start some of its reactors and by bloated global uranium supplies appear likely to persist for the near to medium term. In such a market, maintaining a fixed production target makes little sense, Cameco said, and it dropped its previous target of boosting supplies to 36 million pounds by 2018.


    "That uncertainty has lasted for longer than had been expected," said Chief Executive Tim Gitzel, in a statement. "Although we still have an extensive portfolio of assets from which we can increase our production, the market incentive must be there."


    Cameco, which owns the world's largest-producing uranium mine at McArthur River, Saskatchewan, forecast production of 23.8 to 24.3 million pounds of uranium in 2014, up modestly from 23.6 million pounds last year.


    Even as it removed its production target, Cameco said it still expects to bring its high-grade Cigar Lake uranium mine in northern Saskatchewan into production in the first quarter, with ore processing to begin at Areva SA's McClean Lake mill by the end of the second quarter.


    Cameco said uranium sales should range from 31 million to 33 million pounds in 2014, with overall revenue ranging from flat to up five percent, due to higher realized uranium prices. It sold 32.8 million pounds last year.


    The spot uranium price has edged higher recently to around $35.50 per pound of uranium as of Jan. 27, according to Ux Consulting Company, moving slightly off its eight-year low of $34.50 reached in December.


    Cameco's shares reached nearly two-year highs in late January after Japan's trade ministry said on Jan. 15 that it would approve a revival plan for the utility responsible for the Fukushima nuclear disaster, Tokyo Electric Power Co.


    There are also signs that excess uranium supplies are thinning out, with many analysts predicting a shortage by 2016.


    Australia's Paladin Energy Ltd on Friday said it would suspend production at its Kayelekera mine in Malawi until the uranium price recovers. The mine accounts for about 2 percent of global supply.


    Last year, the Russia-United States highly enriched uranium agreement expired, removing a major source of secondary uranium supply.


    Net earnings for Cameco's fourth quarter rose to C$64.1 million, or 16 Canadian cents per share, including a C$70-million impairment charge on its agreement with Talvivaara Mining Company Plc to purchase uranium produced at a nickel-zinc mine in Finland.


    In the year-earlier quarter, Cameco earned C$40.9 million, or 10 Canadian cents per share and booked a C$168 million write-down on an exploration project in Australia.


    Adjusted earnings were C$150 million or 38 Canadian cents per share, down from C$233 million or 59 Canadian cents a year earlier.


    On that basis, analysts were expecting earnings per share of 54 Canadian cents, according to Thomson Reuters I/B/E/S.


    Revenue in the fourth quarter rose 15 percent to C$977 million, surpassing expectations for C$919.8 million.


    Cameco's uranium sales fell 12 percent to 12.7 million pounds in the quarter, while its average realized uranium price slipped four percent to $47.76 per pound.


    News © Reuters Limited. Click for Restrictions.
    7 Feb 2014, 10:26 PM Reply Like
  • 96815234
    , contributor
    Comments (2463) | Send Message
    Looks like all is not well with stock down 4% today, having traded lower than $20 as well...
    10 Feb 2014, 03:15 PM Reply Like
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