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Uranium slides to eight-year lows, banks cut outlook amid Japan delays

  • Uranium prices have dropped to eight-year lows, with delays in restarting Japan's nuclear reactors prolonging a uranium supply glut, Bloomberg reports.
  • Uranium dropped to $29/lb. on May 2, the lowest since June 2005 and extending this year’s drop to 16%; UBS has reduced its 2014 price forecast by 9% to $39/lb., and Credit Suisse cut its projection by 7% to $38.80.
  • Japanese restarts are the key catalyst to get utilities to resume long-term contracting, which should support prices, Raymond James analyst David Sadowski says, cutting his 2014 price forecast by 14% to $36.
  • "The next 18 months we see as being a very difficult period for the market," Cameco CEO Tim Gitzel says in the report.
  • ETFs: URA, NLR, NUCL.
  • Companies: CCJ, DNN, USU, URRE, UEC, URG.
Comments (5)
  • Darrell
    , contributor
    Comments (258) | Send Message
     
    Folks now is the time to start buying the uranium EFTs: NUCL, URA and NLR.

     

    It is my bet that UEC will probably go bankrupt, UEC revenue stream cannot sustain its debt expense and operating expenses: I think the creditors will use this latest downturn in U prices to force UEC into bankruptcy. No matter what, the creditors will have to put up additional money to keep UEC operating, it is better for them if they had ownership interest in the company.
    16 May, 06:14 PM Reply Like
  • King Rat
    , contributor
    Comments (610) | Send Message
     
    Read back the past 18 months and all the way down from the $50s were claims that "get ready for a spike to the $80s in the next few months".

     

    If finally those guys are right, buying CCJ $21 '15 call for $1.50 doesn't look bad.

     

    Assuming the stagnation continues, selling the same covered call doesn't look bad.
    Insurance for 7% further loss while providing a max. 14% return ($1.40 option, $1.25 appreciation, 27ยข dividends), 22% annualized.

     

    edit=disclaimer, I don't own CCJ outright nor do I know of it being in any fund I own for myself or clients. The stock has dipped below $18 4 times in the last 3 years despite higher than current uranium prices. I also do not recommend "chasing yield" nor do I recommend purchasing options. Just saying a 7% insurance policy on what *might* be an undervalued stock has my interest piqued. CCJ has also peaked 25 more than once during that span and if it happens again in the next 8 months, selling a $21 call could deprive you of $2.50 potential gain.
    16 May, 06:34 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5436) | Send Message
     
    So the banks actually think uranium will go higher. Surely the bottom is near.
    16 May, 08:54 PM Reply Like
  • bull n bear
    , contributor
    Comment (1) | Send Message
     
    The forcus is still on japan.. If only they are able to start up their plant ASAP
    17 May, 10:08 AM Reply Like
  • Ajayyy
    , contributor
    Comments (315) | Send Message
     
    Nothing in Japan gets done fast. It's a very slow moving bureaucracy. Uranium prices are doing a head-fake. Everyone expected them to go up and so they are heading down. We are still above the avg. cost curve of a uranium miner. While there could be further downside, the bottom can't be much farther from here.

     

    The main takeaway for me is that now all these analysts have cut their PT, the opposite will be true. Uranium will end 2015 on the same strong note that it started the year.

     

    The smarter option in Uranium is to buy 2016 Calls for CCJ.
    17 May, 12:13 PM Reply Like
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