On CCJ's unusual warning to analysts that they were too bullish on 2016 performance, Issac told the TD Securities Mining Conference that the company felt compelled to “correct what we felt was a misalignment in earnings expectations" and that it wanted to be transparent with the investment community.
Even after recent production cuts, the market is still oversupplied and utilities will be covered until ~2022, when demand increases to the point it cannot be satisfied by existing supply, the CFO said.
Issac believes customers are taking a “wait-and-see” approach as to whether Kazakhstan, the world’s top uranium producer, follows through on last week’s announcement that it will cut output by 10% due to weak market conditions, sending uranium spot prices higher.
Among other uranium names in today's trade: URRE +27.6%, URG +6.1%, UEC +4.7%, DNN +4.4%, UUUU +4.2%, URA +3.7%.
Cameco (CCJ -14.5%) plunges in early trading and drags down other uranium producers after the company said it expected its 2016 adjusted profit to be significantly lower than analyst estimates and that it would cut 120 jobs at three of its uranium mines.
The announcement contained no details explaining the cause of the shortfall, but CCJ said its earnings expectations are not reflective of the strength of its core uranium business.
Cameco (NYSE:CCJ) -9.5% AH after saying it expects 2016 adjusted net earnings to come in "significantly lower" than analyst expectations.
CCJ says it delivered 31.5M lbs. of uranium during 2016 at an average realized price of C$54.46/lb., as expected, but expects to report an IFRS net loss for the year due in part to asset impairments resulting from fair market value assessments at year-end; it expects to make total adjustments to net earnings of C$180M-C$220M after-tax (C$0.45-C$0.56/share).
CCJ says "current earnings expectations are not reflective of the strength of our core uranium business," but it is planning measures to further cut costs and improve efficiency at its mines, including a 10% workforce reduction (~120 employees total) at its McArthur River, Key Lake and Cigar Lake operations.
Shares of uranium producers shoot higher for a second straight day after spot prices for the commodity surge 10% after Kazakhstan's state nuclear-fuel company said the country would not produce as much uranium as planned this year.
Analysts say the announcement from Kazakhstan, the world’s biggest producer, may mark an inflection point for the market and could lead to higher prices.
In today's trade: URRE +32.4%, UEC +14.8%, DNN +8.7%, URG +6.8%, UUUU +5.5%, CCJ +4.1%, after big gains yesterday.
Uranium prices have largely been in free fall since the 2011 disaster at Japan's Fukushima Daiichi nuclear power plant, sliding to a 12-year low of $18/lb. in December, but prices yesterday jumped above $24 for the first time since September.
Denison Mines (DNN +12.5%) surges on news that it will increase its ownership stake in the Wheeler River uranium project to 66% from the current 60% by the end of 2018.
The JV partners agree to allow for a one-time election by partner Cameco (CCJ +10.3%) to fund half of its ordinary share of joint venture expenses in 2017 and 2018, with DNN funding CCJ's shortfall contribution in exchange for part of CCJ's interest.
The JV parties also approve a C$12.5M 2017 budget for the program.
Chinese demand for uranium is expected to nearly double to 9,800 metric tons/year by 2020 from the end of 2015, although a supply glut will continue to keep prices depressed, says the head of a unit of state-owned China National Nuclear Corp.
China is in the middle of a nuclear reactor building program and aims to have 58 GW of capacity in full commercial operation by the end of 2020, up from 30.7 GW at the end of July, but the executive says only ~53 GW of capacity would be online as not enough construction of nuclear plants had already begun.
Uranium is trading at ~$18.75/lb., down from $67 before Japan's Fukushima disaster in 2011.
Uranium spot prices likely will remain under pressure for the rest of the decade because of high inventory levels, recycling of already-mined uranium and the slow restart of Japan's nuclear reactors, Fitch Ratings forecasts.
An extended period of oversupply has contributed to a major build-up in utilities' uranium stockpiles, with European utilities having enough fuel to last three years and Japanese utilities enough for 4-5 years, which will maintain pressure on prices as demand slowly recovers, Fitch says.
A dispute between Fission Uranium (OTCQX:FCUUF) and a retail shareholder group has escalated to the point where the shareholders are working on a plan to launch a proxy fight and kick out the company’s board, Financial Post reports.
The dispute that was brewing for months went public this week as Fission’s board adopted a bylaw that forces the group to give the company 30 days notice if it wants to name new directors at the Dec. 15 annual meeting.
The group believes the decision to pursue a merger with Denison Mines (NYSEMKT:DNN) is evidence the board is not acting in the best interests of the company and that shareholder value is at risk.
Denison Mines (NYSEMKT:DNN) and Fission Uranium (OTCQX:FCUUF) say they have terminated their C$483M merger agreement after the deal failed to receive the necessary approval of two-thirds of Fission's shareholders.
At the deadline for submission of proxies on Friday, DNN's shareholders had strongly supported the deal.
DNN had sought to acquire Fission to expand its presence in the Athabasca mining region in Saskatchewan.
Japan is rejoining the countries using atomic power after the Fukushima nuclear disaster more than four years ago, as Kyushu Electric Power says it will begin bringing online the No. 1 reactor at its Sendai facility on Aug. 11, start power generation as early as Aug. 14 and return it to normal operations next month.
The move is an important de-risking event for the uranium market, says BMO Capital analyst Edward Sterck: While "Japanese utilities are sitting on significant excess inventories, the fact that these will now start to be consumed [in Japan] should ease fears of sales from inventory,” and it shows there is a regulatory restart process in Japan that actually works, which clears the way for more.
Canada's government says it has approved an application for Australia’s Paladin Energy (OTCPK:PALAF +4%) to construct its proposed Michelin uranium mine in the provinces of Newfoundland and Labrador, making a rare exception to its policy that requires uranium mines to be majority owned by Canadian companies.
Analysts say the approval may open the door to other foreign investors seeking majority ownership of Canadian uranium mines, and could encourage investment by two Chinese utilities that have said in recent months they are looking at Canada for acquisitions.
Canadian companies that own non-producing uranium assets in the country include Cameco (CCJ +0.9%), Fission Uranium (OTCQX:FCUUF +2.1%) and Denison Mines (DNN -1.1%).
Chang's deposits with the potential to attract immediate Chinese interest are Rio Tinto's (NYSE:RIO) Roughrider, Cameco's (NYSE:CCJ) Millennium, Fission Uranium's (OTCQX:FCUUF) Patterson Lake South and UEX's (OTCPK:UEXCF) Shea Creek; Denison Mines' (NYSEMKT:DNN) Wheeler River project could get attention for the long term.
China National Nuclear Power Corp. is expected to raise as much as $2.16B in what is set to be China’s largest domestic IPO in five years.