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.
Seemingly doubling down on his tweet yesterday regarding nuclear weapons, MSNBC earlier this morning reported Donald Trump as having told one of its anchors, "Let it be an arms race."
Might uranium suppliers benefit from such a race? No, says the Carnegie Endowment's Mark Hibbs. Both Russia and the U.S. have enough uranium stockpiled to produce about 10K weapons. Both also have plenty of plutonium.
Uranium suppliers: Uranium Energy (UEC +4%), Uranium Resources (URRE +0.7%), Cameco (CCJ -0.2%). ETF: URA
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.
A uranium glut that has caused futures prices to drop 18% YTD - the worst performer among all the world's commodities - is set to turn into a shortage as miners cut output and nuclear reactor construction climbs, Uranium Energy (NYSEMKT:UEC) CEO Amir Adnani tells Bloomberg.
Oversupply from mines in Kazakhstan, Canada and Australia has sent prices plunging even as iron ore and oil rally, but as supply diminishes and demand improves, stockpiles will be eroded and the slump will reverse, the CEO says.
Prices are not factoring in the pace at which inventories will disappear in coming years, according to Morningstar's David Wang, who expects uranium to more than double to about $65/lb. by 2019 from $28.25 now.