Following Meltdown, Cameco Is Positioned For Long-Term Growth
- Cameco has provided better-than-expected production guidance from its Cigar Lake mine.
- The company’s output is expected to grow by 40%-50% through 2018-19, as per Credit Suisse and Morningstar estimates.
- The market fundamentals are improving, thanks to two key Asian countries.
A 2015 'Nuclear Renaissance' Should Fuel Solid Gains For Uranium Stocks
- The recent sell-off in many energy stocks has created a buying opportunity in the uranium sector.
- Uranium could be one of the world's most undervalued assets and be poised for demand growth.
- Japan plans to restart a number of nuclear plants in the coming months and this could mark the start of a 2015 'nuclear renaissance'.
- Beyond 2015, there a numerous nuclear plants that are either under construction or being planned which should virtually guarantee increased demand for uranium.
- Although uranium prices rebounded sharply in November, Cameco shares are down more than 20% this year.
- However, the improving outlook for the uranium market augurs well for Cameco.
- Cameco is a good bet if investors are willing to be patient.
- Shinzo Abe's landslide election victory should give Abe enough leeway to turn on more reactors.
- Shares of uranium miners may be falling because of the perceived connection between uranium and crude oil.
- With a forward PE of 17.9, Cameco is cheap. The company's earnings should rise as uranium prices rise due to more reactors coming online.
Cameco: Japan Finally Announces The Restart Of 2 Nuclear Reactors
- Japanese regional authorities approve the restart of the two-reactor Sendai nuclear plant.
- Many of the other c.50 idle reactors could be back online pretty soon (probably by 2016/17).
- Investors could now assume that Japan is likely to start replenishing its uranium stockpile by 2016.
- As the lowest cost major producer, Cameco will be in a comfortable position when uranium demand picks up and pricing improves, with a likely huge earnings leverage.
- Cameco, which stands to reap the rewards of higher prices, has a strong correlation with uranium and is still trading at very depressed levels.
- According to the 2013 International Energy Outlook, nuclear power is projected to be one of the world’s fastest-growing energy sources, growing at 2.5% Y/Y.
- The entire world (not just Japan) will need to consider all viable options for energy going forward, especially nuclear.
- The recent bullish trends in the uranium market are led by supply-side issues.
- The demand side is also looking interesting.
- Time to reconsider some well known uranium stocks, particularly Cameco and Denison Mines.
Investors Should Be Aware Of Cameco's Dispute With The Taxman
- The Canada Revenue Agency is speeding up the frequency of reassessments of Cameco's tax returns in what may be an attempt to pressure Cameco to settle out of court.
- Cameco's cash is being tied up as they are required to remit 50% of each disputed bill.
- Cameco could ultimately be on the hook for over $1 billion in taxes and penalties.
Update: Cameco Earnings - Strong EPS, But It's Mainly A Japanese Story Right Now
- Cameco reports strong Q2 earnings ($0.20 EPS vs. $0.18 expected). The lowered production target is not a major surprise following the Cigar Lake delay.
- As highlighted in our June 11 article, its low-cost model enables Cameco to weather a tough uranium price environment.
- We continue to believe that Cameco's business model strength suggests the group is in an ideal position to benefit from the expected uranium demand and pricing recovery.
- We reiterate our positive view on the stock following the recent Japanese developments that point to an accelerating nuclear restart program.
- Newsflow from Japan is finally improving: two Kyushu Electric reactors got the NRA safety clearance and could restart in coming months.
- Strong appetite for Japanese Utilities’ bonds suggests a pretty high confidence in the restart of reactors… at least from Japanese investors, who know Japan politics better than us.
- Another key positive is that the Japanese government is making the necessary moves to speed up the inspection and restart process of nuclear reactors.
- The pro-nuclear Tanaka will soon join the five-member panel of the NRA, in replacement of the hawkish Shimazaki.
- The gradual restart of reactors will be positive for sentiment and send uranium names such as Cameco higher.
- The nuclear restart process in Japan is taking longer than expected, putting pressure on the price of uranium.
- Notably, a Fukui prefecture court ordered a Japanese utility not to restart two idled nuclear reactors.
- This is a bump in the road: the precedents set by the Osaka Court of Appeal suggest that this ruling may not remain in force for long.
- We believe that sentiment could improve soon, when Japan gives the go-ahead to several of its reactors, while the long-term supply-demand dynamics are highly attractive.
- Cameco could take the opportunity of a low price environment to buy assets at low valuations.
Uranium Demand Uncertain: Is Cameco Corp. The Right Long-Term Play?
- The decrease in the annual uranium supply caused by the end of the HEU agreement will be offset by countries like Japan and Germany no longer using their nuclear reactors.
- Public distrust will likely keep most of Japans nuclear reactors off for the foreseeable future.
- New reactors under construction will provide little demand for Uranium in the near to midterm because of the time required to build these reactors.
- However, companies like Cameco Corporation (CCJ) are positioned to withstand the uncertainty in the near-term and reap the gains of a long-term recovery in the uranium market.
Jul. 31, 2014, 8:35 AM
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Jul. 16, 2014, 11:52 AM
- Uranium miner Cameco (CCJ +1.7%) is higher despite reporting that ore from its Cigar Lake mine in Saskatchewan would not be milled until early 2015 instead of before the end of 2014, due to problems freezing the ground.
- CCJ freezes the mine's ore zone and surrounding ground to prevent water from flooding production areas, but it says freezing has not advanced as quickly as expected.
- Uranium/nuclear names are broadly higher after two of Japan's nuclear reactors received clearance to re-start: USU +8.2%, DNN +3.3%, URG +3.2%, URRE +1.6%, BWC +1%, URS +0.3%, LTBR flat.
Jul. 16, 2014, 8:35 AM
- Japan's nuclear watchdog gives safety clearance for the restarting of two nuclear reactors in southern Japan, recognizing their compliance with stricter regulations created after the 2011 Fukushima nuclear accident.
- The move is seen as unlikely to lower prices for liquefied natural gas because the country’s 46 other units are unlikely to resume this year; North Asia LNG prices have rallied 54% since Japan shut nuclear plants and boosted gas purchases for power generation after the Fukushima disaster.
- Related nuclear tickers: NLR, CCJ, URA, BWC, SHAW, URS, FLR, LTBR, URG, UEC, URRE, USU, DNN
Jun. 5, 2014, 10:54 AM
- RBC cuts its outlook for uranium prices over the next several years as it concludes the market will remain in surplus through 2020.
- RBC believes Japanese reactor restarts could result in a recovery in uranium prices to $40/lb. in late 2014 or early 2015, but thinks the price is likely to be capped at that level until the market begins to tighten; the firm predicts only four Japanese reactors will restart this year with 28 - slightly more than half the current fleet - eventually restarting.
- Spot prices recently dropped below $30 as supply remains well ahead of demand since the Fukushima disaster.
- RBC cuts its price target for industry leader Cameco (CCJ -2.5%), seeing shares rangebound between $18-$27.
- URZ -3.3%, UUUU -2.5%, URRE -1.5%, UEC -1.1%, USU -0.9%, DNN flat, URG flat.
- ETFs: URA, NLR, NUCL.
May. 16, 2014, 5:30 PM
- 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.
Apr. 29, 2014, 8:35 AM
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Apr. 11, 2014, 4:53 AM
- Japan's Cabinet has approved an unpopular plan to reinstate nuclear energy as an important source of electricity, although there are doubts about how big a role atomic power will be able to play.
- Japan may have to leave up to two-thirds of its 48 idled nuclear reactors closed, a Reuters analysis shows, due to the high cost of upgrades, local opposition or seismic risks.
- The country's nuclear plants were shut following the Fukushima disaster over three years ago, which has caused the country to significantly increase its energy imports. That has acted as a drag on GDP and prompted fears that Japan could suffer from a permanent current-account surplus which could undermine confidence in its massive debt.
- Relevant tickers: DNN, CCJ, USU, URRE, UEC, URG
- Japan ETFs: DXJ, EWJ, FXY, YCS, JGBS, JGBD, JYN, NKY, DBJP, EZJ, EWV, YCL, ITF, JPNL, JGBL, JPP, JGBT, JPNS, HEWJ, JGBB, FJP, URA
- Nuclear ETFs: URA, NLR, NUCL
Apr. 5, 2014, 8:25 AM
- Bloomberg discusses the chances of the next nuclear accident, arguing it is a crisis waiting to happen and could be in a country with little experience to deal with it.
- While atomic power has fallen from favor in some western European countries since the Fukushima accident in Japan - Germany, for example, is shutting all its nuclear plants - it’s gaining more traction in Asia as an alternative to coal; of the 176 reactors planned worldwide, 86 are in nations that had no nuclear plants 20 years ago.
- If nuclear is to remain a part of the world’s energy supply, the industry must come up with solutions to make sure contamination - and other consequences, including financial - don't spread beyond station grounds, former NRC boss Gregory Jaczko says.
- Gregor Macdonald believes nuclear has no future, adding the extinction level event bearing down on global nuclear power is the rise of solar.
- Nuclear names: URA, NLR, NUCL, CCJ, DNN, USU, URRE, UEC, URG
Mar. 25, 2014, 5:55 PM
- Cameco (CCJ) has climbed nearly 10% in five weeks, but BMO analyst Edward Sterck doesn't see more upside ahead and downgrades shares to Market Perform from Outperform; he says the stock is priced at a uranium price of $48-$65/lb., far above the current mid-$30s where it has been mired for months.
- On the other hand, Sterck is optimistic about uranium, and notes CCJ's stock price usually moves in advance of the uranium price, "which could provide a further indication that that an increase in the uranium price may be imminent."
- ETFs: URA, NLR, NUCL.
Mar. 20, 2014, 10:24 AM
- Denison Mines (DNN +7.4%) signs a letter of intent to acquire uranium assets from International Enexco (IEXCF); DNN would buy all of Enexco's shares but spin off the copper assets, which will become part of a newly formed company.
- Enexco's principal uranium assets include a 30% stake in the Mann Lake exploration project and a 20% stake in the Bachman Lake joint venture in Saskatchewan.
- Also, DNN says it intersected high grade uranium mineralization at a new target area near the Phoenix deposit at Wheeler River in Saskatchewan; DNN is the operator and holds a 60% interest in the project, while Cameco (CCJ) holds a 30% stake.
Mar. 13, 2014, 9:44 AM
- Cameco (CCJ +2.6%) says ore production has begun at its Cigar Lake uranium mining operation in Saskatchewan.
- The mining system and underground processing circuits are operational and ore is being transported to the McClean Lake mill, which is expected to begin processing the ore to uranium concentrate by the end of Q2.
- CCJ expects to produce 2M-3M lbs. of uranium concentrate in 2014 and ramp up to its full production rate of 18M lbs. by 2018.
- The uranium market is over-supplied right now, but CCJ believes Cigar Lake will be needed in the future as China and other countries build more nuclear reactors.
- ETFs: URA, NLR, NUCL
Feb. 26, 2014, 2:50 PM
- Top uranium miners rise for a second straight day after the Japanese government reversed plans to shift away from atomic energy, designating nuclear as an integral part in meeting the country’s long-term electricity needs.
- PM Abe's plan, which is expected to receive cabinet approval in weeks, could open the door to restarting some of Japan's 48 idled reactors as soon as this year; the plan also hints at possible new reactors.
- Japan’s turnaround on atomic energy has as much to do with finances as anything else; Japan's utilities have been making up the shortfall caused by the absence of nuclear energy by buying liquefied natural gas on the international market at record high prices.
- Denison Mines (DNN +8.6%), which today announced high grade uranium intersections at its Phoenix deposit, and Cameco (CCJ +4.2%), Canada's largest uranium producer, continue to move higher; smaller miners are fading after posting strong gains yesterday: USU +3.3%, URRE -0.9%, UEC -1.1%, URG -3.4%.
- ETFs: URA, NLR, NUCL.
Feb. 24, 2014, 11:42 AM
- Uranium takeovers are on the verge of a comeback that could put companies such as Denison Mines (DNN +5.2%), Ur-Energy (URG +4.9%) and Fission Uranium (FCUUF) in play, according to a Bloomberg report.
- Uranium prices are forecast to rise more than 40% by year's end as Japanese power plants restart nuclear reactors that have been shut down since the March 2011 Fukushima disaster, and analysts say the rebound in uranium demand may fuel takeovers as buyers try to get ahead of rising prices.
- DNN would make an attractive target for someone looking to gain access to Canada’s Athabasca Basin, home to the world’s richest high-grade uranium; a Raymond James analyst thinks Rio Tinto may be particularly interested.
- Cantor Fitgerald thinks DNN and Fission could be targets of Cameco (CCJ +0.8%), which has been building up cash and last month sold a stake in a power plant for C$450M.
- Also: URRE +5.5%, URZ +4.6%, UEC +0.9%, USU +0.4%.
- ETFs: NLR, NUCL.
Feb. 19, 2014, 3:59 PM
- Investors in uranium companies are not excited by the U.S. government's plans for $8.3B in nuclear loan guarantees, as the amount is viewed as insufficient and the overall loan program is seen as fizzling, according to a NY Times report.
- Funds are coming far later than anticipated and may effectively end a program that Congress established in 2005 to jump-start a new generation of nuclear plants, NYT writes; at one point, the program was expected to support more than $50B in loans for nuclear projects.
- USEC (USU -10.8%) is slammed despite reporting another $16.7M in government obligated funds toward development of the American Centrifuge project.
- Other uranium providers are lower too: URG -4.1%, DNN -3.7%, URRE -3.7%, UEC -3.5%, URZ -3.2%, CCJ -1%.
- ETFs: NLR, NUCL.
CCJ vs. ETF Alternatives
Cameco Corp is engaged in the exploration for and the development, mining, refining, conversion, fabrication and trading of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries.
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