Uranium Continued: Is URG > UEC?

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Includes: UEC, URG
by: Lucas Roberts

Summary

Last article, I recommended UEC to profit from what appears to be a growing demand for uranium.

A commenter asked me to check out URG, which is also a well-positioned U.S. uranium miner and producer.

The argument (as I perceive it): Katusa of Casey Research has given a lot of hype to UEC, which has helped its current share price.

Comparing total cost per pound, a winner emerges.

Whichever way you decide to go, UEC and URG will continue to profit from what I feel is a long term change in the uranium market.

In my last article, I mentioned that the current upswing in uranium prices seem inevitable, as the demand for uranium continues to increase. I argued that Uranium Energy Corp. (UEC) was best positioned to profit, as its total cost per pound of processed uranium was lower than its competitors.

A commenter noted that UEC also happens to be adored by Marin Katusa, Casey Research's Chief Investment Strategist, a man who shouldn't need any introduction to commodity investors. And it is true: the man does like UEC. He s even taken subscribers of Casey Research on a tour of one of UEC s plants.

But this is a company Katusa has been touting as far back as 2011! So while the spotlight from Casey Research certainly helps, it does not fully explain UEC's recent and rather large upswing. Perhaps Katusa has been successful at putting this company on the radar for enough investors to where the recent bullish uranium news was the catalyst. But that's as far as I'm willing to go for explaining the UEC's price upswing with Katusa's efforts.

Now, the commenter claimed that Ur-Energy (URG) was a better U.S. uranium miner and producer. I honestly didn't know too much about URG, so I decided to pull them up and see if UEC was all hype, or if Katusa really did pick the better U.S. uranium miner.

Full disclosure: when I compared these companies, I looked strictly at how much each company had to spend per pound of uranium that it mined. This is a mining company; this is not a tech company looking to build the next iPhone, or a fashion company looking to innovate a new design. It is because of uranium's fungibility that I look strictly at total cost per pound, and for the most part ignore other, more traditional metrics like P/E, E.P.S., etc. I concede that this is overly simplistic, but if you're a uranium miner who has endured the excruciating bear market of the past several years, I feel safe in assuming that you're going to make some money now.

In my previous article, I noted how UEC's total cost per pound was $30.86 per their reporting. To find URG's, I simply pulled up their latest 10-K (page 45) and looked at 2014's total cost per pound. They reported 2014's total cost per pound to be $34.49, up from $34.40 a year ago. So all other things being equal:

UEC > URG

Again, I happily concede that this is overly simplistic. I overlooked the debt that URG has, and some royalties it owes compared to UEC owning everything it has outright. And if any commenters out there wish to point me to items that paint a better picture, I'll be more than happy to examine them.

In the meantime, there was another company this commenter pointed out, named Peninsula Energy Limited. It's an Australian miner with some uranium operations in the U.S. As far as I can tell, their shares do not trade in America, but I'll happily examine them to see if they're better posited than UEC to profit from this upswing of uranium prices using my overly simplistic method!

Now, even though I think UEC is the better deal, URG might be more suited to you if you feel that UEC has moved too much without you. To date, URG's shares have only climbed 16% the past few weeks, while UEC has leapt over 45% in the same time frame. If you want to get in where the price action hasn't been as hot and heavy, go URG. I still think UEC, since it has the cost advantages over URG, will be the ultimate winner. But both will continue to profit as the uranium market demand continues to grow.

Thanks so much for your comments! Each one is read!

Disclosure: The author is long UEC.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.