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The Uranium Sector is Showing Signs of Life FOREVER STOCK NO. 5 Cameco Corp. (NYSE: CCJ)
| Date post: | 14-Sep-2014 |
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Economy & Finance |
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The Uranium Sector is Showing Signs of Life
F O R E V E R S T O C K N O . 5
Cameco Corp. (NYSE: CCJ)
F O R E V E R S T O C K N O . 5
After going into a near free-fall shortly following the catastrophic events in Japan in 2011, uranium prices may rise as much as 40% this year as the country looks to restart nuclear plants.
In fact, many analysts are going out on a limb, calling the eight-year-low price of
$35 per pound early this year a bottom to the market. The oversupply in uranium that resulted from Japan shutting down 50 reactors--responsible for 13% of the world demand--could dry up quickly. That’s especially valid when you consider that with some of the largest producers cutting back over the past few years.
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Japan isn’t the only country about to demand a lot more uranium. Of the
71 nuclear reactors under construction globally, 28 belong to China, according to the World Nuclear Association. Russia, India and South Korea are also expected to drive nuclear growth.
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Source: Earth Times
Regardless of what the pundits say, nuclear power remains the cleanest, safest and cheapest form of mass power generation available. And long-term demand remains intact, leading Credit Suisse to forecast an average price of $55 in 2015 and $70 by 2017.
Even if long-term demand is lowered by 5%-10% over the next 10 years, the World Nuclear Association (WNA) still expects demand for uranium will outstrip supply.
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CLEANEST, SAFEST, CHEAPEST
The supply crunch easily has the potential to become
even more strained, with 63% of current uranium production coming from only 10 mines worldwide.
Additionally, the global supply of mined uranium is
susceptible to supply shocks if one mine floods or stops production for other reasons.
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SUPPLY CRUNCH
The most direct way to profit from the rebirth in nuclear
energy and the shortage in uranium is to buy shares of the most productive uranium miner in the world – Cameco Corp. (NYSE:CCJ).
Based in Saskatchewan, Canada, Cameco is the dominant force in all facets of uranium mining. The Canadian miner produces 20% of the world’s uranium supply and possesses the world’s largest and highest-grade mine - McArthur River.
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WORLD’S MOST PRODUCTIVE URANIUM MINER
McArthur River was discovered in 1988 with production commencing in 1999. It has an estimated life of more than 40 years.
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Source: Mine Stories
Cameco has been blessed with Mother Nature’s most efficient uranium mine. The ore grade at Cameco’s McArthur River mine stands at 15.2%, which is nearly 100 times the world average for a uranium mine. That means Cameco can produce far more uranium by mining far less ore.
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MOST EFFICIENT URARNIUM MINE
Moreover, the McArthur River mine has 20 times more uranium reserves than the second highest-grade mine - Rabbit Lake - which is also owned by Cameco.
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Add the fact that Cameco will bring the world’s largest undeveloped uranium mine - Cigar Lake (which rivals McArthur River in grade and scale) – on line in 2014 and you can quickly see why Cameco is considered the granddaddy of uranium plays.
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Cameco has a seemingly insurmountable competitive advantage in the uranium market. It has the lowest-cost-to-mine uranium in the industry at $26-$28 per pound. Anything close to $30 per pound is considered low cost in the industry.
The sheer size of its uranium deposits makes Cameco the only producer that will definitely have uranium at its disposal for decades to come. As a result of its huge deposits, companies building nuclear power plants consider Cameco a primary uranium source.
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URANIUM FOR DECADES TO COME
In fact, Cameco will supply China’s largest clean-energy enterprise -
China Guangdong Nuclear Power (CGNPC) – with 29 million pounds of uranium concentrates through 2025.
China is expected to increase its nuclear power from 11
gigawatts to at least 80 gigawatts over the next 10 years, with plans to double that amount by 2030, leaving little doubt that demand will not be in short supply.
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The last bull market in uranium pushed Cameco’s stock price to an all-time high of $56 in 2007. This price, which is double the current price, is certainly attainable should uranium prices continue to climb. Cameco had reported that it would be scaling back on its projected output of 36 million pounds by 2018, but is likely to reconsider that move in the face of Japan’s nuclear reboot.
With a dominant market share and proven reserves waiting to be tapped
during a time of proven supply-demand imbalances in the market, Cameco is the stock to own for exposure to uranium. And with demand expected to increase, you should be comfortable buying and holding the stock for years to come.
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THE FUTURE OF CAMECO STOCK
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