Uranium markets have been in decline for more than ten years, with prices plummeting from highs approaching $140 per pound in 2007 to lows in 2016 below $20 per pound. The market took a further hit after Japan shut down its nuclear reactors following the Fukushima disaster in 2011, with spot prices losing more than half their value.
But in recent days, significant stock and spot price moves have been noted by industry watchers.
"Uranium surged the most in more than three weeks as Kazakhstan said it will reduce production by 10 percent this year after prices slumped in 2016 amid a global inventory glut," Bloomberg Markets noted in an article published Jan. 10.
The 10% cut was matched with a 10% rise in the U3O8 spot price, which reached $24.25 a pound on the news. The uranium spot price currently stands at ~$22.00 per pound.
In an interview with Palisade Radio, David Cates, president and CEO of Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT), noted his company has seen increases in both volume and stock price following the announcement. Cates views recent gains as "sustainable," noting he believes "the market was oversold and was in total apathy." The Kazatomprom cutback represents a realization that it may be more valuable to have "pounds out of the ground" than to sell at current prices.
Miners like Denison and Cameco Corp. (CCO:TSX; CCJ:NYSE) are in a position to benefit from the cutbacks. Explorers and developers like NexGen Energy Ltd. (NXE:TSX; NXGEF:OTCQX), Fission Uranium Corp. (FCU:TSX; FCUUF:OTCQX; 2FU:FSE) and UEX Corp. (UEX:TSX), with projects in Canada's Athabasca Basin, have also seen upward stock movement in the wake of the Kazatomprom announcement. The stock of U.S. producer Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT) has increased ~35% since the beginning of 2017.
While Japan holds significant uranium in stockpiles to power its reactors, which it is slowly bringing back online, other countries, including China, are building reactors. As Dundee Capital Markets analyst David Talbot told The Energy Report in a 2016 interview, "according to the World Nuclear Association, there are 439 nuclear reactors in operation, 64 under construction and 154 more planned." The analyst also noted that "lower uranium prices have moved investors away from the sector, but when the price turns, it often happens quickly."
The Bloomberg Markets article included comments by Cantor Fitzgerald Analyst Rob Chang, who stated in a note: "We had given up on expecting Kazakhstan to exercise production restraint as its mines were the lowest cost operators in the world. . .This news is a definite surprise and may be the inflection point for the uranium space to head higher across the board."
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1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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( Companies Mentioned: CCO:TSX; CCJ:NYSE, DML:TSX; DNN:NYSE.MKT, EFR:TSX; UUUU:NYSE.MKT, FCU:TSX; FCUUF:OTCQX; 2FU:FSE, NXE:TSX; NXGEF:OTCQX, UEX:TSX, )
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