Uranium Stocks Soar To 6 Year Highs On Blowout Cameco Earnings, Hugh Hendry Reco

To our readers, Hendry said nothing new, as we have previously repeatedly laid out the bullish case for uranium stocks in general, and Cameco (CCJ) - which controls the world’s largest high-grade uranium reserves and low-cost operations and is one of the largest global providers of the uranium fuel - in particular (here, herehere and here),

There was some actual news yesterday when Power Magazine reported that Honeywell announced its plans to reopen its sole US uranium plant (i.e., Metropolis Works in Illinois – i.e., the US’ sole uranium conversion facility).

“As the only domestic uranium conversion facility, Honeywell’s Metropolis Works facility has been an important national strategic asset, well-positioned to satisfy UF6 demand both in the U.S. and abroad,” the company said on Tuesday.

Commenting on this development, GLJ Research overnight published a note, stating that "with our model pointing to a sizeable deficit in uranium supply emerging in 2020 – driven by near-record-low uranium spot prices, as a present, which has rendered the bulk of the world’s uranium supply loss-making – any spike in demand for uranium substrate would, we believe, result in substantially higher prices (our bull thesis on the global uranium space is supported, in part, by the fact that uranium demand is largely inelastic to price [i.e., utilities will buy, no matter what the price])."

The conclusion:

The Uranium sector supply/demand balance is the tightest we've seen since pre-Fukushima. Furthermore, producers who account for over 50% of global supply are keeping capacity at bay for the sole purpose of driving Uranium prices higher. When you add to this the Uranium stocks are now gaining attention from ESG investors due to their low GHG footprint and quintessential role as a clean energy alternative, we see the set-up for incremental/new Uranium investments as opportune. Under this backdrop, we prefer Cameco given its low-cost industry positioning and solid balance sheet - Cameco currently boasts a cash-to-debt ratio of 79.5%, which was enabled by the company fortifying its balance sheet during the most recent downturn.

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Monica Kingsley 2 months ago Contributor's comment

Good focus on uranium, I did so as well today. Keep up the good work throughout!