22 Mar Time to Buy Uranium Stocks?
It has been a very challenging few years for uranium prices since the Fukushima nuclear disaster in 2011. Will 2018 be the year that uranium prices rebound? I’m optimistic that prices could finally rise in 2018.
The U3O8 spot price is currently at $21.90 USD per pound which is above the lows of $18 priced in late 2016. The combination of higher demand and a decrease in supply could lead uranium prices higher. The million dollar question is when? Let’s take a look at the recent supply cuts by some of the biggest uranium miners.
Last year, persistently low U3O8 prices prompted a number of big supply cuts. Kazatomprom, the national operator of Kazakhstan for import and export of uranium said it would reduce its uranium output for the year by 2,000 tonnes as well as by 20 percent over the next three years. In addition, major Canadian uranium producer Cameco suspended production at its McArthur River mine and Key Lake milling operations. The reality was these companies couldn’t mine uranium at a cost of $50 per pound and sell it for below cost. These cuts have helped reduce the oversupply of uranium and have given a slight boost to uranium prices.
Now the other equation is that we need to see uranium demand increase. It has been suggested by experts that many utility companies that require uranium will soon be entering a major contracting cycle as 30 to 35 percent of their needs in 2020 are not under contract. If prices rise then many of these companies may choose to lock in their supply thus generating demand. Also, Japan’s nuclear fleet generally accounts for around 10 percent of total uranium demand and if we see a restart of their reactors then this could drive even further demand.
So how can you take advantage of the potential rise in uranium prices? The best and easiest way is to buy companies that mine and hold uranium. One of the world’s largest publicly traded uranium company is Cameco (TSX: CCO, NYSE: CCJ). They are based in Canada and in 2015, accounted for over 18% of the world production of uranium.
If you don’t want any mining risks associated with owning an uranium miner then you may want to buy Uranium Participation Corp (TSX: U) They are a Canadian based holding company that invests nearly all of their assets in uranium, both in the form of uranium oxide (U3O8) or uranium hexafluoride (UF6).
Securities Disclosure: I may hold a direct investment interest in the companies mentioned in this article.