A Couple Uranium Comments
One comment from LPG and another from a member of UEC.
Very positive news for the uranium sector today with Cameco (CCJ) announcing it will indefinitely suspend production at its Mac Arthur River and Key Lake mines. (see Bloomberg article pasted below). Recall that Mac Arthur River mine was as of last year the largest producing uranium mine in the world. Just to show the company is serious about the measures announced, the firm will also lay off 550 workers (+150 employees at its HQ).
In our weekly uranium sector update over the past 2 weeks, we wrote: ” […] we’ll likely see more sector price action in Aug-Sept, underpinned by newsflow, esp. from CCJ re: MacArthur Mine. ”
So it seems I was wrong: Cameco news came 6 days earlier than the August-September window I had expected. 🙂 🙂 🙂 Joke aside, our thesis on uranium sector is playing out exactly as planned/laid out a few months ago.
U3O8 prices are slowly moving up, underpinned by newsflow which I’ve seen decisively bullish month after month. A good amount of stocks are up significantly from their lows 2 years ago, and the investment community is pretty much not paying attention/showing no sign of interest: these are the precise characteristics of a “stealth” bull market, something which happens before the herd/crowd finally realizes what is going on and piles on.
As mentioned previously, a key thing to watch is the U.S gvt decision on uranium imports tariffs while the Kazatomprom IPO will also, in our view, act as a sector catalyst (we would expect the Kazak to do their utmost to lift uranium prices ahead of the planned national company IPO: the government likely wants to maximise $$$).
Comments from UEC regarding the Cameco announcement.
Cameco Q2 Report: World’s largest uranium mine/mill to be kept on indefinite care and maintenance. Key Takeaways:
- Rebalancing of the uranium market fundamentals is accelerating with extended shutdown of McArthur River/Key Lake
- Continues to remove ~19 million pounds of production annually
- Requires Cameco to buy substantial uranium quantities from the open market to backfill contracted commitments
- Cameco projects this purchasing to be between 11 and 15 million pounds over the next 18 months (includes 2-4 million pounds yet to be purchased in 2018)
- These volumes, combined with recent speculative interest and looming utility procurement cycle, should overwhelm available supplies – expect upward volatility
- Shutdown is indefinite in nature, subject to Cameco again securing acceptable long-term contract prices (greater than $40?)
- Extremely positive near-term development for uranium market outlook – Total production cuts since 2016 are ~30-33 million pounds
- Occurring at the same time as strong Trump Administration support for a revitalized U.S domestic uranium industry