Price of Canadian Uranium Major Rises 14%

Cameco Corp.'s (CCO:TSX; CCJ:NYSE) price surged about 14% in the past few days to CA$69.18 per share, boosted by the uranium price reaching a 16-year high, according to media reports.

"Currently sitting at US$94 per pound (US$94/lb) U3O8 . . . uranium prices are reflecting the undeniable supply crunch the sector faces following years of undersupply (2018−current)," Haywood Securities analysts wrote in a January 11, 2023 report.

"If uranium prices sustain current levels for a longer duration, we expect equity valuations to rebase to be more reflective of the current commodity price," added Haywood.

Company is Top Pick and Buy Rated

Headquartered in Saskatoon, Saskatchewan, Cameco is one of the world's largest producers of uranium concentrate, described BMO Capital Markets Analyst Alexander Pearce in a December 19, 2023 research report.

In Canada, Cameco operates two mines and owns uranium refining and conversion facilities. It has a 40% interest in the Inkai project in Kazakhstan. Last November, Cameco purchased 49% of Westinghouse, the original equipment manufacturer/technology provider for about half of the world's nuclear reactors.

Today, added Pearce, Cameco boasts "advantageous geographical exposure and vertical integration" as well as "the largest and most liquid uranium stock."

Cameco is a 2024 Top Pick of Scotia Capital Analyst Orest Wowkodaw.

Cameco is a 2024 Top Pick of Scotia Capital Analyst Orest Wowkodaw, StockWatch reported on January 16, 2024. Wowkodaw rated the company Sector Outperform based on "improving fundamentals driven by the dual Western world agendas of decarbonization and energy independence."

Eight Capital maintained its Buy rating on Cameco, wrote Analyst Ralph Profiti in a January 16, 2024 report, StockWatch noted.

Profiti commented, "We believe Cameco remains well-positioned for improved financial performance driven by our forecasts of rising uranium prices, exposure to market-related contract terms, improved cost structure as Cigar Lake and McArthur River reach steady-state production rates, and the benefits of revenue opportunities amid vertical integration in the uranium and fuel services businesses through a 49% stake in Westinghouse Electric."

Similarly, in December 2023, Pearce reiterated BMO's Buy recommendation on Cameco and opined it was poised to ascend "with attractive EBITDA growth, liquidity and advantageous geographical production."

Long-Term U3O8 Undersupply Expected

Current fundamentals of the uranium market bode well for Cameco, according to experts.

U3O8 currently is in undersupply, and the shortfall, Haywood purported, will persist "into the latter half of the decade, amid a tight spot market. This, in turn, will keep pressuring the uranium price to increase.

Kazatomprom, the world's largest uranium producer, recently announced it may miss its production targets for up to two years, Fundamental Research Corp. (FRC) reported, which would negatively affect new supply.

FRC added, "Given that Russia contributes to 35% of global enriched uranium production, we believe the uranium supply chain remains highly vulnerable."

Michael Ballanger of GGM Advisory Inc. also has a positive outlook on Cameco.

No short-term solution to the U3O8 undersupply exists, Haywood noted. However, the metal's spot price is "rising well into incentive price territory required for new production."

As for uranium demand, BMO's Pearce purported it will continue growing as long as the desire for "nuclear generation increases and supply security becomes more relevant for utilities and governments."

Haywood noted that at the 2023 United Nations Climate Change Conference, 22 countries pledged to triple nuclear power-generating capacity from 2020 levels by 2050, noted the analyst. Today, 61 nuclear reactors are being built in addition to the 141 operating ones, and 113 more are planned.

Pearce also pointed out that sentiment around the world toward nuclear power is improving, and this, too, should benefit the uranium sector.

The Catalyst: Sustained Higher Uranium Prices

BMO forecasted that the uranium spot price will rise to an average of about US$76/lb, up from the current price of about US$70/lb, and stay put throughout this year and next, Pearce wrote.

With a higher spot price, Cameco could produce more and generate greater revenue from its assets. BMO expects it will accomplish both this year and, in doing so, take its 2024 EBITDA 81% higher than last year's. 

Michael Ballanger of GGM Advisory Inc. also has a positive outlook on Cameco.

"The uranium ducks are quacking loudly," he reiterated in a January 16, 2023 article. "With gap openings like the ones we saw in Cameco on Friday, the chart patterns of these companies are quickly moving from "gradual" to "vertical. When that happens, a reversal is sure to arrive."

Ownership and Share Structure

According to Reuters, insiders own 0.2% or 919,723 shares of Cameco. Of the 21 insiders, the three holding the most shares are President/Chief Executive Officer/Director Timothy Gitzel with 0.11% or 460,593 shares, Chief Financial Officer/Senior Vice President Isaac Grant with 0.02% or 87,185 shares, and Senior Vice President/Chief Corporate Officer Alice Wong with 0.02% or 80,270 shares.

Cameco has 885 institutional investors that, together, own 74.59% or 323.63 million (323.63M) shares.

The Top 5 are Fidelity Management and Research Co. with 6.19% or 26.84M shares, The Vanguard Group Inc. with 3.54% or 15.37M shares, Capital World Investors with 3.29% or 14.29M shares, Mirae Asset Global Investments with 2.89% or 12.55M shares and T. Rowe Price Associates Inc. with 2.59% or 11.22M shares.

Strategic and retail investors own the remaining 25.21%.

Cameco has 433.87M shares outstanding and 432.16M free float shares. Its market cap is CA$21.7 billion, and its 52-week trading range is CA$32.65−69.18 per share.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [Cameco Corp.].
2. [Doresa Banning] wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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