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In a recent research note, Raymond James revised its uranium prices and shared its 3 top picks in the uranium space.
Despite having reported a cut in its short term price forecast for uranium, in a recent revision of uranium supply demand fundamentals, Raymond James analyst David Sadowski writes that “we retain conviction of a global shortfall situation commencing in 2014, which should result in sustained, higher uranium prices.”
With prices trailing below $50/lb so far this year, Raymond James has reduced its 2013 uranium price forecast to US$45 per pound from $58/lb. However, despite lowering its estimates, the firm feels that uranium has the potential to move towards the $50/lb range by year-end. For 2014, Raymond James sees uranium at $45/lb, and remains bullish on uranium’s long term fundamentals, maintaining its original outlook of $70/lb.
Raymond James recommends investors look at “quality uranium equities with compelling near-term catalysts,” that can weather current lows and benefit from the inevitable rising price. Among Raymond James’ top picks sit Cameco (TSX:CCO), Denison Mines (TSX:DML) and Kivalliq (TSXV:KIV).
Top 3 picks
Cameco is Sadowski’s top pick for uranium producer, calling it the “go-to” blue-chip name in the uranium space. The company is a low-cost producer with a low risk profile. Cameco is one of the largest uranium producers with the two top high-grade uranium mines, McArthur River and Cigar Lake, located in Saskatchewan’s Athabasca Basin.
Investors should be on the lookout for the start-up of Cigar Lake, slated for mid-year with first production delivered in Q4.
As far as development projects go, Denison is Sadowski’s top pick. The company is working on developing its Wheeler River Phoenix deposit located between the McArthur River and McClean Lake mill. Phoenix has roughly 60 million pounds of uranium, at 16.5 percent grading, making it the third highest grade uranium deposit in the world, after Cameco’s McArthur River and Cigar Lake deposits. With the finalized acquisition of Fission Energy’s assets, Denison is poised to be a premier uranium miner.
Denison has several upcoming catalysts that investors might want to note. The company is working on resuming operations at the McClean Lake mill, as well as starting a summer drill program at Wheeler River.
Raymond James continues to believe that Denison Mines could be a potential takeover target for either Rio Tinto (NYSE:RIO), Cameco or Asian nuclear utilities.
Kivalliq Energy is Raymond James’ top exploration company pick. With its projects located outside the Athabasca Basin, the firm views this junior as “one of the most exciting uranium explorecos operating today.”
So far, Kivalliq is off to a strong 2013, kicked off by a 60-percent increase in its previous resource estimate for the Lac 50 Trend in January, and new discoveries at the Angilak property in April. For the remainder of the year, Kivalliq has a number of upcoming catalysts that include preliminary results from its 3,000- to 4,000-meter phase 1 drill program at the Angilak deposit, which are expected over the next several weeks, as well as assay results, further drilling during the summer months, followed up by a potential resource update in the new year. The company expects a maiden preliminary economic assessment in early 2014.
Other considerations
Raymond James also had a look at several other uranium companies that could be valuable assets for an investor. The firm looked at Paladin (TSX:PDN), highlighting its improving operations and looming asset sale, which should significantly reduce debt.
UEX Corp. (TSX:UEX) owns 49 percent of Shea Creek, which is noted as one of the largest undeveloped resources in the Athabasca Basin. Raymond James believes the project has “superb exploration upside.” Ur-Energy (TSX:URE) is working towards production on Lost Creek in Wyoming; investors should look out for that in late 2013.