What are the uranium stocks to watch in 2019? Analysts at Raymond James recently listed three they have on their radar right now.
The U3O8 spot price has sat flat since the beginning of the year after slipping from its January price of US$29 a pound. Currently, the price has plateaued at US$25.75.
There is a general consensus among experts that prices will trend higher moving into the latter half of Q2 and Q3, driven by production cuts, utilities companies coming to market and increased demand from countries bringing reactors online.
However, analysts at Raymond James note in their latest report that they have corrected their earlier uranium price forecast, reducing it by roughly US$3 as a result of a subdued market.
“We have reduced our 2019 average uranium price by 8 percent (to US$30.80 from US$33.63) to reflect the weaker market to start the year,” the analysts say in their latest report.
The US Section 232 investigation into foreign uranium imports has been pointed to as part of the reason the price has slightly deflated.
As the uranium sector awaited commentary from the Department of Commerce, which was turned over to the US president in mid-April, US utilities companies that usually purchase on the spot market in Q1 refrained from buying, leading to larger than normal reserves and stockpiles.
In their previous uranium outlook report, the Raymond James analysts admitted that attitudes remain restrained when it comes to uranium, despite its status as a viable option for clean energy production.
“We acknowledge that there is still a large inventory overhang built up after the Fukushima accident and sentiment remains negative in some countries given comments from a number of governments (e.g. Germany) about reducing their nuclear fleets and the growth of renewables and natural gas,” they said.
Nevertheless, sector participants remain certain a uranium shortage will materialize in the coming years, especially with so many projects being shuttered. Reactivating these projects will take time and could ultimately lead to a supply crunch.
Read on to learn which three uranium companies the firm prefers for exposure to the sector.
1. Cameco (TSX:CCO,NYSE:CCJ)
Current price: C$15.47; year-to-date: +0.04 percent
Last year, Cameco made international headlines when it indefinitely closed its major McArthur River and Key Lake uranium operations in Saskatchewan.
At the end of March, Cameco submitted a technical report for McArthur River to the Canadian Securities Administrators, increasing its previous reserve estimate by 9.1 percent and asserting that it will be able to hit 18 million pounds of production per year upon restart.
“The McArthur River operation is one of the best uranium mines in the world, and we are pleased with the significant improvement in the economics of the McArthur River operation since the last report in 2012, which clearly highlights how much value this asset will create when it comes back into production,” said Tim Gitzel, Cameco’s president and CEO.
“However, we want to be very clear, the market conditions necessary for a restart decision have not been achieved, and therefore the production suspension will continue for an indeterminate duration.”
2. NexGen Energy (TSX:NXE,NYSEAMERICAN:NXE)
Current price: C$2.12; year-to-date: -7.78 percent
NexGen Energy is heavily invested in developing projects in Saskatchewan’s Athabasca Basin, an area that accounted for the vast majority of the 23 percent of global supply Canada produced in 2016. NexGen has three ongoing projects in the Basin: Arrow, Rook 1 and the ISO Energy deposit, named after NexGen’s 64 percent owned subsidiary.
In March, the company released the results from feasibility stage drilling for its Arrow deposit, where strong high-grade mineralization was intersected in all sub-zone targets.
“This development-focused drilling continually highlights the incredible nature and strength of Arrow in terms of the continuity of high-grade uranium,” CEO Leigh Curyer said in the announcement.
3. Uranium Participation (TSX:U,OTC Pink:URPTF)
Current price: C$4.28; year-to-date: -3.61 percent
Unlike traditional miners that explore and develop mining projects, Uranium Participation is a fund that invests 85 percent of its proceeds in uranium equities; the company also lends uranium to third parties.
In early April, the company released a report on its estimated net asset value, pegging it at C$614.9 million or C$4.45 per share.
The analysts at Raymond James note that Uranium Participation is a low-risk investment because it doesn’t actually mine for uranium, but has high exposure to the space. They state, “Given over 90 percent of UPC’s assets are invested into uranium, changes in the price of U3O8 and UF6 could have a material impact on the shares.”
The data for this article was retrieved on April 25, 2019.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.