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Index / Uranium (Nuclear Minerals) / Exploration, Mining, Marketing, Acquisitions

7/31/2017 by mdc
Reuben Gregg Brewer reports that the Cameco Corporation is the world largest pure-play uranium miner. That has not been a great business to be in lately, but the outlook for uranium appears pretty enticing. For aggressive investors, Cameco nearly 80% price decline over the past decade could be a huge buying opportunity. But what if the bull case does not pan out?

The first thing to note about Cameco and uranium is that the miner has actually managed to weather a deep industry downturn pretty well. To give you a feel for the pain, uranium prices hit a 12-year low in 2016. But last year was the only year of the last 10 that the company dipped into the red. And that $0.16 per share loss was largely driven by one-time charges to adjust the business to the difficult market environment.

The outlook, however, remains bright. That is because of increasing demand for power and the increasing preference for carbon-free energy sources. In fact, there are over 50 nuclear reactors being built right now. That should help to soak up the oversupply in the uranium market today. Add in Japan slow march toward restarting nuclear power plants shut after the Fukushima disaster and there is even more reason to be positive.

Demand growth is going to be important. Those 50 new plants being built and the Japan push to restart its nuclear fleet are big positives. But there are plants being shuttered, too. For example, after Fukushima occurred, Germany may try off nuclear power. It is in the process of phasing nuclear out completely with little to stop the process but dirty coal and wind and solar are making electricity very costly. Japan is hearing out public opinion, but the restarting process will continue after the high costs of electricity impact public.

In the end, nuclear has a bad image (Not) and that could easily leave demand weaker than expected today, but the adversaries will only represents minor irritation to those developing nuclear power.

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