Cameco: Harper and the Uranium Rush

February 17, 2012 by prospectingjournal · Leave a Comment

COMMENTARY–ProspectingJournal.com–

Remember the days when Steven Harper exercised negative rhetoric about selling uranium to sources that could not guarantee responsible use? Let’s just say he has experienced a change of heart, coupled with a vehicle upgrade. Harper has just signed a new deal that has the green stuff written all over it.

Having recently reached an agreement with China that will significantly increase trade and Canadian uranium exports, domestic uranium producers are set to cash in on portions of the deal said to be worth up to $3 billion.

And when I say Canadian producers I mean Saskatchewan’s Cameco, the world’s largest publicly traded Uranium Company. There are a number of factors this deal brings into play. First and foremost, you can expect Cameco to profit on almost all of the $3 billion included in the agreement. Why? Uranium might be available everywhere, but there are few producers that can meet the demands of a consumer like China. And China is asking for a lot. They are targeting the largest deposits in the world and there are only a limited number of uranium endeavors that can satisfy its thirst. In this Canadian ballpark Cameco stands alone.

Tim Gitzel, Chief Executive of Cameco, has claimed the deal will allow the company to progress with supply agreements that will see 52 million pounds of uranium sold and transported to Chinese nuclear reactors, a deal that almost total the full $3 billion. The demand from China is so great that it will likely offshoot all projected losses attributed to nuclear slowdowns in Germany and Japan. And the news comes on top of extremely promising economic data. Cameco Corp. recently reported a net income of $265 million in its fourth quarter, boasting a 29 percent jump in the net income it reported at the same time year.

And even amidst production setbacks tied to Japan’s recent nuclear catastrophe Cameco is still sticking to its target to double uranium

production to 40 million pounds by 2018. In fact, the Japanese Earthquake and Tsunami that hampered last year’s demand for uranium is acting as a catalyst for investment in Cameco’s shares in 2012. Uranium is currently $52 a pound, roughly $25 below the price it boasted last year before the disaster struck. It means that there is no better time to buy shares in Cameco. Dundee Capital Markets’ David Talbot is of the belief that “the valuation of these stocks is going to go up” as a mere result of the scarcity factor. There are many that will profit off the low share costs and the New Year has reinforced such sentiments. Uranium stocks have already grown by over 20 percent.

Cameco was always a story of when to buy and not if. With China and Harper now effectively guaranteeing production booms and long-term price increases there is a shuddering feeling that the opportune moment has arrived. Harper has just made a new friend, and barring another nuclear disaster, the sky is the limit for Saskatoon’s mining giant.

Jason Staeck

ProspectingJournal.com