The tragedy at the Fukushima Daiichi nuclear power plant in Japan, which was caused by the country's largest recorded earthquake in March 2011, tanked the uranium sector. Following the tragedy, Japan shuttered all of its nuclear reactors, and other nations took similar measures. Uranium's demand consequently plunged.
Cameco Corporation (NYSE:CCJ) and Kazakhstan's Kazatomprom, the world’s largest uranium producers, later intervened to reduce output to limit supply and sustain prices as the value of uranium continued to decline.
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Though, Kazatomprom revealed intentions last week to produce an additional 2,000–3,000 metric tons in 2024 than initially anticipated, an increase of about 10%.
“Several countries, including South Korea, Germany, France, and the UK have recently shifted energy policies, creating a more favorable stance towards nuclear energy,” said Gianni Di Poce in his weekly “Benzinga Pro Insider Report.” “Perhaps most importantly,” the analyst said, “the European Union just classified nuclear energy as “green.” This could bid up the price of uranium, which has already risen notably in the past year.”
Among the proponents of increasing the use of nuclear power is Tesla Inc (NASDAQ:TSLA) CEO Elon Musk. On Friday, he said in a tweet that limiting the use of this energy source "is insane from a national security standpoint & bad for the environment to shut them down."
Musk went on to call environmentalists who opposed nuclear power - "sadly anti-human."
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“I am bullish on Cameco Corporation as long as the stock remains above $40.00-$41.00,” Di Poce said. “Upside target $60.00-$62.00.”
On Aug. 24, Japan's Prime Minister Fumio Kishida announced that the country would not only develop new nuclear power plants, but would also restart up to 17 idle nuclear power plants and extend the lives of the 10 operating nuclear reactors.
Stateside, the U.S. government issued a ‘request for proposal’ (RFP) for the first time in years to add to the Uranium Reserve.
Cameco, based in Canada, has displayed prudence in their contracting strategy and job selection, which has enabled them to secure a free quarterly cash flow north of $400.9 million.
Net income growth has averaged 23% over the past 5 years. “This could be set to increase even more shortly as CCJ still has another 10 million pounds of production capacity that has yet to be contracted out,” Di Poce said.
From a technical standpoint, the stock is breaking out of a multi-month saucer pattern. “This could lead to an accelerated breakout to the upside,” the analyst wrote.
Photo: Courtesy of NVIDIA Corporation on flickr
According to a letter to clients that the Financial Post obtained from Orest Wowkodaw, an analyst at Bank of Nova Scotia who follows Cameco Corp., only seven of Japan’s almost 50 reactor units are now in use. By 2030, Wowkodaw anticipates the restart of 21 units, or 5% of the world's nuclear capacity.
More countries are looking for solutions to replace fossil fuels with clean energy as a result of the geopolitical tensions between Russia and Ukraine. President Joe Biden recently signed the Inflation Reduction Act, which also prioritizes investments in nuclear energy, a bullish case for the world's largest uranium producer.
