Existing large projects have been put on standby. Both Areva and Rio Tinto plc (ADR) (NYSE:RIO) have curtailed production in Africa. Rio Tinto plc (ADR) (NYSE:RIO)’s giant Rossing mine in Namibia is not economic at current prices. Rössing is the world’s longest-running open pit uranium mine. Operating since 1976, Rössing has produced the most uranium of any single mine.
The coming uranium stock bull market
Lately, sell-side analysts, investment newsletter writers and industry consultants are coming to the same conclusion. I’m highly confident that the long-term uranium price will rebound to above $70 per pound. It could happen in six months or in two years. Importantly though, uranium stocks will start to move long before the long-term price reaches $70.
Massive supply/demand imbalance for uranium in the U.S.
“Security of Supply,” these are not just words when it comes to uranium. Global geopolitics mean that uranium supply could literally be fought over in coming years. Casey Research believes that Russia is making an aggressive grab for as much uranium production, processing and enriching business that it can.
The U.S. is highly vulnerable to uranium supply disruptions from Russia and Kazakhstan. That’s a fact, not an opinion. Very few realize that Kazakhstan is by far the largest producer of uranium. It should come as no surprise that Putin’s Russia has A LOT of influence in Kazakhstan!
The U.S. consumes between 50-55 million pounds of uranium in its 104 nuclear reactors, yet produces only 4 million lbs. The U.S. is far LESS energy independent in uranium than it is in oil. Denison Mines Corp (NYSEMKT:DNN) and Cameco are just two examples of pure-play uranium companies that stand to benefit in coming years.
Denison Mines Corp (USA) (NYSEMKT:DNN) is an emerging star in Canada. Having sold its U.S. assets to Energy Fuels, Denison is the top exploration play in and around the Athabasca region. The Company is frequently mentioned as a takeout target with Rio Tinto plc (ADR) (NYSE:RIO), Areva and Cameco Corporation (USA) (NYSE:CCJ) cited as likely suitors. Denison recently finalized the acquisition Fission Energy Corp. The company now has a range of early-stage to later-stage exploration / development projects. The Athabasca region has the highest grade uranium ores in the world.
Cameco Corporation (USA) (NYSE:CCJ), Cameco is a world leader in low-cost uranium production. Its operations provide about 14% of world mine production and it has approximately 465 million pounds of proven and probable reserves and extensive mineral resources. Cameco is the largest U.S. producer with in-situ recovery operations in Wyoming and Nebraska. The company also has operations In Kazakhstan.
Conclusion
Investors hate a sector one month and love it the next. Just like with First Solar, Inc. (NASDAQ:FSLR), sentiment could change substantially within a relatively short period of time. Uranium stocks remain out of favor, but for how much longer? I don’t know. However, if uranium prices start to move higher, uranium stocks like Denison Mines Corp (USA) (NYSEMKT:DNN) and Cameco could move sooner rather than later.
The article First Solar Up Over 300%, Will Uranium Stocks Follow? originally appeared on Fool.com.
Peter Epstein has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Peter is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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