A tunnel at Cameco's Cigar Lake uranium mine in northern Saskatchewan
Uranium producers are still in the dumps, with Cameco Corp. in particular not far off its recent lows. The reason, of course, relates to the aftermath of Japan's massive earthquake and tsunami in March, which triggered a nuclear crisis that has not gone away. That crisis has devastated popular support for nuclear energy, even as crude oil prices march higher with the global economic recovery - but does it matter?
Apparently not. Uranium prices sank in the immediate days following the earthquake, tumbling from about $68 (U.S.) a pound to about $50 - a 26 per cent plunge. However, prices have been recovering just as fast, with uranium recovering to nearly $60 a pound.
From RBC Capital Markets (via FT Alphaville): "We think it is very important to note that our 2020 forecast market imbalance remains very large at approximately 80 million pounds. To fill this deficit, many new uranium mines will need to be built and new uranium mines will need to be discovered. To accomplish this feat, the uranium price must rise to a level that will incentivize new mine development and revitalize the languishing uranium exploration segment of the equity markets."
Apparently, investors continue to treat uranium producers based on public perception of nuclear power, rather than underlying uranium prices. This sounds a bit like staying clear of an oil sands producer because of environmental concerns, even as crude oil prices rise.
David Berman