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Miners work about 600 metres below the surface at Cameco Corp.’s McArthur River uranium mine in northern Saskatchewan. (© STRINGER Canada/REUTERS)
Miners work about 600 metres below the surface at Cameco Corp.’s McArthur River uranium mine in northern Saskatchewan. (© STRINGER Canada/REUTERS)

NUMBER CRUNCHER

Cheap uranium stocks: Three top picks Add to ...

What are we looking for?

One of our Globe Investor colleagues bought stock in uranium miners after the Fukushima nuclear plant meltdown two years ago as prices tumbled. It’s been a couple of long years for him because uranium prices have remained depressed, but his patience may pay off.

Global uranium prices appear poised for a sustained increase, starting in about a year, according to Raymond James analyst David Sadowski. “We retain conviction of a global shortfall situation,” he wrote in a research report. “Recent share price weakness continues to imply attractive entry points for most names – we encourage investors to build positions in higher quality names that can weather current spot price weakness, but are poised to benefit from what we view as an inevitable rise in uranium prices.”

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What we found

Cameco Corp. is Mr. Sadowski’s top pick among producers. He considers it to be “the blue chip, ‘go-to’ name in the space.” Its costs are low, it carries less risk than most others, its Cigar Lake mine is set to start up in the middle of the year, and its stock is cheap, with its price at just 1.1 times net asset value.

Among developers, he likes Denison Mines Corp. “We view Denison as the top explorer company in the world’s best uranium jurisdiction – the Athabasca Basin – with compelling takeout and medium-term production potential,” Mr. Sadowski said, adding that Rio Tinto PLC, Cameco and some Asian nuclear utilities appear interested in Denison’s assets.

His top pick for an explorer is Kivalliq Energy Corp., which he called “one of the most exciting” junior uranium exploration companies in operation. “We believe Kivalliq stands apart from its peers, offering 100-per-cent-owned, high-grade, shallow resources in a safe jurisdiction [Nunavut]; compelling exploration upside; a track record of success, including proven exploration techniques and very low discovery costs of $1.15 per pound (excluding corporate costs); a solid management team with significant experience in Canada’s North; and strong backers.”

Paladin is the most leveraged company to a uranium price rebound and appears attractively priced, Mr. Sadowski said. UEX Corp. owns 49 per cent of the largest undeveloped resource in the Athabasca Basin, Shea Creek, “which has superb exploration upside, in our view,” he added.

As always, do your own research if you’re considering buying these stocks.

Follow on Twitter: @SVerma__

 

Uranium-related stocks

Ticker Price $
(Apr. 25)
RJL
6-12 mo.
Target $
URANIUM PRODUCERS
Cameco Corp. CCO-T 19.44 25.00
Paladin Energy Ltd PDN-T 0.84 1.60
Uranium One Inc. UUU-T 2.79 2.86
Weighted Average
URANIUM DEVELOPERS and EXPLORERS
Denison Mines Corp. DML-T 1.25 2.00
Kivalliq Energy Corp. KIV-X 0.23 0.70
UEX Corp. UEX-T 0.49 1.20

Source: Raymond James Ltd., Company reports, UxC, Thomson Financial, First Call (consensus data). Note: Enterprise Value (EV) = market capitalization + net debt. Net Asset Values based on 8% discount rate and fully diluted shares (where appropriate, adjusted for future equity requirements), in CDN dollars. NAV and EV/lb average multiples weighted by EV.

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  • CCO-T
  • PDN-T
  • UUU-T
  • DML-T
  • KIV-X
  • UEX-T
  • URE-T
  • U-T
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