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Globe Investor Nuclear revival sparks Cameco rally as uranium demand grows

Scott Bishop, chief engineer at Cameco Corp.'s Cigar Lake uranium mine. Shares of Cameco have climbed 12 per cent in Toronto in the past month.

Geoff Howe/Bloomberg

Cameco Corp., the world's second-largest producer of uranium, is emerging as a rare bright spot among Canada's largest mining companies on signs nuclear power is shaking off its post-Fukushima slump.

Shares of Cameco have climbed 12 per cent in Toronto in the past month. By comparison, Teck Resources Ltd., the world's second-largest exporter of seaborne metallurgical coal, fell 16 per cent and Barrick Gold Corp., No. 1 for bullion production, slid 18 per cent.

A U.S. plan to cut carbon emissions from power plants may support new reactors and the restart of a Kyushu Electric Power Co. plant this week is highlighting a drive to get more atomic stations online in Japan. The improved prospect for uranium, the raw material in reactor fuel, is in contrast to slowing demand and ample supply for metals such as aluminum and zinc, which sent the Bloomberg World Mining Index to a six-year low in July.

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"What we're seeing is the U.S. and Japan really renewing their commitment to nuclear power," Rob Chang, a Toronto-based analyst at Cantor Fitzgerald LP, said Tuesday in a phone interview. "You've also got India and China pushing ahead with their nuclear expansion."

Uranium futures on the New York Mercantile Exchange have climbed 18 per cent in the past year to $36 a pound, while the benchmark price for steelmaking coal has fallen 23 per cent to $93 a metric ton and gold futures have dropped 14 per cent.

U.S. President Barack Obama this month unveiled a blueprint for reducing carbon emissions from the nation's power plants by almost a third from 2005 levels by 2030, allowing new reactors to count more toward individual states' efforts to meet federal targets for carbon-free electric power.

Weeks earlier, the government of Japanese Prime Minister Shinzo Abe confirmed plans to have atomic energy account for as much as 22 per cent of the nation's energy requirements by 2030.

Cameco's "underlying commodity price isn't falling off a cliff like it is for all these other producers," David Sadowski, an analyst at Raymond James Financial Inc. in Vancouver, said in a phone interview.

Cameco, based in Saskatoon, was among uranium miners battered by a uranium-price collapse after Japan shut all its nuclear plants for safety checks following the March 2011 earthquake and tsunami that crippled Tokyo Electric Power Co.'s Fukushima Dai-Ichi power station. Cameco shares fell 14 per cent last year, the most since a 54 per cent plunge in 2011.

Kyushu Electric's two reactors on Japan's southern island of Kyushu are the first to pass post-Fukushima regulatory checks and some legal challenges. The power company's Sendai No. 1 reactor unit was restarted on Tuesday, and another 11 may begin operation next year, according to Polina Diyachkina, an analyst at Macquarie Group Ltd.

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Uranium has advanced as nuclear utilities increased purchases of so-called long-term supplies, according to data from Cameco.

Fukushima's resumption is positive for uranium producers because it reduces the risk that Japan's nuclear-fuel inventories would flood the global uranium market, Cameco chief executive officer Tim Gitzel said.

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