Categories: Energy / General Market Commentary
Topics: General Energy / General Market Commentary

Uranium stocks gain big as Kazakhstan cuts production

Uranium stocks gain big as Kazakhstan cuts production

In the wake of announced production cutbacks by Kazakhstan's state-owned uranium mining powerhouse, Kazatomprom, the beleaguered uranium market has seen an upswing.

Uranium markets have been in decline for more than ten years, with prices plummeting from highs approaching $140 per pound in 2007 to lows in 2016 below $20 per pound. The market took a further hit after Japan shut down its nuclear reactors following the Fukushima disaster in 2011, with spot prices losing more than half their value.

But in recent days, significant stock and spot price moves have been noted by industry watchers.

"Uranium surged the most in more than three weeks as Kazakhstan said it will reduce production by 10 percent this year after prices slumped in 2016 amid a global inventory glut," Bloomberg Markets noted in an article published Jan. 10.

The 10% cut was matched with a 10% rise in the U3O8 spot price, which reached $24.25 a pound on the news. The uranium spot price currently stands at ~$22.00 per pound.

In an interview with Palisade Radio, David Cates, president and CEO of Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT), noted his company has seen increases in both volume and stock price following the announcement. Cates views recent gains as "sustainable," noting he believes "the market was oversold and was in total apathy." The Kazatomprom cutback represents a realization that it may be more valuable to have "pounds out of the ground" than to sell at current prices.

Miners like Denison and Cameco Corp. (CCO:TSX; CCJ:NYSE) are in a position to benefit from the cutbacks. Explorers and developers like NexGen Energy Ltd. (NXE:TSX; NXGEF:OTCQX), Fission Uranium Corp. (FCU:TSX; FCUUF:OTCQX; 2FU:FSE) and UEX Corp. (UEX:TSX), with projects in Canada's Athabasca Basin, have also seen upward stock movement in the wake of the Kazatomprom announcement. The stock of U.S. producer Energy Fuels Inc. (EFR:TSX; UUUU:NYSE.MKT) has increased ~35% since the beginning of 2017.

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