Why Cameco, Ur-Energy, Royalty uranium and Energy uranium stocks are rising today

Uranium stocks end the week on a strong note, with shares of Cameo (CCJ 6.34%) the stock down 5.8% by 10 a.m. ET and smaller rivals Ur-Energy (URG 10.10%), The royalty of uranium (UROY 15.86%)and Uranium Energy (UEC 13.89%) is doing even better — up 8.2%, 9.9% and 12.7%, respectively.

And all four of these nuclear stocks have only one company to thank for their rallies: Kazakhstan’s Kazatomprom.

What Kazatomprom said today

That The Financial Times pointed out this morning, Kazatomprom (literally short for “Kazakhstan Atomic Industry”) is the world’s largest producer of uranium for nuclear power. The problem is, he plans to become one smaller uranium producer as early as next year.

Citing “project delays and a shortage of sulfuric acid,” Kazatomprom cut its 2025 uranium production target by 17 percent to a range of 25,000 to 26,500 metric tons. With Kazatomprom responsible for about 20 percent of global production, that means global uranium supplies — already constrained by Russia’s war in Ukraine — will fall another 3 percent to 4 percent next year.

Worse, FT quotes a Canaccord Genuity analyst warning that Kazatomprom’s forecast may turn out to be optimistic. Canaccord estimates Kazatomprom will produce closer to 23,000 tonnes of uranium next year, further tightening global supplies.

In addition, Canaccord noted that Kazatomprom has very few reserves to cushion the impact of a production cut in 2025. Rising uranium demand has depleted the company’s stockpile of already mined and ready-to-ship uranium by 31% so far this year.

Should You Buy Uranium Stocks?

In short: Kazatomprom cannot produce enough uranium to meet the global needs of nuclear power plants, so other uranium producers will have to increase their own production to fill the gap. The good news for investors is that this will mean higher uranium prices and likely more profits for those who own shares of Cameco, Ur-Energy, Uranium Royalty and Uranium Energy — at least for a while.

The spot uranium price is just under $80 a pound today, down from around $105 a pound in February, according to Trading Economics data. That’s already well above the $60 a pound price that economists believe is needed to encourage production, which has been trending higher. Higher prices and the prospect of higher profits will only encourage uranium miners to mine more.

What will higher production mean for manufacturing companies? In the short term, it should mean higher profits as companies sell more uranium at higher prices.

Rising prices have already made Cameco (last year), Uranium Royalty (this year) and Uranium Energy (last year, although it started losing again this year) profitable. Ur-Energy, meanwhile, has yet to post an operating profit since 2018. As prices continue to rise, there’s a good chance that more of these stocks will become steadily more profitable — at least until production growth picks up. create an oversupply and it will start driving prices back down. again. After all, this is a cyclical industry, and investors can’t enjoy a boom without anticipating a bust lurking just around the corner.

So what’s your best bet to play this trend?

I have to think it is to buy Cameco first while keeping an eye on the others. Of the four uranium stocks discussed here, it has the best record of profitability (having posted positive net returns in six of the last 10 years). It is also the only uranium stock currently generating positive free cash flow.

At a price-to-free cash flow ratio of 45, Cameco stock isn’t cheap. But if you absolutely, positively feel like you need to invest in the uranium rally today, Cameco still looks like the safest way to do it.