Thursday, November 9, 2017

Has uranium finally found a bottom?

It appears that way after this news from uranium mining giant Cameco.

Uranium investors have been desperately looking for a reason to be positive for a long time. They got that reason on Thursday when Cameco Corp. announced facility closures that will remove a large amount of the commodity from the market next year.

The Saskatchewan-based uranium producer’s decision to suspend production at its flagship McArthur River mine and the Key Lake milling operations in northern Saskatchewan for 10 months will lead to approximately 845 temporary job losses. However, the move is expected to provide a boost to a global uranium market that is forecast to be oversupplied by approximately 20 million pounds in 2018.

The market liked this news:


 These cuts by Cameco are on top of the cuts announced by Kazatomprom earlier this year to cut production of uranium in Kazakhstan, which is the largest producer in the world.

This is exactly the behavior we would expect to see in a market that is bombed. The price of uranium is so low that no one can make money at these levels. Conversely demand is still growing as China, India, and Russia continue to build new reactors. Cutting prodcution will bring supply into synch with demand.

In addition, recent elections in japan have allowed Prime Minister Abe to remain in power and he is a big booster of nuclear power and has stated that he intends on continuing restarts of reactors post Fukishima.

Other good news is that the French government has pushed out their goal of shutting down their nuclear reactors past 2035.

I have been wrong on the timing of a uranium price revival however it is obvious to me that with nuclear providing 11% of the world's electricity, and much more in certain countries, that the price has to go higher in order to incentivize capital to produce new uranium.

I bought (URA) today at the open.

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