Friday File: Uranium, Growth and Earnings Updates (plus one buy)

Checking in CCJ, DIS, PLOW, LGND, NVDA, SWKS, USAU, YTRA and Fairfax India

By Travis Johnson, Stock Gumshoe, November 10, 2017

So what’s going on in the world this week? Uranium caught my eye… dominant uranium miner Cameco (CCJ) is suspending production at some of their Saskatchewan operations, so the other uranium names took that as a good sign, with the juniors in the space seeing their stock prices pop (the whole sector, as represented by the URA ETF, popped up a good 10% in moments on the news)… but that’s a risky game.

Cameco CEO Tim Gitzel said the following in the press release early Thursday morning:

“With the continued state of oversupply in the uranium market and no expectation of change on the immediate horizon, it does not make economic sense for us to continue producing at McArthur River and Key Lake.”

There’s a possibility that this is a “capitulation” and that Cameco’s production halts will help prices — which is a big part of the point, after all, you cut production when prices are too low to make money, and you hope that cut will help lift prices — but there’s no guarantee that Cameco’s move will improve pricing anytime soon… it won’t even really impact Cameco’s ability to sell at the same volume, given their large inventory of above-ground uranium.

And Cameco is the largest producer and the only real blue chip uranium name in North America, but it is also quite small compared to Kazatomprom, the largest producer in the world, and we have no idea what Kazatomprom will do going into their IPO next year (Kazakhstan is privatizing its largest companies, including Kazatomprom and Air Astana — the timing is not certain, but unless markets collapse or there are other outside concerns the first shares are likely to be floated outside the country (probably in London, though that’s a guess) in the first half of next year).

Some folks have speculated that Kazatomprom will try to manipulate uranium prices higher before their IPO, and they’re really the only producer that could do that (they started a trading business to help add liquidity to the “spot” market for uranium earlier this year), but if we’ve seen anything over the last five years with uranium it’s that there are a lot more moving parts than investors can’t model or predict successfully… the logical “story” of uranium for five years now has been that it “has to” recover in price, mostly because demand is rising ...

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