Thursday 1st October 2020

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After Japan

Other Uranium Stocks Have Recovered, But Uranium One Lags Behind

By The Highgrade Review

The Japanese disaster, now approaching its one month anniversary, continues to be the only topic of discussion for investors in uranium stocks. The spot price of uranium fell 10%, to $60 per pound immediately after the earthquake and tsunami created a nuclear incident at the Fukushima reactor, sending low levels of radiation drifting south to Tokyo. Prices eventually fell as low as US$49.25 per pound. Perhaps a lesser known fact amongst casual observers is that the price has almost completely recovered. By March 24, it was back to $61.13.

What’s behind the speedy recovery? Many analysts point to a lack of real options for replacing nuclear energy, which supplies 13.5% of the world’s electricity generation. Independent analyst Peter Strachen says the situation will “basically blow over in the next 12 to 18 months, as people realize that there’s no real alternative in the short to medium term, for large, baseload power supply.” Strachen points to a number of new plants being built in India, China and Brazil.

Other Uranium Stocks Have Recovered, But Uranium One Lags Behind

Analysts with The Bedford Report agree. They say that China is currently in the process of quadrupling its uranium consumption to 50 million to 60 million pounds a year and says it plans to build 10 nuclear power plants a year for the next decade. Even as the Japanese crisis hit its darkest hour, with the crisis at Fukushima still not contained, the Obama administration said that “nuclear power will remain a key component of America’s energy mix, despite worldwide anxiety over the safety of reactors.” The US currently has 104 reactors in 31 states.

Raymond James mining analyst Bart Jaworski told the Globe and Mail the disaster has created an opportunity for investors to buy quality uranium stocks at a discount. He said, “We expect this situation to be no different than what happened after the Three Mile Island [1979] and Chernobyl [1986] accidents, where reactor growth continued quite strongly due to the large amount of reactors already in construction phase.”

Two of Jaworski’s favorite picks are Cameco and Paladin Energy. Cameco is down just over 19% since the Japanese disaster, from $36.32 March 11 to $29.25 April 6. Paladin Energy is down about the same, from $4.66 March 11 to $3.82 April 6. A look at other TSX-listed uranium plays reveals similar, or better, numbers. Denison Mines has forfeited a shade over 20% of its pre-Japan price, while First Uranium is down just 8%.

And then there’s Uranium One. Despite a modest recent rally, the Vancouver based miner is still down nearly 33% since the Japanese quake, from $5.96 March 11 to $4.04 April 6.

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