Cameco Corp. (CCJ): Analyst Sees 'Perfect Storm' of Positive Developments
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GLJ Research analyst Gordon Johnson made positive comments on Cameco Corp. (NYSE: CCJ) saying they believe a "perfect storm" of positive developments suggests it's time to "get serious" about the uranium sector on the long side.
The analyst commented, "In short, in light of recent news and a slew of checks we’ve done in the space recently, we maintain our positive bias and C$27.00/shr 2021E price objective on CCO’s shares (+33.3% upside from yesterday’s closing price). In short, the Uranium sector supply/demand balance (Ex. 1) is the tightest we've seen since pre-Fukushima. Furthermore, producers who account for over 50% of global supply are keeping capacity at bay for the sole purpose of driving Uranium prices higher. When you add to this Uranium stocks are now gaining attention from ESG investors due to their low GHG footprint and quintessential role as a clean energy alternative, we see the set-up for incremental/new Uranium investments as opportune. Under this backdrop, we prefer Cameco given its low-cost industry positioning and solid balance sheet - Cameco currently boasts a cash-to-debt ratio of 79.5%, which was enabled by the company fortifying its balance sheet during the most recent downturn."
Further, the analyst highlighted the following positive developments:
- Uranium Sentiment: Physical fund Yellow Cake PLC raised $140mn, exercises $100mn Kazatomprom option to buy 3.5mn lbs U3O8 from depleted KAP stores now needing re-stocking;
- Recent US Secretary of Energy (Nominee) Comment: "I will work with the Department to continue to support the research, development, and demonstration of technologies to preserve our existing [nuclear] fleet, deploy advanced reactor technologies, and expand nuclear energy" - https://t.co/JEW0KLCrWr?amp=1;
- GLJ Research Initial Estimates. Low – France Nuclear End-of-Life Extensions: France’s recent decision to extend the life of 32 nuclear reactors for 10 years might sound like no big deal, but our new ests. suggests this equates to around 14mn lbs of U3O8 per year for 10 years (i.e., a whopping 7.5% of 2020E global demand); this is the equivalent of another large mega-mine nearly as big as Cigar Lake needed (just for France);
- Supply Destruction 1: Orano, supplier of uranium fuel for France's fleet of 56 Nuclear reactors, 32 of which have just been approved for 10-year life extensions, is just a few days away from permanently closing 1 of its 2 major U3O8 mines in Niger, with no replacement mine coming online; yet more demand destruction.
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