Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Top Ten Stocks for a Uranium Price Rebound

Commodities / Uranium Aug 02, 2013 - 10:52 AM GMT

By: The_Energy_Report


When it comes to uranium market sentiment, "it's all about Japan," says David Talbot, senior mining analyst at Dundee Capital Markets. With restart applications trickling in and reactor construction underway throughout the world, a turnaround looks less like an "if" and more like a "when." In the meantime, Talbot sees many investors sitting on the sidelines. In this interview with The Energy Report, Talbot discusses the catalysts that could trigger the next uranium boom and the companies that could make investors wish they had arrived at the party a little earlier.

The Energy Report: In your last interview with The Energy Report in December, you were expecting that 2013 would be the turnaround year for uranium. What's your assessment of where things stand now?

David Talbot: Our long-term outlook remains essentially the same as last year. What we and most of the industry underestimated was the possible impact of cash-strapped sellers on the spot market. Despite recent spot market weakness, uranium producer equities have pushed ahead 10%, developers 12% and explorers 17%, on average. A uranium supply crisis is still brewing and the fundamentals do remain strong. Demand is stable and reasonably predictable. The weak spot price still threatens future mine supply with more closures, cancellations and deferrals of mining projects. The all-important catalyst at the end of this year is the end of the Russia-U.S. HEU "Megatons to Megawatts" program, which in our view will not be renewed. That means 24 million pounds (24 Mlb) of secondary supply comes offline with no replacement − equivalent to the entire production of Cameco Corp. (CCO:TSX; CCJ:NYSE). Uranium prices are too low to incentivize new builds right now. We think prices must rise, as will the equities. The Uranium One Inc. (UUU:TSX)takeout deal approved in March indicates Russia wanted to lock down a reliable uranium source. Guangdong's (CGNPC) purchase of Extract Resources Ltd. is the preeminent takeover after Uranium One. As these utilities purchase these big projects it leaves less supply on the table for the rest of the utilities.

TER: The big price drop in early July sent uranium down to a seven-year low. What happened there? Was this the bottom or is there more to come?

DT: Uranium prices have dropped significantly in the past month or so. A few weeks ago, near-term requirements appeared low and the first applications for Japanese reactor restarts were not yet filed. Restrictions were also removed from the U.S. Department of Energy regarding how much uranium it's allowed to sell in any given year. That added to the already negative sentiment.

The following week, a few suppliers failed to sell to a certain utility and were forced to place that material on the market relatively cheaply. That led to the spot price retreating even more. More positive news coming out of Japan on restarts should help the price edge back up. But during the summer lull, negative sentiment could still dominate, and prices could drop further.

TER: What catalysts might cause a significant uptrend in prices going to this predicted $70+ per pound ($70+/lb) level?

DT: It's all about Japan. Japanese restarts should provide a psychological boost. Fukushima really ended the last uranium bull run and reactor restarts will likely get that going once again. Once Japan moves forward, the rest of the world will start to catch up on the uranium purchases they've been deferring.

Investors are likely to return at that point. Utilities will also have to return to term contracting as they do have significant unmet uranium requirements over the next four or five years. There are more reactors planned or proposed now than ever before, and we are seeing contract awards for construction of reactors, like in Turkey for example, and the UK reaffirmed its commitment to nuclear only a few months ago. We continue to forecast a supply/demand deficit by the end of 2014. By 2020, we expect about 240 Mlb of demand to be offset by only ~200 Mlb of total supply, including secondary supplies.

TER: The U.S. imports about 90% of its uranium, yet we still have significant recoverable deposits. What do things look like for domestic production?

DT: Things are moving forward on the permitting front in the U.S., which remains the largest uranium consumer in the world with the largest reactor fleet. It produced only about 4.1 Mlb last year, which was about a 4% increase from the prior year. We'd expect that number to increase to perhaps 4.5–5 Mlb this year. Cameco is by far the largest producer in the country and plans to increase production at both its Smith Ranch-Highland plant in Wyoming and its Crow Butte plant in Nebraska. We expect combined production to improve from 1.9 Mlb last year to about 2.6 Mlb this year. That should offset some production losses from, say, Uranium One, which decided not to develop any more well fields at its Willow Creek in-situ recovery (ISR) project in Wyoming.

We're also expecting increased production from Uranium Energy Corp. (UEC:NYSE.MKT) from its Palangana operation in south Texas. We're expecting initial production out of Ur-Energy Inc.'s (URE:TSX; URG:NYSE.MKT) Lost Creek mine in Wyoming. The U.S. still imports about 90% of its 55 Mlb per year consumption. Producers such as Ur-Energy and Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT) have had some preferential contracts in the past. For example, we believe that Ur-Energy's contracts with utilities are in the $60/lb or greater range. That's a pretty good premium to existing spot prices. Energy Fuels Inc. (EFR:TSX; EFRFF:OTCQX) sold its uranium last quarter for an average price of $56.23/lb when the average spot price for the period was in the low $40s.

TER: Energy Fuels is the largest U.S. conventional uranium producer, yet its market cap is only $130 million ($130M). What's going on there?

DT: Energy Fuels has huge leverage to uranium prices and is one of our top picks in a rising uranium price environment. It has high price contracts, an effective and acquisitive management team and huge expansion potential. The company has really been focused on running only its lower-cost operations while delivering about 100% of its production into these higher-priced term contracts.

This stock is still relatively unknown, but these guys have the potential to go from around 1 Mlb this year to 3–5 Mlb going forward. It recently announced an acquisition of Strathmore Minerals Corp. (STM:TSX; STHJF:OTCQX) in an all-share deal worth about $30M. Shareholders could benefit with a stronger company, lower-cost project pipeline and relationships with a couple of Asian utilities with deep pockets, KEPCO and Sumitomo. Strathmore's flagship Roca Honda project in New Mexico has some synergies that can really work with Energy Fuels. The acquisition eliminates Strathmore's need to build a mill, potentially making the Roca Honda project much more economic. We definitely see Energy Fuels as an up-and-comer in a rising uranium price environment.

TER: So where is it trading now and what's your target price?

DT: The stock right now is trading at $0.18 and our target price is a cool $0.75.

TER: You've been out on some site visits. Tell us a little about what you've seen.

DT: I enjoy site visits and have been to about 80 different uranium projects around the world. I went back to Wyoming in July and saw three ISR mines, Ur-Energy's Lost Creek, Uranerz's Nichols Ranch and Cameco's Smith Highland Ranch operations. Ur-Energy is the best performer this year out of the developers. It's up 70% over the past few months. We were very impressed with the innovative design of the Lost Creek plant and feel very comfortable with the expertise, depth and competence of the company's team.

The Nuclear Regulatory Commission pre-operation inspections are underway at Lost Creek and we expect production by August with first deliveries in October. We're looking for about 200,000 pounds (200 Klb) of production this year. Maybe 800–900 Klb next year with production costs under $25/lb. The Pathfinder acquisition brings two high-quality assets, primarily the Shirley Basin, which is the next project to be developed. There's a little bit of financing risk remaining, but we expect that to be largely sorted out. We maintain our buy on Ur-Energy and target price of $2.30 per share from the current $1.29 level.

TER: How about Uranerz?

DT: Uranerz runs a bit different model, permitting smaller deposits and only constructing the frontend of the plant. It plans to toll process its resin at Cameco's Smith Ranch facility where Cameco will take that loaded resin, precipitate the uranium, dry and package it. This arrangement benefits Uranerz by minimizing start up risks and saving capital through deferred completion of its own mill, and may even save on operating costs. Uranerz just started construction of two deep disposal wells at about $3M each; it will need these wells before production can start. We expect about 500 Klb of production next year with total cash costs of around $37/lb—somewhat higher than Ur-Energy's costs due to higher taxes and royalties in Wyoming. Uranerz is now trading at $1.35 and we maintain a buy rating and a $2.65 target price.

We also visited Cameco's Smith Highland Ranch ISR operation, which has been in production for over 16 years. Cameco's U.S.-based operations have been core long life, low-cost projects for years. About 12% of Cameco's production comes from the U.S., accounting for half of total U.S. production. About 18% of our NAV comes from its U.S. operations. We're expecting increased production this year out of North Butte and see Cameco moving forward with the 15 Mlb Reynolds project, which is likely going to be permitted around yearend. We've got a buy on Cameco and target price of $25.20.

TER: Why did you only start covering Cameco now?

DT: With well over 20 analysts covering Cameco, I felt my value was better added covering earlier-stage development and exploration stories. I initiated coverage on Cameco in June as a clear defensive play in today's uncertain uranium environment. It's an industry leader with world-class assets. Cameco rarely misses its guidance and looks poised to continue the strong track record despite low uranium prices. The big catalyst this year is the commissioning of the Cigar Lake project, expected any day now. We're forecasting 23.4 Mlb of production this year, 25.4 next year and just under 36 Mlb by 2018. Cameco is where the big money is going in the sector.

Despite our belief that producers are where investors should be going right now, we do want to highlight two exploration companies, Fission Uranium Corp. (FCU:TSX.V) and Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT). Both are exploring some exciting high-grade projects in the Athabasca Basin. Very few companies in the sector are receiving as much attention as these two names. We have Fission Uranium as a buy, speculative risk, no target. Fission owns 50% of the highly perspective and the much-talked-about PLS discovery in the Athabasca Basin. This has propelled the stock and also reignited interest in the whole sector. PLS is high grade, shallow, consistent and thick. The team's already discovered three zones here, with indications that more discoveries are likely. There are already about 30 Mlb discovered in these three zones with 75 Mlb or more possible. Fission's very first hole this summer intersected mineralization over 85 meters (85m). Perhaps the market has priced in the uranium that's already been found, but we don't think it accounts for the vast upside potential.

Fission has a very skilled technical team that already succeeded in discovering the J Zone and selling it to Denison. This team discovered the original Boulder Field on PLS with its patent pending airborne radiometric survey technology, and now it's further expanding the PLS discovery. Fission's entrepreneurial management team has significant ownership and is definitely aligned with shareholder interests. This is an exciting story that's only going to improve with the 44-drillhole program currently underway.

Denison Mines is another investor favorite that trades very well. We rate Denison as a buy with a $2.00 target price. The company has majority ownership in the world's third-highest-grade deposit, Phoenix, that already has 60 Mlb of uranium at 16.6% U308. We easily see 20–30 Mlb upside from here. The latest drill hole announced about two weeks back turned out to be the best hole ever on the property, 43% over 10m. A significant part of our NAV for Denison comes from a strategic value of its 22.5% ownership in the McClean Lake Mill. Its world-class mill is one of just three mills in the Athabasca Basin, and the only one capable of processing ultra high-grade ores. It represents near-term cash flow potential. Denison holds another large deposit called Midwest and a plethora of other exploration projects. This company is an attractive entry point for investors who want exposure to the basin. Between the takeover potential and the ultra high-grade Phoenix deposit, we clearly see investors supporting its premium valuation relative to its peers.

TER: Any others you'd like to mention?

DT: We like Paladin Energy Ltd. (PDN:TSX; PDN:ASX) and rate it as a buy with a $2.40 target price. Paladin has really delivered this year. Production and sales targets were met with realized prices 13% above spot. Cost-cutting targets at both operations exceeded expectations. Operations achieved capacity. Debt was trimmed. Production guidance was increased for next year and we believe a potential game-changing strategic initiative lies waiting in the wings. Paladin has huge leverage to rising uranium prices with costs that are coming down rapidly. We do expect a strategic partnership to be announced likely later this quarter. We believe that Paladin might be willing to sell about 20% of its Langer Heinrich mine in Namibia. Our NAV valuation suggests perhaps a $200–300M price tag for that. The company has a disciplined expansion approach here. We think right now is the time for investors to take advantage of the turnaround in Paladin. The stock still trades at a discount to its peers. With this strategic alliance, we do expect a rerating in the stock as debt levels fall further.

Finally, we like Uranium Participation Corp. (U:TSX) as a buy, high risk, with a $7.50 target price. Uranium Participation is essentially a uranium ETF holding 13.4 Mlb of physical uranium and therefore its easy to calculate an NAV for the stock. We estimate its NAV right now at $4.81 per share at $34.50/lb uranium. We view Uranium Participation as a proxy for sentiment from the sector and a low-risk investment vehicle for those who seek pure uranium price exposure with no operational permitting or geopolitical risk. We suggest getting in this name before uranium prices rally further.

TER: So what does the future look like for uranium and what should investors be doing to hopefully benefit and make some money here?

DT: Once we get through the summer doldrums and get some visibility on the Japanese nuclear power restarts, we expect uranium prices to firm and rise toward the end of this year and into next year. We are still calling for $65/lb uranium in the long term. To get to those levels, investors will need to see higher prices as incentives before any large uranium mines are built. Based on history, there's a chance that once uranium prices do start to rebound, stock prices could jump quickly. It's our expectation that many investors will sit on the sidelines, skip some of these early gains and likely come into the sector once it's clear what direction it's headed in. In the meantime, we suggest that investors look to the producers, especially those companies that are larger and more liquid. They should also look at select exploration companies, such as Fission Uranium or Denison Mines. All eyes are on those companies right now and their exploration programs are in full swing and expected to deliver significant news flow throughout the summer.

TER: Thanks for your thoughts today, David.

DT: Thank you for having me.

Dundee Capital Markets Senior Mining Analyst David Talbot worked for nine years as a geologist in the gold exploration industry in Northern Ontario. David joined Dundee's research department in May 2003, and in the summer of 2007, he took over the role of analyzing the fast-growing uranium sector. David is a member of the PDAC, the Society of Economic Geologists and graduated with distinction from the University of Western Ontario, with an Honors Bachelor of Science degree in geology.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

1) Zig Lambo conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: Fission Uranium Corp., Energy Fuels Inc., Strathmore Minerals Corp. and Uranerz Energy Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3)David Talbot: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Dundee Capital Markets and its affiliates, in the aggregate, beneficially own 1% or more of a class of equity securities mentioned in this interview: Energy Fuels Inc.
5) Dundee Capital Markets has provided investment banking services to companies mentioned in this interview in the past 12 months: Denison Mines Corp., Energy Fuels Inc., and Fission Uranium Corp.
6) All disclosures and disclaimers are available on the Internet at Please refer to formal published research reports for all disclosures and disclaimers pertaining to companies under coverage and Dundee Capital Markets. The policy of Dundee Capital Markets with respect to Research reports is available on the Internet at
7) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
8) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
9) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110
Petaluma, CA 94952

Tel.: (707) 981-8204
Fax: (707) 981-8998

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in