Cameco (NYSE: CCJ) essentially called the bottom in uranium with its spot market purchases during the first quarter. Now it appears that the producer's enthusiasm for the metal may have proven contagious.
The second quarter saw a huge spike in trading activity, with spot market transactions between utilities, traders, and producers tripling the prior year's volume. The 21 million pounds of uranium that changed hands actually marked a quarterly record.
Cameco's wheeling and dealing once again made the company's operating metrics appear worse than they are, given the firm's low cost of production. Still, with perhaps an unparalleled insight into uranium market dynamics, the company's seeing an opportunity to make some money here. More power to them.
Speaking of power, Cameco's quarterly financial results were greatly bolstered by above-market power prices realized by 32%-owned Bruce Power, which is an operator of six nuclear plants. Not even XTO Energy (NYSE: XTO), which locked in natural gas prices of roughly double the going rate this past quarter, can boast of price realizations this far above market. Bruce pulled in $70 per megawatt hour, versus the quarterly average Ontario spot price of $23/MWh.
Uranium production was light this quarter, down 27% year over year. The decline was largely attributable to planned maintenance shutdowns at both the McArthur River/Key Lake complex and the Rabbit Lake mine. As with any miner, from Suncor Energy (NYSE: SU) to Teck Resources (NYSE: TCK), maintenance shutdowns are routine, and nothing to be alarmed about. The last thing investors should worry about is Cameco running out of uranium to mine.
Just in case someone was worried, the company noted that it has the potential to double annual production over the next decade. And that's entirely organic growth, based on existing assets like Kintyre, which Cameco acquired from Rio Tinto (NYSE: RTP) last year.
This profound growth trajectory, combined with low production costs and a strong long-term demand outlook, puts Cameco right alongside Goldcorp (NYSE: GG) as one of the world's most compelling large-cap miners. Kudos to any Fool with the presence of mind to hoover up shares when they traded at half their current price earlier this year.
Motley Fool CAPS players have awarded Cameco a top rating of five stars. Join the conversation, and make your own call on the stock right here.
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