Shares of Cameco Corp (NYSE:CCJ) fell 15% last month, pulling the shares back into negative territory for the year-to-date period. There's been little good news in the uranium market for some time, which is highlighted by the fact that Cameco's stock is off some 80% over the last 10 years.
The big story with Cameco remains a moribund uranium market. The company is focused exclusively on uranium, doing everything from mining to processing the material for use in nuclear power plants. But uranium has been in a long downtrend, with recent spot prices down around 20% compared to the average spot price in 2016.
That's not the most compelling backdrop for Cameco, even though the company has contracts in place that have protected the miner's top and bottom lines from low spot prices. In the end, Cameco can only do so much in this environment since the commodity it produces is suffering. And it's worth noting that the protection afforded by those contracts will eventually run out.
The negative view of the uranium market and Cameco's place in it was confirmed on October 27, when the miner reported earnings. Not only did it lose money, but Cameco reduced its production outlook as well. Although CEO Tim Gitzel noted that the quarter's results were largely expected, he went on to add that, "We can't control the timing of a market recovery." The company continues to focus on the things it can control, like operating high-quality, low-cost mines. But until uranium prices recover, things are likely to be tough for Cameco and its shareholders.
There are silver linings on the clouds hovering over Cameco and uranium. But, as the CEO said, there's no way to know when the bad news starts to turn positive. At this point, Cameco is most appropriate for aggressive investors who have bullish outlook for the nuclear fuel. All others should probably avoid the uranium market and Cameco.