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Why Uranium Stocks Popped This Morning

By Rich Smith - Dec 7, 2020 at 2:10PM

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The Senate clears the way for the U.S. to buy a lot of uranium.

What happened

Shares of uranium stocks are glowing green on Monday -- and you can thank the United States Senate for that.

As reported over the weekend, the Senate's Committee on Environment and Public Works has just approved a bipartisan bill aimed at establishing a U.S. national strategic reserve of uranium. The prospect of government funds being spent to acquire large amounts of the nuclear fuel sent shares of uranium mining stocks sharply higher today.

As of 1:05 p.m. EST, Cameco (CCJ 2.47%) was up 13.3%, Denison Mines (DNN 2.94%) soared 13.5%, Energy Fuels (UUUU 1.39%) rose 15.5%, and Uranium Energy (UEC 3.47%) skyrocketed 22.3%.

Cartoon picture of two nuclear reactors generating steam

Image source: Getty Images.

So what

Commenting on the legislation, Uranium Energy CEO Amir Adnani said the bill, if it becomes law, "will provide a clear path for implementation of the U.S. uranium reserve and provide a strong platform to revitalize the U.S. uranium industry" -- which a congressional report warns is currently at "high risk of insolvency."

The legislation -- again, if it becomes law -- could avoid that risk by ordering that the government buy uranium mined by only Nuclear Regulatory Commission-licensed facilities (or equivalent agreement state agencies) to fill out the strategic reserve, promising a near-term infusion of revenue for the industry. In particular, the law would prevent purchases from companies owned or controlled by Russia or China.

Now what

Of the four companies named, two -- Cameco and Denison -- are actually headquartered in Canada, and most of Cameco's assets are also located in Canada (although it gets most of its revenue from the U.S.). Uranium Energy, in contrast, does both most of its business in the U.S. and has most of its assets here. Accordingly, it's the stock performing best in reaction to today's news.

There's still a big risk facing all four companies, however, which shouldn't be ignored: Today's news concerns a bill, not yet a law, approved by just one committee of the Senate and not yet passed by either the full Senate or House. With a new class of legislators coming to Washington, and a new administration moving into 1600 Pennsylvania Ave. in a few weeks, there's no guarantee this bill will ever become law.

Stay alert, and stay tuned.

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Stocks Mentioned

Uranium Energy Corp. Stock Quote
Uranium Energy Corp.
$3.88 (3.47%) $0.13
Cameco Corporation Stock Quote
Cameco Corporation
$25.29 (2.47%) $0.61
Denison Mines Corp. Stock Quote
Denison Mines Corp.
$1.23 (2.94%) $0.04
Energy Fuels Inc. Stock Quote
Energy Fuels Inc.
$6.59 (1.39%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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