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Why Uranium Stocks Raced Higher This Morning

By Rich Smith - Dec 14, 2020 at 12:06PM

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As uranium legislation progresses, a supply crunch could boost prices for the nuclear fuel.

What happened

Shares of uranium mining stocks are glowing green again on Monday -- just one week after the U.S. Senate Committee on Environment and Public Works approved a bill aimed at establishing a U.S. national strategic reserve of uranium. As of 11:25 a.m. EST:

  • Cameco ( CCJ 5.79% ) stock is up 3.5%
  • Denison Mines ( DNN 9.09% ) is up 8%
  • Energy Fuels ( UUUU 5.12% ) is up 9%
  • Uranium Energy ( UEC 10.09% ) is up 10%
Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

Last week's legislation is one factor keeping uranium stocks moving higher today. Uranium company CEOs are hoping that an infusion of funds from the federal government buying uranium for its stockpile will save uranium companies from their present "high risk of insolvency" (said one Congressional report). So demand is one factor -- but supply is another.

This morning, one of the four stocks named above (specifically, the one enjoying the weakest gains -- Cameco) announced that it is temporarily suspending production at its Cigar Lake uranium mine in northern Saskatchewan to limit risks of the coronavirus spreading among its workforce there. Cameco noted that Saskatchewan is in the midst of a serious COVID-19 outbreak, and the company has collected "six positive tests at our northern operations in recent weeks, including three at Cigar Lake."  

Now what

To safeguard the rest of its workforce of about 300, Cameco is instituting "a significant reduction in personnel" and "placing the mine in a safe state of care and maintenance" for the time being.

The company noted that any decision on restarting production "will depend on how the COVID-19 pandemic is impacting the availability of the required workforce at Cigar Lake, how cases are trending in Saskatchewan, in particular in northern communities, and the views of public health authorities."

In the meantime, the company will incur costs of between $8 million and $10 million per month for care and maintenance. The company will also need to buy more uranium on the market to meet its supply contract obligations, which should boost uranium prices for companies that are still producing. Which in turn explains why all the other uranium stocks are doing so much better than Cameco today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Energy Fuels Inc. Stock Quote
Energy Fuels Inc.
UUUU
$8.41 (5.12%) $0.41
Cameco Corporation Stock Quote
Cameco Corporation
CCJ
$23.39 (5.79%) $1.28
Uranium Energy Corp. Stock Quote
Uranium Energy Corp.
UEC
$3.60 (10.09%) $0.33
Denison Mines Corp. Stock Quote
Denison Mines Corp.
DNN
$1.56 (9.09%) $0.13

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

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