Shares of uranium company Denison Mines (DNN 3.91%) soared a whopping 59.6% in the month of February, according to data provided by S&P Global Market Intelligence. That handily outran the Global X Uranium ETF's (URA 2.45%) 20.5% gain in the month, suggesting there was more to Denison's rally than just industry-specific news.
Denison Mines, and several other uranium stocks, soared on the very first day of February after Bank of America speculated that global demand for uranium could be as much as 26 million pounds more if the U.S. postponed closure of its aging nuclear plants due 2021 to 2030. Nuclear reactors run on uranium fuel.
By the second week of February, Denison shares were rallying to dizzying heights backed by several developments. To start, on Feb. 8, Denison approved a $24 million budget for 2021 to resume the environmental assessment process at its 90%-owned Wheeler River mine. Investors cheered the news as Wheeler River is Denison's flagship uranium mine under development, with first production expected in 2024. The next day, Denison announced encouraging exploratory drilling results at Phoenix, a uranium deposit at Wheeler River.
Denison shares may have taken a breather from there if not for the surprise element the world's largest publicly traded uranium producer, Cameco (CCJ 2.78%), sprung up on Feb. 10. Cameco not only delivered a surprisingly strong set of fourth-quarter numbers but also expressed optimism about the "long-term fundamentals for the uranium market" as it stepped into 2021. Cameco also announced its decision to keep production suspended at its key Cigar Lake mine, which spurred the market's hopes of further tightening of the global supply of uranium.
Around the same time, industrial giant Honeywell (HON 1.54%) revealed its intention to reopen its uranium conversion facility in Illinois that was idled in 2018 as demand for uranium hexafluoride soured. The news lifted the nuclear industry's hope as Honeywell's plant is the only such facility in the U.S. that converts uranium ore concentrates to uranium hexafluoride to power up nuclear reactors.
Honeywell's announcement came at a time when the nuclear power industry was already in the news, thanks to the severe cold weather and winter storms in the U.S. that sent prices of natural gas soaring and drew attention to nuclear energy as an alternative and reliable source of power.
With industry experts touting the present uranium industry's supply-and-demand balance to be the tightest they've seen in several years, the euphoria in Denison Mines, and uranium mining stocks overall, isn't surprising. However, Denison is still years away from production, so investors are unlikely to bet on the stock just yet. I suspect a traders' short squeeze could've had a big role to play in the dramatic rally in Denison Mines shares last month, which is also why I wouldn't be surprised to see unnerving volatility in the stock going forward.