After enjoying a nice run-up earlier in the week, uranium stocks melted down on Friday. As of 3:30 p.m. EDT, shares of uranium mining company Energy Fuels (UUUU -2.16%) are down 10%, NexGen Energy (NXE -3.27%) is off 10.2%, and Uranium Energy (UEC -3.74%) is suffering worst of all -- down 12.1%.
The funny thing is, there doesn't appear to be an obvious reason for the sell-off.
To the contrary, this morning shares of two of the bigger names in uranium mining, Denison Mines (DNN -1.70%) and Cameco (CCJ -1.93%), both got a lift from Wall Street when investment bank Raymond James assigned higher price targets to each: C$2.40 for Denison and C$34 for Cameco.
That should have been good news for peer uranium stocks like Energy Fuels, NexGen, and Uranium Energy -- but apparently wasn't.
At the same time, spot prices for actual uranium yellowcake, used in the production of nuclear fuel and mined by these companies, just hit their highest levels in nearly a decade, closing at $49.65 a pound last night.
Call me a surprised skeptic, but if uranium prices keep rising like they've been rising, it won't be too much longer before uranium reaches the magical price level of $60 a pound, which according to MiningReview.com is the price necessary to make uranium mining sufficiently profitable that miners will begin reopening shuttered mines, and investing to increase production and capitalize upon the more attractive prices.
In any ordinary world, you'd think that would be good news for uranium mining stocks, and a reason for their shares to go up today, not down. Then again, if uranium miners start producing more, then fears of the very same supply crunch that has been propelling prices higher these past few weeks could very well be eased -- sending prices right back down again. Such is the nature of investing in cyclical industries like mining... and energy... and mining for energy.
Don't say you weren't warned.