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Why Uranium Energy, Energy Fuels, and Ur-Energy Stocks Keep Falling

By Rich Smith – Dec 3, 2021 at 3:24PM

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Uranium prices keep declining, and they're taking uranium stocks down with them.

What happened

Shares of uranium mining company Uranium Energy (UEC 1.58%) fell 9.9% as of 2:10 p.m. ET on Friday. Peer uranium miners Energy Fuels (UUUU 2.11%) and Ur-Energy (URG 1.80%) likewise tumbled, down 9.3% and 8.5%, respectively.

It's not hard to see why.

Three red arrows going down and crashing through the floor.

Image source: Getty Images.

So what

Since recovering a recent peak price of $48 a pound a week ago, the value of yellowcake uranium has been falling steadily, dropping below $47 and heading toward $46. (Uranium futures contracts are priced at $46.35 currently, according to data from Trading Economics.)

Dishearteningly for investors, the market price of uranium kept on declining despite miner Uranium Royalty announcing a big sale of uranium to China General Nuclear Power Group yesterday at prices significantly higher than the market price -- $47.71 per pound. Apparently, investors don't expect that price to stick.

Now what

You can't blame them for their pessimism, either. Ever since Sprott Physical Uranium Trust Fund sparked a rally in uranium in September, when it formed a fund to buy and hold physical metal, price spikes in uranium have been followed by repeated declines in price in a spiraling series of progressively lower "highs."

Now, on the plus side, the nadir of each decline these past few months has been higher than the preceding low as well. But if you look at where prices have been ending up, while they're still oscillating pretty wildly, they seem to be homing in on a midpoint price of about $46 per pound. That's very close to where uranium prices stand today, by the way, which may mean that the dramatic rises and falls in the price of uranium stocks will also settle down once the price of the metal they mine finds its happy medium.  

On the other hand, if $46 is the magic number for what uranium will end up costing, that won't necessarily be great news for uranium stock investors, who still need uranium to sell for about $60 a pound to turn their companies profitable.

Come to think of it, that just might be another good reason to sell uranium stocks today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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