What happened
Uranium Energy (UEC 3.45%) stock stunned the market in February with its 52.9% rally in the month, according to data provided by S&P Global Market Intelligence. The small-cap uranium stock is up another 17% already so far in March, which means anyone who'd bought Uranium Energy shares at closing on Jan. 31 is sitting on almost 80% gains as of this writing.
Uranium Energy hasn't even generated any revenue since 2015, so why's the stock on fire? It's hard to pinpoint one reason.
So what
Uranium Energy made a huge announcement on Feb. 3 when it said it had repaid whatever debt it held as of Jan. 31 and is now "completely debt free" with $125 million in cash and liquid assets. Now that's an impressive financial profile to have for any mining company, and CEO Amir Adnani credited it to the company's efforts to improve its financials in the past year or so while growing its reserves and production capacity.
Days later, Uranium Energy filed its Regulation S-K 1300 technical report summary for its Reno Creek Project in Campbell County, Wyoming. It was an important development as this filing under the Securities and Exchange Commission (SEC) requires complete disclosure of information about any mining property or assets that's material to a business.
Image source: Getty Images.
On Feb. 16, Adnani said the outlook for nuclear energy and uranium has "never been brighter" and that the uranium market's fundamentals offer potential for uranium prices to rise significantly. Part of his optimism was driven by the rising global interest in nuclear energy. Europe, in particular, even proposed to label some nuclear plants as "green energy" to subsidize it, which could eventually boost demand for nuclear power in Europe and, therefore, demand for uranium fuel that powers nuclear reactors.
Meanwhile, the short-term story for uranium continued to gain momentum, what with industry leader Cameco (CCJ 0.71%) pledging to continue to restrict uranium supply. Cameco was among the first companies in the industry to announce production cuts in recent years to help balance demand and supply and provide a floor to weak uranium prices. Cameco also confirmed an improvement in the uranium market sentiment and increased its dividend by a solid 50%.
The uranium market has, indeed, turned around in recent months, and many fear rising uranium prices could drive companies to produce more. The industry, therefore, cheered Cameco's decision to limit production, and investors pumped up uranium stocks, including Uranium Energy.
Now what
Uranium Energy took a big growth leap recently when it acquired the world's fourth-largest uranium producer, Uranium One, for $112 million in cash. The deal gives Uranium Energy access to several projects, including one of the largest central processing facilities in the U.S. with a licensed capacity of 2.5 million pounds of uranium per year.
More importantly, some of Uranium One's assets are ready to commence production, which means Uranium Energy could start generating revenue soon. This comes at a time when uranium prices are surging, thanks partly because of the Russia-Ukraine war that has sent energy prices flying out of the window and has compelled the world to look for alternative fuels like nuclear energy to secure their energy future. In just the past couple of weeks, uranium prices have jumped almost 20% and are about to hit 10-year highs.
It's a win-win for Uranium Energy, as the company has also been buying physical uranium to sell at spot prices to raise funds for production and growth. As of last count, Uranium Energy had 4.1 million pounds of uranium at an average cost of $32 per pound. Uranium is hovering around $51.50 per pound as of this writing.
