Uranium stocks got hammered on Thursday, with shares of companies from established players to young miners taking a hard beating. Here's how much some of the top losing stocks from industry had fallen by 3:50 p.m. ET:
- Uranium Energy (UEC 1.39%): Down 16.5%.
- Energy Fuels (UUUU -1.35%): Down 11.8%.
- Cameco Corp (CCJ -1.49%): Down 10.3%.
- Denison Mines (DNN 0.56%): Down 10.2%.
- Ur-Energy (URG): Down 9%.
There seemed to be no fresh news catalyst to explain the meltdown in uranium stocks, and they evidently rode the broad-based sell-off in commodity stocks Thursday. Chances are, uranium stocks would have fared much better otherwise given the latest updates coming from the industry.
Among the factors that typically affect uranium stocks, prominent ones include uranium prices, fossil fuel prices, and developments in the nuclear energy industry. From that standpoint, Thursday should have been a bumper day for uranium stocks.
To start, uranium prices hovered around $64 per pound, or very close to the 11-year highs of $64.50 hit on April 13, according to data from TradingEconomics.com. Prices of oil and gas, meanwhile, also inched higher on Thursday.
It's largely because of surging prices of fossil fuels amid the Russia-Ukraine war that several nations are rethinking their energy policies and bringing clean energy back to the discussion tables. That includes nuclear energy, which has, in fact, received a significant amount of attention lately. President Biden is the latest reason nuclear energy is all over the headlines even as I write this.
Under a $6 billion spending plan, the U.S. Department of Energy has just announced plans to seek applications from owners and operators of distressed nuclear reactors to prevent their shutting down.
Several nuclear reactors in the U.S. are due for premature retirement because of financial constraints, but the Biden administration is keen to keep them active in a bid to boost supply of nuclear energy. Nuclear power plants currently account for almost half the nation's carbon-free electricity, and are therefore considered crucial to help the U.S. achieve 100% carbon-free electricity by 2035.
That's fantastic news for the uranium industry. Nuclear reactors run on uranium fuel, so more reactors mean greater demand for uranium.
With the broader market losing momentum on Thursday and stocks across several sectors bleeding in the red, uranium stocks that had run up high in recent weeks were also hit hard. Uranium Energy, for example, has been on a tear this year but closed Thursday trading down a whopping 16%.
On any other day, though, Uranium Energy stock would have rocketed, and I'm not saying so just based on Biden's $6 billion plan. Uranium Energy just revealed it added 400,000 pounds of uranium to its physical inventory, taking it to a total of five million pounds.
Why is this important? The thing is, Uranium Energy hasn't generated any revenue in years, and while it readies its assets for production, it has been buying uranium cheaply in the spot market to sell later in a rising price environment. So the company's current inventory cost it roughly $38 per pound, which effectively means Uranium Energy could net a neat profit of almost $130 million if it were to sell the entire inventory at current uranium spot price.
Combined, these factors also bring us back to the core point of the day: That today's plunge in uranium stocks was sentiment-driven and may have little to do with industry- or company-specific fundamentals.