What happened
Uranium mining stocks were looking radioactive in Wednesday afternoon trading -- in a bad way, as in, investors were running away from them. At the close of the session, Denison Mines (DNN 2.23%) was down 7.6%, Energy Fuels (UUUU 6.50%) was down 9.8%, and Uranium Energy (UEC 0.42%) was down 9.9%.
But you probably shouldn't be surprised.
Image source: Getty Images.
So what
Fact is, after topping out near $65 per pound in mid-April, the spot price of uranium has plunged by about 25% to a recent price of $48.75 per pound, according to data from TradingEconomics.com.
Indeed, the situation is even a bit worse than that. According to a report just out from the uranium experts at Ocean Wall, uranium prices have actually fallen as far as $48 a pound today, and are now at their "lowest levels since the beginning of March" (which also tallies with TradingEconomics' data).
What's the problem with uranium lately? According to Ocean Wall, there actually isn't a problem, because utilities are continuing to buy uranium on long-term supply contracts at prices of anywhere from $52 to $61 a pound. Indeed, reports of utility buying appear to have contributed to a short rebound in uranium stock prices over the last few days. The fact that those companies' stocks declined Wednesday, therefore, may be more a function of investors' inability to confirm the pricing on these longer-term supply contracts. The spot market is more visible, and it's very visibly falling -- and it's hard to maintain optimism when the most visible aspect of the market looks pessimistic.
Now what
Is Ocean Wall right about the uranium market being stronger than it appears? It may well be. For the time being though, until some uranium stocks report Q2 earnings and prove that profits are on the rise, the situation we're in is this:
Energy Fuels just reported earnings two days ago and, despite sales growing 732%(!) year over year, the company actually lost more money in Q1 2022 than it did in Q1 2021 -- $0.09 per share. Denison Mines reported two weeks ago. Its sales surged 66% year over year, and while it reported a net profit due to one-time items, its operating profits were negative, and its free cash flow was, too.
That leaves Uranium Energy next in line -- it will report earnings in early June. Analysts are predicting that for the fiscal quarter that ended April 30, Uranium Energy, too, will reveal it lost money. But for the time being, that report is the best chance we have of finding a miner that can confirm that uranium prices got high enough in April to produce a profit.
Failing that, though, I'm afraid we're going to have to conclude that the spot price on uranium really is a good barometer of the profitability of uranium stocks. And if spot prices on uranium are dropping, it makes sense that uranium stocks have further to fall as well.
