The recent earthquake and resulting tsunami in Japan is a colossal tragedy. Another potential tragedy is a man-made one, from Japan’s dependence on nuclear energy. With the impending melt-down of four nuclear reactors at the Fukushima nuclear power plant, the world has become suddenly nervous about nuclear energy. Coupled with mass evacuations and possibility of widespread radioactive contamination in a heavily populated region, investors pulled the trigger Monday morning on a global sell-off of uranium producers and juniors (see table below). The selloff continued today with Denison Mines (DML-T) and Cameco (CCO-T) among other uranium producers losing value.
However it seems much of the sell-off was an emotional trigger. World governments have come short of suspending the construction and funding of new reactors, and the shipments of uranium to power those reactors. Uranium for the military and nuclear medicine remains in demand. The moral implications of nuclear energy also remain an issue. However with surging global demand for energy, many countries including China are inclined to actively pursue nuclear energy over safer green alternatives, such as geothermal. Take the U.S. for example which has over 104 reactors (according to the World Nuclear Association), and is looking for alternatives to oil dependency from the Middle East – which includes building more nuclear plants. Finland made it quite clear yesterday they were continuing with their nuclear energy program.
|Company||Symbol||Market Cap.||Div. Yield||Friday Close||Tuesday Close||% Change|
|Denison Mines Corp.||DML-T||795M||NA||3.19||2.34||-26.6%|
|First Uranium Corp.||FIU-T||145M||NA||0.96||0.79||-17.7%|
Investing in Uranium Companies
I’ve never purchased Uranium Stocks. I have always felt they are too high risk for my investment objectives. However, I am considering becoming a buyer of one or two of the big established Uranium miners after these dramatic price declines. Both Denison Mines (DML-T) and Cameco (CCO-T) for example, are well established companies, and Cameco pays a dividend – though a small one at 1.3%
Cameco however is in a unique predicament compared to other Canadian Uranium producers, in that Cameco sells about 20 per cent of its fuel to Japan (in a recent Globe and Mail article). That has to be taken into account when deciding whether to purchase Cameco Shares.
Jaymus at Realized Returns covered Denison Mines (DML-T) in an in-depth article on January 12th. Clare at Money Energy covered the Canadian Uranium Stocks back in mid February, with the perspective of Chinese demand for Uranium increasing. That demand hasn’t subsided, and now Japan will also be a large scale importer of uranium – assuming they rebuild and continue with their nuclear program.
Next week I will have some investment capital available, and I will look at both Denison Mines and Cameco if they still remain fairly valued. I would also prefer to invest in an established uranium miner rather than a uranium exploration company.
I do not own any of the stocks mentioned. This post is not an endorsement, and should not be taken as financial advice or a buy recommendation. Uranium companies are higher risk investments, and not all uranium companies are created equal. Be prudent and do your research before investing!