Uranium Stocks On Sale

Cameco CorpThe 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.

Denison Mines

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
Cameco Corp. CCO-T 12.6B 1.3% 36.32 32.07 -11.7%
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%
Paladin Energy PDN-T 2.49B NA 4.66 3.48 -25.3%
UEX Corporation UEX-T 246M NA 1.87 1.25 -33.2%
Uranium One UUU-T 3.57B NA 5.96 3.73 -37.4%
Uranium Participation U-T 727M NA 8.35 6.84 -18.1%

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.

Conclusion

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.

Disclaimer

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!

19 Responses to “Uranium Stocks On Sale”

  1. maybelline

    Mar 16. 2011

    Hi Ninja, good post. I’ve been watching uranium stocks also. Wasn’t planning on buying either, but like yourself, the stock prices have dramatically declined. They’re on my watch list.

    Reply to this comment
  2. The Dividend Ninja

    Mar 16. 2011

    UPDATE:
    Chinese government said this morning they are suspending all new construction on nuclear reactors, and holding off current uranium shipments; pending safety review of existing reactors.

    Reply to this comment
  3. My Own Advisor

    Mar 17. 2011

    Good post DN. I might read up more on these stocks and this sector in general, it’s quite foreign to me.

    Cheers,
    Mark

    Reply to this comment
  4. As someone heavily invested in Uranium (I own just about every stock you’ve listed), I’ve always known my portfolio would take a hit should we face a nuclear crisis anywhere globally.

    My opinion remains that nuclear remains the energy source of the future. Public sentiment can turn fast when disaster strikes, but I am not convinced disaster has struck just yet. I don’t believe it will take a generation like post-Chernobyl crisis.

    As for the disaster. I do not mean to downplay the seriousness of it, but the fact that things (at this time) appear to be well controlled is a testament to the safety engineered in to the designs. A level 9 earthquake, followed by a Tsunami, explosions, and a crippled infrastructure. That is quite a series of events to withstand! And good on the brave men & women who continue to play critical front-line roles for the safety of the population.

    As for investing.. I have taken a massive hit, but I don’t know if this is a buying opportunity or not. I am going to have to spend some time evaluating that and perhaps increase my positions next week.

    The announcement of several nations to put plans for reactors on hold is quite concerning for the industry. However, current demand already puts a lot of pressure on sales. Big producers like Cameco will not have any issues continuing to sell 100% of their production – it is just a matter of what the price will be when the next round of contracts are negotiated!

    Reply to this comment
  5. gibor

    Mar 19. 2011

    @Dividend Ninja: from your post, you are considering Denison Mines (DML-T) and Cameco (CCO-T) …. Don’t you think that Uranium ETFs are safer play? I mean URA and NLR … both of them hold CCO , DML, UUU etc
    I bouught on Fri a little bit of URA..planning to buy something else… whatever ppl say, our world cannot exist without U

    Reply to this comment
  6. The Dividend Ninja

    Mar 19. 2011

    @MOA, Thanks! yes for me too..

    @gibor, thanx for posting :) An ETF is a great way to play the U market, never thought of that option. Thanks for pointing that out!

    Reply to this comment
  7. The Dividend Ninja

    Mar 19. 2011

    @Jaymus, thanx for posting and taking the time to comment :)

    I agree with both gibor and yourself that Uranium, whether we like it or not is a part of our society – at the very least for medical and military use. And I agree will continue for power generation – though its going to become much more expensive for the industry as new safety standards are implemented (i.e. securing cooling systems and infrastructure against earthquake as well).

    However in light of Japan I think countries will begin to reassess alternatives such as Geothermal and Natural Gas – because in the long run they are much cheaper! China isn’t posturing or bluffing, if they say they are reviewing and rethinking their nuclear program – then they are.

    I have 2 questions for you.

    If I was in your position holding U stocks, I would have added to my position last Monday or Tuesday. Did you have that opportunity? Since you are already holding these stocks why wait?

    And secondly, Uranium stocks are considered higher risk investments than other stocks, a point you recognize – “I’ve always known my portfolio would take a hit should we face a nuclear crisis anywhere globally.” In light of the added risk, did you consider adding trailing-stop-losses or stop-losses on your positions to protect profits?

    Thanx again for posting :) PS I would welcome a guest-post if ur interested, you seem to have a good background on these stocks.

    Reply to this comment
  8. BeatingTheIndex

    Mar 20. 2011

    Nice post DN, there’s definitely an opportunity to pickup some U stocks on sale if you have the patience to wait it out. I haven’t bought any unfortunately as my DD on U stocks is outdated…

    Reply to this comment
  9. The Dividend Ninja

    Mar 20. 2011

    @BeatingTheIndex
    Thanx for posting Mich:)

    Reply to this comment
  10. The Dividend Ninja

    Mar 20. 2011

    @BeatingTheIndex
    Thanx for posting Mich:)

    Reply to this comment
  11. The opportunity to add to my positions wasn’t available to me, basically because I was under a rock at the time. :) I was aware of the pending crisis and knew they would take a hit at opening on Monday, but I did not take the time to establish any trades.

    I believe uranium stocks will bounce back as long as the situation in Japan does not go critical. At this point, I would say they have done a great job containing & managing the situation. Only time will tell how sever things get.

    The contamination of foodstuffs is a dream-come-true for the media, but in reality is of little concern to public safety unless the levels of radioactive isotopes are being understated. However, perception is reality. I hate to say it, but thankfully the Libya situation has distracted the media to a real crisis and got them off of the nuclear-issues in Japan.

    I might take you up on the guest post when I have some time.

    Reply to this comment

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  7. The Dividend Ninja » The Japan Effect ~ a Week in Review - April 5th, 2011

    [...] With the impending melt-down of four nuclear reactors at the Fukushima nuclear power plant, investors pulled the trigger last Monday morning on a global sell-off of uranium producers. Established companies such as Denison Mines (DML-T) and Cameco (CCO-T), saw their share prices plummet in 2 days of selling. Even China publicly said last week, they are suspending all new construction on nuclear reactors, and holding off current uranium shipments; pending safety review of existing reactors. I wrote about this in my previous post uranium stocks on sale. [...]

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