Market comment by Ringler Research on the latest press release from Cameco on 08.11.2017:
Cameco announced yesterday after market close that uranium production at its mines, McArthur River and Key Lake in northern Saskatchewan will be shut down temporarily from the end of January 2018.
Cameco produced a total of 27 million pounds of U3O8 on a group level in 2016, making it the largest exchange listed uranium producer in the world.
The McArthur River Mine is the largest and highest grade mine (9.6% U3O8) in the world, with 258.1 million pounds of Proven and Probable Resources. Mine production at ‚McArthur River / Key Lake‘ was 12.6m pounds in 2016. This number corresponds to approx. 46% of the total annual production of the company!
We see Cameco’s decision as very bullish for the entire sector, as the uranium spot market is further eroded.
Kazakhstan is responsible for about 39% of the world’s uranium production. When the country announced in January 2017 that annual production (2015: 23,800 tonnes) would be reduced by 2,000 tonnes (4.4 million pounds or around 8%), there were fire works in stock prices of uranium companies – many companies posted gains of between 100 and 200%. The spot uranium price rose from $ 17.7 to $ 24 in a very short time.
The production decision has a huge psychological effect on the sector. There has long been time a large discrepancy between the long-term and short-term uranium prices. In our opinion, new projects will only be realized from a uranium price of more than 50 USD. We therefore expect a significant increase in uranium prices.
Many long-term uranium supply contracts will expire in the next 1-3 years. We assume that the power plant operators will take notice, that only minimal supply quantities are available on the spot market.
The next uranium bull market will come, it’s only a matter of time! Many Australian uranium companies responded to the press release from Camerco with gains of 20-35%! We are looking forward to the price changes of the North American companies later when the market opens.
Further information about Cameco and the press release from 08.11.2017 can be found here: