Insights

Cameco shares rise as the world focuses on clean and sustainable energy sources

As the world’s focus turns to the impact of climate change and the need to take action to avert more environmental damage, the search for more viable and sustainable energy sources is now getting more attention.

But what does this mean to you as a trader and investor? What sectors and stocks should you be looking at as environmental and climate change issues generate a lot of attention?

As we scour the global markets, the Monex Securities research team found some outstanding stocks that have benefited from the rising interest in clean and sustainable energy. 

Global stock markets are full of mining and energy stocks that stand to gain and to remain in favour as the world searches for net zero-emission.

From New York (New York Stock Exchange) to Australia (Australian Stock Exchange) and across to Hong Kong (Hong Kong Stock Exchange), we monitored mining stocks that have seen tremendous price moves over the past few months. And the charts are still pointing to further upside.

In this post, we will focus on Canadian Mining and Energy Corporation (CAMECO – NYSE: CCJ) – an outstanding uranium mining company.

Who is Cameco and what does it do?

The Canadian Mining and Energy Corporation (Cameco) was established in 1988 when two Canadian government-owned corporations merged and were privatised.

The merged company was initially partially owned by a provincial government and the Canadian federal government. Cameco had its Initial Public Offering (IPO) in July 1991 and became fully privatised in February 2002.

The Canada-based miner has extensive land holdings including exploration that span about 1.7 million acres of land, the majority near its existing Canadian operations.

Cameco operates uranium mines in North America and Kazakhstan, including McArthur River-Key Lake, the world’s largest uranium producer, and Cigar Lake, the world’s highest-grade uranium mine, both in Saskatchewan.

As the world’s largest publicly traded uranium company, Cameco was ranked as the world’s second-largest uranium producer (in 2015), accounting for 18% of world production.

According to a company statement, Cameco’s tier-one operations have the licensed capacity to produce more than 53 million pounds (100% basis) of uranium concentrates annually.

Aside from its mining operations, Cameco is also a leading supplier of uranium refining, conversion and fuel manufacturing services.

You can find more information about Uranium stocks to trade here.

Strong financials

In his statement during the company’s most recent financial results, Tim Gitzel, Cameco’s president and CEO said: “Our second-quarter results reflect the continued execution of our strategy. We have a strong balance sheet and we ended the quarter with about $1.2 billion in cash.”

Given the rising demand and positive prospects for nuclear power generation, Gitzel said he’s confident of Cameco’s strategy and growth.

“We are excited about the future of nuclear power generation, about the fundamentals of uranium supply and demand and the prospects for our company and remain committed to our tier-one strategy and our vision. Globally, we see demand for both traditional and non-traditional uses of nuclear power growing as the increasing focus on electrification while phasing out carbon-intensive sources of energy continues to take hold.”

What are analysts saying about Cameco

In a recent report Investors Observer noted that Cameco Corp stock has gained 171.64% over the last 12 months, and the average rating from Wall Street analysts is a Buy.

Over the past year, the S&P 500 Index has gained 35.09% while CCJ has gained 171.64%, that’s why the publication is predicting that analysts will expect the stock to rise 7.22% in the coming year.

In a recent investor survey in the US, Cameco Corp scored the highest overall rated company in the Uranium industry with an overall score of 75. The overall score measures the company’s performance based on both short and long-term indicators.

Research analysts at Scotiabank have raised their price target for Cameco from C$27.00 to C$35.00 and have issued an ‘outperform’ rating on the miner.

In their research report in late September, TD Securities also revised its rating of Cameco from a “hold” to a “buy” and set a C$35.00 price target for the uranium miner.

The Royal Bank of Canada has also joined the chorus of analysts, upgrading their rating of Cameco from an ‘underperform’ to a ‘sector perform’ in early September.

What’s pushing uranium prices higher?

After the Fukushima (Japan) nuclear disaster in 2011, investment in nuclear reactors almost came to a total halt. And this sent uranium prices plummeting as demand subsided and investment dried up for almost 10 years.

But as the world searches for clean and sustainable energy sources, there’s been a significant uptick in uranium prices as mining companies anticipate rising demand for the silvery grey metal.

Some market observers and analysts pointed out that the establishment of the Sprott Physical Uranium Trust Fund (based in Toronto, Canada) is a major catalyst for uranium miners.

The specialist global asset manager is a major investor in physical uranium. Recent media reports showed that the fund began trading on the TSX last July and has recently increased uranium purchases from the spot market.

The (Sprott) fund bought two million pounds of uranium in the last 10 days of August and another 1.2 million pounds at the start of September, according to recent reports.

Another boost to the uranium price is the fact that Kazatomprom, the world’s largest producer of uranium, recently confirmed that it would keep production flat in the next two years. This means that without an increase in production/supply, uranium prices could rise further as demand rockets higher.

Technical Analysis: What the charts are showing about Cameco shares

As with the underlying market for physical uranium, the price of shares in Cameco can be volatile at times, but the longer-term trend has been undeniably bullish since at least the end of 2020. Sharp gains during late August and early September of 2021 have accelerate the upward trend. The fact that these gains were achieved on much higher than average volume implies that the move is well supported by investors.

While further volatility cannot be ruled out, relatively good support is seen in a band between US$22 and US$20.  While near term dips hold above the latter, the focus remains on the potential for prices to push above the US$27 region and on to levels not seen for more than a decade.

Conclusion

Given the world’s focus on clean energy and toward a more sustainable power supply, plus its well-established and massive presence as a uranium producer and processor, Cameco is in a good position to take advantage of the rising demand for metal.

Based on its recent price moves supported by growing interest and trading activities in physical uranium, Cameco stock price may still have a long runway for more upside.

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