Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18
Bitcoin BTCUSD Elliott Wave View Calling for Rally toward $15,000 - 13th Mar 18
Hungary’s Gold Repatriation Adds To Growing Protest Against US Dollar Hegemony - 13th Mar 18
Record Low Volatility in Precious Metals and What it Means - 13th Mar 18
Tips for Writing and Assembling the Classification Essay - 13th Mar 18
Gerald Celente "If Rates go up too High, the Economy goes Down, End of Story" - 13th Mar 18
Stock Market Selloff Showed Gold Can Reduce Portfolio Risk  - 13th Mar 18
Silver Does it Again! Severe Consequences - 12th Mar 18
Has the Stock Market Rally Run Out of Steam? - 12th Mar 18
S&P 500 at 2,800 Again, Stock Market Breakout or Fakeout? - 12th Mar 18
The No.1 Energy Stock To Buy Right Now - 12th Mar 18
What Happens Next When Stock Market Investor Sentiment is Neutral - 12th Mar 18
Economic Pressures To Driving Gold and Silver Prices Higher Long-Term - 12th Mar 18
Labour Sheffield City Councils Secret Plan to Fell 50% of Street Trees Exposed! - 12th Mar 18
Stock Market Uptrend Resuming? - 11th Mar 18
Bond Market Interest Rate Yields Are Rising Again… Stocks Are on Thin Ice - 11th Mar 18
Death of Europe's Greenest City, Police State Sheffield Labour Council to Fell 50% of Street Trees - 11th Mar 18
Do All Bull Stocks Markets Need to Have a Bearish Divergence? - 11th Mar 18
An Inflation Indicator to Watch, Part 3 - 11th Mar 18
Online Stock Trading Tips - Tips about Online Trading & Day Trading - 11th Mar 18
NDX makes a new high. What does that mean? - 10th Mar 18
Blue Chip Companies on Track for $800 billion Buyback Record in 2018 - 10th Mar 18
Cheap Gold Stocks Basing - 10th Mar 18
An Introduction to Online Forex Trading - 10th Mar 18
Sheffield Police State as Tree Protesting Citizens Are Snatched off the Streets! - 9th Mar 18
Riding the Bitcoin Wave - 9th Mar 18
Are We in Late Cycle? Implications for Gold - 9th Mar 18
US Bond Market 3 Amigos Bottom Line - 9th Mar 18
The Stock Market Bubble Conversation - 9th Mar 18
The Last Great Myth of Every Financial Market Euphoria - 9th Mar 18
London Property Market Sees Brave Bet By Norway As Foxtons Profits Plunge - 8th Mar 18
Casino and Bingo - A Brief Statistics - 8th Mar 18
Stock Market Shrugs Off Trade War Fears, But Will It Go Higher? - 8th Mar 18
Gold Stocks & Silver Oversold but Not Gold Price - 8th Mar 18
Benefits of Using Same Day Loans In Emergencies - 8th Mar 18
Permanent Life Insurance: Is it a Waste of Money or a Valuable Investment? - 8th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Cameco to Benefit From Rising Demand For Uranium

Commodities / Uranium Aug 09, 2012 - 11:10 AM GMT

By: Elliot_H_Gue

Commodities Best Financial Markets Analysis ArticleFor the first time in 34 years, US oil production has risen for three consecutive years. Since reaching a low in 2008, output has in­creased by 1.2 million barrels per day and America’s reliance on import­ed oil has fallen to 66 percent of consumption from 75 percent.

America’s 21st century energy boom is the result of aggressive de­velopment of unconventional US oil plays such as the Bakken Shale in North Dakota and the Eagle Ford Shale in south Texas. Horizon­tal drilling and hydraulic fracturing, innovations that improve the flow of oil through shale rock, have enabled producers to unlock billions of barrels of new oil reserves (see “The US Oil Gusher”).

Although this upsurge in domestic US oil production is a tremendous boon to the US economy, non-OPEC oil production outside North America is expected to fall in 2012 because of production outages and project delays.

More than 1,400 onshore rigs are drilling for oil in the US, up from less than 180 units in mid- 2009. This unprecedented surge in activity was possible because producers in shale plays earn strong returns when oil prices are between $80 to $100 per barrel. But if oil prices were to drop below $70 per barrel for a prolonged period, producers would scale back their activity.

Although US oil demand has declined because of the slug­gish economy, China and other emerging markets continue to experi­ence strong demand growth. Chinese oil imports hit an all-time high in early 2012. 

The increase in global oil demand continues to exceed the growth in non-OPEC production, keeping the balance in global oil markets tight. Crude oil prices have already pulled back enough to reflect the slowdown in the global economy. Look for the price of West Texas Intermediate crude oil, the US benchmark, to average between $90 and $100 per bar­rel in coming years. Brent crude oil, which better reflects global supply and demand, should average $100 to $110 per barrel.

The outlook for US natural gas prices remains less sanguine. Al­though hot summer weather has led to robust demand and could push gas prices back up towards $4 per million British thermal units this summer, US production capacity continues to out­pace demand leading to a glut of gas in storage.

In contrast, I remain bullish on uranium prices. As the chart “Poised for a Rebound” shows, US uranium prices fell sharply in the wake of the March 2011 accident at the Fuku­shima nuclear power plant in Japan. However, as I wrote in Global Conditions Are Conspiring For A Swift Upswing In Uranium Prices, the widespread notion that the accident will derail nuclear power is overblown.

Since then, only two countries have significantly curbed their use of nucle­ar power: Japan and Germany. How­ever, Germany has long been an anti-nuclear country and already planned to phase out the energy source. Japan has found it harder to wean itself from nuclear power than the government initially expected; in July, the country restarted two nuclear facilities to avoid summertime power shortages. 

Meanwhile, emerging markets such as China, India and Russia have reaf­firmed their commitment to building significant nuclear capacity in coming years. China plans to increase its nucle­ar generation capacity from 11.9 gigawatts (GW) in 2011 to as much as 70 GW by the end of the decade.

China has 26 nuclear reactors un­der construction and another 51 plants have reached advanced plan­ning stages. If all proposed plants are built, Chinese nuclear capacity could surge to more than 200 GW over the coming 20 years.

Cameco Corp (TSX: CCO, NYSE: CCJ) is the largest pure-play uranium producer in the world. The company extracts more than 22 million pounds of uranium per year, accounting for roughly 16 percent of global produc­tion. Cameco’s McArthur River mine in Canada is one of the world’s low­est-cost operations. With ore grades that are 100 times higher than the world average, the company has to process far less ore to produce urani­um than most of its peers.

Production is likely to rise sharp­ly over the next few years, driven by the start-up of the massive Cigar Lake project towards the end of 2013. Cigar Lake has even higher ore grades than McArthur River and Cameco’s share of production should top 9 million pounds per year at full capacity. Cameco employs a conservative marketing strategy, selling around 40 percent of its production under long-term contracts at fixed prices that provide a cushion when uranium prices are low. This conservative strategy also helps the company support its dividend, which has been steadily rising over the last 10 years.

With the demand for uranium rising at a roughly 4 percent to 5 percent an­nualized pace, uranium prices will need to increase to incentivize new produc­tion. The coming upsurge in uranium prices will be a boon for the industry’s lowest-cost producer. 

Mr. Gue is also editor of The Energy Strategist, helping subscribers profit from oil and gas as well as leading-edge technologies like LNG, CNG, natural gas liquids and uranium stocks.

He has worked and lived in Europe for five years, where he completed a Master’s degree in Finance from the University of London, the highest-rated program in that field in the U.K. He also received his Bachelor’s of Science in Economics and Management degree from the University of London, graduating among the top 3 percent of his class. Mr. Gue was the first American student to ever complete a full degree at that business school.

© 2012 Copyright Elliott H. Gue - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Elliott H. Gue Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules