Cameco (CCJ.US) is a Canadian producer and supplier of uranium, the main fuel for nuclear reactors. Company shares are gaining nearly 7% in premarket. Over the weekend, news emerged that the situation at the Zaporizhia Nuclear Power Plant, in Ukraine, had been stabilized. Russia and Ukraine also agreed to host an international commission to investigate the state of both Ukrainian plants. There is no indication of an environmental disaster at any of them. Investor concerns rose on Friday after Russian troops attacked Zaporizhia power plant.
Cameco benefited from the return of positive market sentiment in H2 2021 and stock price managed to break above the downtrend in recent weeks. Stock is currently trading above its 20-day moving average at $21.83. Cameco is the largest of the western uranium ore supplier, and the company recently halved its dividend and reopened its Key Lake and McArthur River mines.
As a result of the conflict in Ukraine, Europe wants to move away from fossil fuels - Russian coal and gas and nuclear power is one of the key alternatives. This is due to the lack of carbon footprint and the high efficiency of the reactors. The Uranium market and nuclear-related companies are very sensitive to negative news regarding environmental disasters. News of an environmental catastrophe caused by a power plant accident or fire could bring back the 'demons' of Fukushima and cause a collapse in the uranium price and a return of very negative sentiment around nuclear energy.
Garii Kasparov, a well-known Russian chess player now living in New York known for his political involvement in opposition to the Kremlin, has many times already suggested the idea of a return to nuclear power as the most optimal solution in environmental and business terms. In his recent statements, he has also signaled to Germany to consider reopening its closed nuclear power plants. Opening up uranium in Germany, which is dependent on Russian gas and coal supplies, would result in a large increase in market demand. This does not seem impossible, as the transition to hydrogen, nuclear and renewable energy has been recognised by the European Commission as the ideal 'energy mix' for an energy independent Europe.
However, some investors are sounding the alarm about the asymmetrical investment risks currently associated with the uranium market. This is due to the increased likelihood of accidents at Ukrainian nuclear power plants - as long as there is a war on Ukrainian territory, this kind of threat exists. This information was provided by, among others, Sprott Investment, a Canadian fund known for investing in commodities and precious metals. It was this fund that 'unleashed' the uranium price in the summer of 2021 by buying the physical commodity off the market at any price for fear that uranium prices would rise in the future.
Cameco's stock price was boosted by reports of uranium's possible inclusion on the US government's list of strategic commodities and a change in analysts' rating from a dozen research firms to 'Buy' with a target price of $35 per share. On the other hand, Rise Aviation, which transports Cameco workers to remote locations, reported an increase in planned flights following the reopening of the mines and the re-employment of pilots laid off in 2020. This indicates a general recovery in the company's operations.
The uranium sector remains a risky place to invest, especially taking into account Russian aggression in Ukraine. For the moment, however, we have not seen a spectacular collapse in uranium prices or declines in valuations of stocks from the sector.
Cameco (CCJ.US)- despite the appearance of a head-and-shoulders formation on the D1 chart, buyers managed to uphold control. Declines slowed down around the height of the purple trend line, and price managed to stay above the key support zone at $20.15 and resumed uptrend. If current sentiment prevails, an attack on the recent highs at $28.00 may occur. Source: xStation5
