With its once-pariah product coming back into fashion, one of Canada’s largest mining companies is hitting valuations not seen in more than 15 years.
Cameco Corp. CCO-T is benefiting from a resurgence in uranium, as nuclear power is increasingly adopted by countries seeking ways to reduce carbon emissions and supply issues arise.
On Monday, the company’s shares were trading around $54.25, just $5 below their 2007 all-time high.
In recent years, the world’s attention has turned to reducing carbon emissions to combat climate change. One of nuclear’s biggest selling points is that it generates no CO2 emissions, leading some observers to predict an increase in the construction of new power plants, including small modular reactors (SMRs), which are touted as cheaper and easier to build than their larger cousins.
Brian MacArthur, an analyst at Raymond James, wrote in a note to clients Thursday that he expects demand for uranium to continue to grow as nuclear power is increasingly adopted as a source of energy. green energy “.
The uranium revival follows a prolonged crisis triggered by the meltdown of Japan’s Fukushima power plant in 2011, after an earthquake and tsunami. Many nuclear projects were canceled after the accident, prompting Germany to abandon nuclear power altogether.
The war in Ukraine has disrupted the global nuclear fuel market. In April, the governments of Canada, France, Japan, the United States and Britain announced they would work together to establish new supply chains that would exclude Russia, a traditionally major player.
The war also significantly reduced the supply of Russian natural gas to Europe. Nuclear power has been touted as an alternative or at least a stopgap until renewable energy such as solar and wind are more widely adopted.
Meanwhile, Saskatoon-based Cameco, one of the world’s largest uranium suppliers, is facing production problems. The company recently reduced its production forecast for the year by 8 percent, to 30.3 million pounds, due to operational problems at both its Cigar Lake mine and its Key Lake mill, which serves the McArthur River mine.
“Cameco’s recent production shortfall further highlights the growing security of uranium supply risk at a time when demand prospects are stronger,” Mr. MacArthur wrote.
“Uncertainty over where nuclear fuel supplies will come from continues to drive long-term contracts, with evidence that the broader uranium market is moving toward replacement rate contracts for the first time in over of a decade. »
Analysts are also bracing for the possible impact of Niger’s coup in July. Chris Drew, an analyst at Jefferies, wrote in a note to clients that continued political uncertainty there could delay Global Atomic Corp.’s Dasa project, which is expected to bring 4.5 million pounds of new production online in 2025.
The world’s nuclear reactor fleet, fueled primarily by uranium mined and processed in conversion and enrichment plants, has been in steady decline for decades.
According to the World Nuclear Association, as of June, there were 437 reactors in operation worldwide, with a combined generating capacity of 391 gigawatts. They cover about 10 percent of global electricity demand, up from 17.5 percent in the mid-1990s. Despite a frenetic pace of reactor construction in China, over the past two decades more reactors have been closed than started, according to the latest industry study carried out by Mycle Schneider Consulting.
However, recently, several countries with large reactor fleets (notably France, Japan and Russia) have decided to extend the operating life of power plants that were about to be decommissioned.
In Canada, Ontario Power Generation is more than halfway through the renovation of its four-reactor Darlington plant in Clarington, Ontario. Bruce Power is also renovating its Bruce Generating Station on the eastern shore of Lake Huron and this month restarted a refurbished reactor.
A year ago, the Ontario government asked OPG to study the feasibility of refurbishing four of the eight reactors at its aging Pickering plant, with the aim of extending their lifespan by 30 years. (The plant is scheduled to decommission in 2026.) This summer, Hydro-Québec revealed that it planned to renovate its Gentilly-2 plant, on the south shore of the St. Lawrence River, which ceased operations in 2012.
“More than 140 reactors could be subject to extended operation by 2040, depending on economic criteria, emissions reduction targets as well as security of supply,” the World Nuclear Association said in a report released this month examining the nuclear fuel market. .
The report concludes that “intense development” of new uranium projects will be necessary throughout this decade to avoid future supply disruptions.
“There is no doubt that there are sufficient uranium resources to meet future needs,” he notes. “However, producers were waiting for a rebalancing of the market to start investing in new capacity and bringing idle and shut down projects back into production. »
Although its price has tripled over the past five years to trade at around $65.50 per pound, uranium remains well below the all-time high of around $140 reached in 2007.
Although it is increasingly being touted as a clean energy source, concerns remain about the challenges of long-term storage of radioactive waste and the possibility of another power plant accident.
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