The Motley Fool

Forget Teck Resources Ltd. and Buy This Stock Instead

If you’re a long-term holder of Teck Resources Ltd. (TSX: TCK.B)(NYSE: TCK), I imagine you are really frustrated right now. From an all-time high in the $60s at the end of 2010, its share price dropped an uncomfortable 7% yesterday.

Yesterday’s big hit was a result of China’s announcement that it would be adding up to a 6% tariff on coal imports. It’s the Chinese government’s way of trying to give its local coal miners a fighting chance. That country is going to be taxing coking coal 3%, which is part of the steelmaking process — 44% of Teck’s revenue comes from that.

But let’s look at it another way: Coal is a dirty business. While it is an effective way to generate electricity, the ramifications on the environment are extreme. Millions of tons of pollutant are released into the air because it’s the act of burning coal that generates the needed electricity.

It’s my opinion that this trend of pulling away from resources like coal is going to continue. Countries are going to opt for cleaner technologies that also provide tremendous amounts of energy. And there’s one company in mind that I think is going to be at the forefront of that change.

Welcome to the land of uranium

Cameco Corporation (TSX: CCO)(NYSE: CCJ) is another stock that has been getting hammered in the past few years. And that’s for a few reasons. The first is that demand across the board just started to drop. Less demand, less product. The second reason is because of the Fukushima disaster, which resulted in Japan shutting all of its reactors down.

Now, though, Japan is planning to reopen the reactors and that’s going to require more uranium. But then there’s the country across the water from Japan: China. While China is looking to support its local coal miners, it is also looking to generate more of its power from cleaner resources. China already has 21 operating nuclear power plants and there are 27 more that are currently in construction.

By 2030, China wants to get 150 GWe from nuclear energy alone. Who do you think is going to supply all of that uranium?

I doubt new mines will created to support this because it takes a long time to start producing uranium. Therefore, the largest uranium miner in the world, Cameco, is in a prime position to dominate this trend. As the demand for uranium increases, the price will as well. Cameco will be on the receiving end of that and, indirectly, so will you.

So if you’re on the fence right now about whether to buy Teck Resources or Cameco, take your money and put it in the future. I think Cameco will continue to grow over the coming years.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jacob Donnelly has no position in any stocks mentioned.

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