5 Reasons Why 2018 Could Be a Comeback Year for Cameco Corp.

It’s been a long time coming, but there are several encouraging signs that suggest that 2018 could be a huge comeback year for Canadian uranium miner Cameco Corp. (TSX:CCO)(NYSE:CCJ). Find out why.

| More on:

Shareholders of Cameco Corp. (TSX:CCO)(NYSE:CCJ) and junior uranium miners like Denison Mines Corp. (TSX:DML) have been patiently waiting for what has been close to a decade now for some sign — any sign — that the long-drawn-out bear market in uranium prices would soon come to an end.

Good news — the commodities market is starting to show some encouraging signals that a turnaround is already underway – this could very well turn out to be the catalyst that uranium prices have been so desperately in search of for years now.

But even beyond macro factors that could serve to drive commodity prices higher, Cameco has five more forces behind it that could make 2018 a great year for the company.

A disciplined, long-term strategy

Cameco’s strategy is to take advantage of long-term growth drivers driving nuclear energy, while also taking cues from the markets that will allow it to adapt to changing competitive dynamics.

Evidence of this is the company’s announcement in November that it is suspending operations at the McArthur River mining facility and Key Lake milling site.

Obviously, it’s not great news that the company will be cutting production, but the move shows that Cameco is serious about protecting the sustainability of the uranium market — a move which should reward shareholders over the long term.

A world-class portfolio of mining assets

Cameco is the market leader among the world’s uranium miners thanks to its world-class portfolio of mining assets.

Cameco’s McArthur River/Key Lake mine is the world’s largest uranium mine, and its Cigar Lake mine offers the highest-grade uranium deposits globally.

The market-leading quality of Cameco’s assets gives the company a decided advantage in a low-price environment like today’s.

Growing demand for nuclear energy

Today, nuclear reactors are being built all over the world with 56 sites currently under construction in countries like China, India, and Russia.

In addition, the Japanese market, following a period where many reactors were taken offline as a consequence of the Fukushima disaster, is seeing several reactors starting to come back online.

The uranium market is expected to be undersupplied for the next decade

Following the shutdown of many Japanese reactors, the uranium spot market became oversupplied, as Japanese reactors began unloading their uranium stockpiles, re-selling them in the secondary market.

Yet the oversupplied spot market ended up leading to a shutdown of many international mining operations, and the result today is a primary market that simply will not be able to meet oncoming demand and more reactors start up.

Cameco, meanwhile, thanks to its superior assets and disciplined approach, has been able to weather the current downturn and is enviably positioned to meet an undersupplied market.

Here’s your catalyst — Kazakhstan cuts production by 20%

On December 4, Kazakhstan’s state-run uranium miner — which is also the world’s largest uranium miner — announced it would be cutting its production by 20% in a bold attempt to remove the supply glut and provide a boost to uranium prices.

Cameco shares rallied by 41% over the next month on the back of the announcement but have since given back most of those gains, now trading only slightly above where they traded when the news was announced, making now an opportunistic time to pick up shares in the Saskatoon-based miner.

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 jphillips has no position in any of the stocks mentioned.

More on Dividend Stocks

money goes up and down in balance
Dividend Stocks

This 6% Dividend Stock Is My Top Pick for Immediate Income

This Canadian stock has resilient business model, solid dividend payment and growth history, and a well-protected yield of over 6%.

Read more »

ways to boost income
Dividend Stocks

1 Excellent TSX Dividend Stock, Down 25%, to Buy and Hold for the Long Term

Down 25% from all-time highs, Tourmaline Oil is a TSX dividend stock that offers you a tasty yield of 5%…

Read more »

Start line on the highway
Dividend Stocks

1 Incredibly Cheap Canadian Dividend-Growth Stock to Buy Now and Hold for Decades

CN Rail (TSX:CNR) stock is incredibly cheap, but should investors join insiders by buying the dip?

Read more »

bulb idea thinking
Dividend Stocks

Down 13%, This Magnificent Dividend Stock Is a Screaming Buy

Sometimes, a moderately discounted, safe dividend stock is better than heavily discounted stock, offering an unsustainably high yield.

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $15,000 in This Dividend Stock, Create $5,710.08 in Passive Income

This dividend stock is the perfect option if you're an investor looking for growth, as well as passive income through…

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

3 Compelling Reasons to Delay Taking CPP Benefits Until Age 70

You don't need to take CPP early if you are receiving large dividend payments from Fortis Inc (TSX:FTS) stock.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Better Dividend Stock: TC Energy vs. Enbridge

TC Energy and Enbridge have enjoyed big rallies in 2024. Is one stock still cheap?

Read more »

Concept of multiple streams of income
Dividend Stocks

Got $10,000? Buy This Dividend Stock for $4,992.40 in Total Passive Income

Want almost $5,000 in annual passive income? Then you need a company bound for even more growth, with a dividend…

Read more »