It’s been long enough that I’d say I actually need to give an introduction and background here.
I’ve owned Cameco since Fukushima; literally, I bought my first round of shares at $29 while the reactor was melting down. Since then, I’ve built a position, by averaging in and trading rips, that has a cost average around $21.
My belief was that, at the time, commitments to roll back nuclear power facilities were vastly overconfident (if not totally unrealistic) and would ultimately end in retraction. So far, I haven’t seen anything to make me change my views on this. I also felt that the dangers of nuclear power and the consequences of the Japan problem were being overblown. Nuclear accidents have traditionally been forecast to be, literally, millions of times worse than they actually are.
Recent developments in the space include:
1) Japan is prepping 4 more reactors to reopen, while creating the review process to speed things up a bit
2) Tokyo Electric is getting impatient, using a subsidiary of itself to start pushing back against government agency claims that any of its reactors lie on fault lines
3) China is ramping up construction of power plants
4) They’ve also discovered Fukushima is leaking radioactive water – could stiffen the process back up
5) The forced shut down is starting to do its damage to nuclear power companies – Japan Atomic Power, for instance, will be forced into a hard bankruptcy shortly if they can’t get operations up and running or, worse, are forced to decommission any of their three reactors. This would flood the market with fire sale priced uranium fuel
6) Russia has not expressed any desire so far to extend the HEU (Megatons for Megawatts) agreement; it currently stands at over 95% completed. Although interestingly enough, Executive Order 13617 (which floods Russia with money for decommissioning nuclear weapons for fuel) has been extended by the Obama Administration under emergency decree. I’d be more inclined to think that’s an indication a new agreement is being drafted, if I didn’t know how much politicians like to fling slush fund money around to friends and enemies alike. For the moment, I’m predisposed to believing Putin will not be crafting a new agreement
Altogether, the ability of the uranium market to shore itself up depends on Japan for now. There is a visible push to get the reactors up and running, and elements of the government seem at least partially favorable to it. For the last two years, the uranium market has been frozen, as the fuel miners and electricity producers sat in a stalemate, waiting to see what would happen next.
We’re about to find out, I think.
If Japan can successfully navigate back to nuclear power, it would thaw the uranium space, encouraging power companies that have been so far waiting to see if nuclear opposition would gain more traction, or if Japan’s unspent fuel would be up for sale, back to the markets to bring their fuel cycles up to speed.
If not, Japan power companies will likely start to arrest, plunging the entire sector back into violent fluctuations. For this reason I am exclusively a holder of CCJ, and no others, because they are too small and will have trouble surviving if everything doesn’t pan out just right. This does worry me, as Japanese culture is notoriously slow and patient, almost to a fault. It is not completely out of the question that they let their power companies crash. I simply have to hope that they don’t.
Long term, the sector is ripe, with lots of new demand, and supply concerns at current production targets. However, any disruptions could easily drag out the recovery another few years.
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