CCJ’s 2012 revenue attributable to shareholders plummeted 41% from last year. The 4th quarter was an absolute bloodbath, with revenue off 83%. Most of the carnage is from a massive write down the company took on a project called Kintyre. The rest is from uranium prices being cut down mercilessly.

However, you should have known this was going to be ugly, if only from the most recent sales prices of uranium-308.

Have a peak.

When prices go into free fall like that, it means one thing: no actual sales are occurring.

The end of 2012 was horrible for uranium sales. Because reactors don’t require a continuous feed of fuel, there exist periods where their operators may elect to sit back and not come to market. So really, almost nothing was done at the end of the year. This makes sense – with two major elections (Japan and the US), global uncertainty, looming recession, and no imminent need for uranium, producers were in the uncomfortable position of having no buyers. If you were a lowly player, desperate for some sales to keep the doors open, the last three months were not a good time for you.

But that’s all drawing to an end soon. Japan and the US have reaffirmed nuclear energy. Emerging markets are going full bore. Russia is done flooding the market with cheap HEU stock.

We are preparing for an epic resurgence of nuclear fuel prices.

Would you care for a second opinion?

Here’s one.

Here’s another.

And another.

I’ve been hammering on this point since the Fukushima reactor was still busy melting down. I’ve mentioned all the points myself – expectations of the ability of countries to drop nuclear power are unrealistic. One does not simply drop 30% of their grid. And with the immense competition for power sources globally, ignoring such a potent fuel is madness.

Now, slowly, all of my predictions, as laid out literally in the middle of the tsunami crisis, are playing out. Japan is backtracking. The US has confirmed they intend to move forward with construction of the first reactors built in this country is 30 years. The emerging markets are embracing nuclear to diversify their grids. Environmentalists have even begun marginalizing the anti-nuclear activists in their ranks – crushing their ability to be heard; mocking them openly.

Next up, Europe starts caving, led by Germany; which has no choice but to acknowledge that there is no way they can replace their nuclear facilities with windmills and solar panels.

And as these realizations hit, the price for nuclear fuel is going to skyrocket. With it, CCJ’s earnings will go from the worst in its history, to the very best.

Bring it, kids. I have your numbers. It’s time to pay up.

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Hands down, the most frustrating aspect of investing for me is buying into a solid, proverbial gold mine, only to discover that the current shareholder base are conviction-less cowards tripping over themselves to undermine what’s in the company’s best interests.

Unfortunately, it’s these very situations that tend to prove the most profitable, because there’s a never ending shortage of frightened shares coming to market, which can be scooped up over prolonged periods of time for bottom-low prices.

When I find myself in positions where I have no spare cash, though, these deserters shaking my boat are a source of furry.

Take for instance, BAS. The stock cannot seem to find its legs, because every time it makes a push over $12, a flood of sell orders comes from somewhere in the backfield. Why? Oh well because shareholders are just so worried about the next quarter of numbers.

Here’s the thing. We already know how the next quarter of numbers will look – awful. And the stock’s still cheap. Now shut up, calm down, and grow a back bone.

Another keen example would be CCJ. The stock gets blasted every few months by a wave of fleeing children masquerading as shareholders, because the uranium market has not instantly completely recovered. Comically, we’ve hit the point where every analysis on uranium is finally admitting that it’s way undervalued and due for a strong rebound.

So what’s the problem? Oh, well “when” that rebound occurs could be this year, or sometime over the next several.

Am I missing something here? The rebound is going to double uranium miners, at least. Most of you fund managers are lucky to average 5% annually. What’s the problem here?

I’m going to end my morning rant on that note. The summary is: a stock’s biggest threat usually comes from within, by double-dealing company owners trying to outsmart the rest of the company stock, usually to their incompetent failings.

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I had a wonderful four day weekend, which culminated in a celebration. I would share that spirit with each of you on this fine evening. I hope all is well wherever you are.

Catching up on today’s action, the signs are beginning to shift to CCJ’s favor. The stock rallied another 3.7% today.

This is a long awaited development.

Back in early 2011, after the Japan earthquake set off the greatest nuclear threat since 3 Mile Island, sheer panic had set in the public broadcasters. I watched, amazed, as men and women with no special understanding of nuclear power drowned out actual industry experts on live television with their warnings of calamity and doom.

No claim was too exorbitant. The calls for widespread death and pestilence were matched only with the audacity of the foregone conclusion that nuclear energy must be completely dead.

I let my pipe burn out, tasting only the lingering roast of the cayuga, as I shook my head in disbelief at this spectacle…

And then, I laid my reputation on the table and began slowly accumulating shares of CCJ, right in the midst of the panic as a nuclear reactor literally melted down on international television.

Now, this is actually the second time I’ve seen a strong resurgence in CCJ’s stock price, leading me to believe in the possibility of a price recovery. The stock had hit the mid teens earlier, and after that discernable bottom, I thought perhaps those days were past. Alas! It was not to be. CCJ’s shareholders proved themselves cowards with the recent collapse of U308 spot prices; incapable of seeing the greater theme.

This rally could be just another such fake. Yet, I have reason to believe it is not. There is great timing of the move, which coordinates with significant developments in the uranium space. Japan has announced they will fast track a discussion of nuclear energy – I believe they have no choice but to continue on the path. Germany (which previously announced a full scale out of nuclear power) has made decisions appertaining to their grid which make abandoning nuclear power impossible. The US has been rather cheerful about nuclear, finally giving permission for the construction of the first new nuclear power plant in decades. China is pushing full steam ahead. India has signed fuel trade agreements with Canada. And Russia is done flooding the markets with HEU from decomissioned warheads.

Whether or not this is the triumphant finale to my symphony remains to be seen. I wait with bated breath.

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My my my, whatever could it be?

This scent and aroma that fills my nostrils.

This welcome hint so starkly different from the effluvia that’s suffocated me until now.

What is it?

I’ll give you a hint…

……

Naw, to hell with hints. I’m in a generous mood. I’ll just tell you.

It looks like uranium prices may have finally bottomed.

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Well, CCJ reported earnings and the stock is getting the homo hammer, off 6% on the open (7% on completion of this post). Yesterday’s price ramp is all gone, and whichever trolls were pushing that purchase are now a pool of putrefaction.

The problem with CCJ is this: if you believe that $0.21 quarters are the new normal, this stock is ridiculously expensive. We’re talking somewhere between 20-30X earnings expensive. To rectify that, you’d have to bring CCJ’s price down. A lot.

CCJ would need to be a $13 stock to justify this pricing with the earnings they’ve been reporting.

But here’s the thing. They’ve been reporting these earnings for two years now.

So the real issue is that the stock market is a medium of instant gratification. People want to make money. And they want to make money right now. There is no patience to wait for developments, or to stick out a rough patch. That’s the entire thesis behind buying CCJ is the first place.

Now, I’ve read their release, and I feel the developments were good. CCJ is taking their foot off the pedal on projects. They are forcing the economics to work. And they’re big enough to affect uranium prices.

Now, a reactor only has to refuel once every few years. So CCJ has to be calm and wait. They can get higher prices by one of two means – Wall Street can accommodate them with higher pricing, or they can force higher pricing (they’re something crazy like 20% of global production, on their own). Uranium prices ARE going higher. It’s a matter of when, not if.

That’s what’s happening here, I think. Cameco is intentionally dropping their revenues, with the goal of increasing spot price, which will make the economics of their new mines work which will lead to higher sales volumes and superior pricing. They have the weight to pull it off.

Now, the second point I want to address is their assessment of global demand by 2021. I feel it’s conservative.

For instance, it includes such projections as assuming that net reactors in Europe decrease by 3 over the next 10 years.

Not going to happen.

To assume that, you’d have to take Germany at their word when they say they intend to close down all their nuclear plants. But this same Germany just shuttered any new development of wind energy (throwing in the towel). Solar is next. So what’s taking nuclear’s place? Natural gas? Yeah, Russia would love that – natty is expensive enough in Europe as it is.

Coal? Oil? There’s only so many places the load displacement can come from. Germany’s going to cave, just like Japan is in the process of caving now.

Now, looking at CCJ’s gross profits and sales volumes, it looks like they have a cost of $30 per pound of uranium produced (before expense cuts, which CCJ says they’re looking into). So let’s say that they can push uranium prices back to $50. That would increase their revenues by 43% by itself. Now you’re talking earnings closer to $0.30, putting the company at a more reasonable 15X earnings.

If they can get uranium back to $55, their earnings are going to blow out by 78%.

If uranium hits $60, they’re looking at a 114% increase in earnings. It’s worth noting that $60 is the long term delivery price of uranium right now (Ux LT 308); it’s only the spot price that’s really hemorrhaging – the long term price (which is used for multi-year contracts) has floored at the $60 price.

And it’s here that Cameco looks cheap. This is the situation where I look at CCJ and say, “this company is going back to $27 a share”.

But I don’t think the long term price of $60 is fair. I think the price is going higher.

The long term price of uranium in 2009 was over $90. The spot price was right around $50. If Cameco can force the spot to $60 and start locking in long term contracts for $90, you’re golden. In this situation, you’re talking about Cameco going for $40 to $50 a share.

And I think it’s totally feasible. The supply and demand aren’t matching up here. The expectations for weaning off nuclear energy are just too rosy, and the price is way too low, even if no new reactors come on line. We don’t have enough fuel right now – higher prices are warranted to expand production.

That is the only thesis for owning CCJ right now. But it’s a good one.

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I bought some more CCJ for $21.32, bringing my total cash position to 15%.

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