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Uranium Production Cuts 'Very Positive' for Market

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Published : November 23rd, 2017
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Rob Chang, an analyst with Cantor Fitzgerald, discussed how one uranium company's upcoming facility closures should affect the market.

Cameco Corp. (CCO:TSX; CCJ:NYSE) intends to halt uranium production at its McArthur River and Key Lake operations for 10 months beginning in February 2018, Chang reported in a Nov. 8 research note.

He indicated this "major production cut" will drop total estimated 2018 uranium production by about 9%, which equals about 13.7 Mlb.

As for the overall effect this could have on the market, Chang concluded, "We expect strength in uranium prices and equities on the back of this news. This is the type of supply shock that will spur strength in the spot U3O8 price as a significant amount of expected production for 2018 is removed."

The analyst qualified those statements, however, noting the change may be slow to take effect for three primary reasons:

1. The market is "less efficient" due to the limited number of existing, qualified uranium purchasers today, Chang wrote.

2. Utilities are not under pressure to buy uranium soon, the analyst noted. They have "shored up what were once large shortages through spot purchases or short contracts," leaving an estimated under 10% of total uranium demand for 2018 and 2019 "uncovered."

3. Current inventory levels could "dampen" the expected price movement, said Chang. "We estimate that there are 800–1,200 Mlb of total above-ground inventory of which about 700–800 Mlb are held by utilities." However, not all of that supply is available for purchase, as significant portions are held for strategic purposes and necessary utility needs."

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from Cantor Fitzgerald, Cameco Corp., Oct. 30, 2017

Potential conflicts of interest

The author of this report is compensated based in part on the overall revenues of CFCC, a portion of which are generated by investment banking activities. CFCC may have had, or seek to have, an investment banking relationship with companies mentioned in this report. CFCC and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although CFCC makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

Disclosures as of October 30, 2017

CFCC has not provided investment banking services or received investment banking related compensation from Cameco within the past 12 months.

The analysts responsible for this research report have, either directly or indirectly, a long or short position in the shares or options of Cameco.

The analyst responsible for this report has visited the material operations of Cameco. Assets visited include: McArthur River, Cigar Lake, and the Key Lake Mill. No payment or reimbursement was received for the related travel costs.

Analyst certification

The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein.    
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